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6 Common Pitfalls to Large-Scale Renewable Energy Procurement Success—and How to Avoid Them

Adopting renewable energy at scale via power purchase agreement can be both challenging and rewarding. Renewables can add tangible brand and PR value, increase an organization’s resiliency to climate change, mitigate current and future risks such as energy price volatility and climate regulations including carbon taxes, achieve publicly committed renewable energy and carbon reduction goals, and improve shareholder, employee, and customer loyalty.

With a myriad of large-scale renewable energy projects available in the global marketplace and diverse internal stakeholder perspectives, making the right renewable energy decisions for your company can be tricky. Being prepared by knowing the do’s and don’ts ahead of time will go a long way. Below is an exploration of both the pitfalls to avoid and keys to success common in large-scale corporate renewable energy adoption.

Common Pitfalls:

Insufficient articulation of goals
Companies occasionally begin pursuit of renewable energy without a clear end in mind. Lack of clarity around the purpose of the program, and its tie to larger economic and environmental targets, can result in later stumbling blocks or even project derailment.

Misalignment with executives
Alignment early on with key executives regarding drivers and criteria for success is critical. Approaching the C-suite with the wrong message and without supporting due diligence can kill a deal and expend valuable political capital for future deals. Establishing a process to achieve internal buy in and support from the get-go is essential.

Turnover in key project team members
Turnover of a key driving member of the team can stall or even derail an active go-to-market process. Selecting a core team as opposed to a single point of contact on both sides of the engagement and documenting steps and decisions throughout the process helps ensure organizational “memory” and consistency.

Poor evaluation of project risks and benefits
Proper evaluation of both the economic benefits and potential risks including market, counterparty, execution, operation, regulation, and reputation is critically important to making the right purchase decisions and gaining final executive sign off. Running a robust financial modeling and risk analysis process to consider multiple outcomes aids in both term negotiation with counterparty and internal alignment.

Insufficient credit/inability to secure credit
Long-term offsite power purchase agreements (PPAs) require a creditworthy counterparty willing to sign at the parent/rated entity-level or post a Letter of Credit. Establishing the preferred approach early on can have a direct impact on the quality of bids received and ultimate economic performance of a chosen project.

Lack of proven due diligence
Inevitably, key decision makers will want to know whether your energy buying team has considered alternative options to long-term structured renewables such as PPAs. A well thought out review of other options such as energy attribute certificates (EACs), onsite solar, utility green power, etc. as well as a defined process and criteria for final PPA project selection is critical to answering this question credibly and achieving executive level approvals.

Keys to Success:

Publicly committed science-based targets, greenhouse gas reduction, and/or renewable energy procurement goals
Setting clear, publicly committed sustainability targets is often needed to sustain the effort required to see a renewable energy strategy through. Public goals also convey transparency, and instill confidence in key stakeholders.

Internal alignment on goals, drivers, and success criteria
Having clear consensus on project goals and milestones enables more efficient group decision making and helps avoid time consuming and potentially deal killing debate and analysis. Establishing and ranking these key drivers and criteria, up front and by importance, will set the stage for a smoother renewable energy buying experience.

Executive support
Mentioned as a pitfall if absent, executive support and commitment to sustainability goals, time and resource commitment, drivers and key criteria, and evaluation is critical to success. Most long-term structured renewable energy options go to the CFO, CEO, or board of directors for final approval. A process for building successful executive decision making needs to be present before getting too far into the large-scale renewable energy buying process.

Proper stakeholder engagement plan
In addition to gaining executive support, engaging the right internal stakeholders with the right message at the right time is critical to achieving alignment and key approvals. For example, approaching a key business function too early–such as accounting–could result in a false “no” due to concerns around derivative accounting that can ultimately be avoided.

Market intelligence and access
Finding renewable energy solutions that meet key criteria is key to success. This is achieved through an up-to-date working knowledge of the market, active developers, and running a focused competitive RFP process. Having a comprehensive market view enables informed decision making on the optimal renewable energy solutions to meet your company’s needs.

Sophisticated project evaluation and risk mitigation
Performing sophisticated and appropriate financial and risk analysis on renewable solutions is key to making the right strategic purchasing decisions. This piece is absolutely essential for achieving internal stakeholder and executive support.

Strong project team lead
Having a core project team lead able to navigate the corporate structure is critical to a successful renewable energy strategy implementation. This individual will be the key to accessing important internal stakeholders across business functions including finance, legal, accounting, treasury, real estate, sustainability and procurement.

The support of a buyer’s advisor
A good buyer’s advisor will be independent, transparent, trustworthy—and enhance your success. Buyer’s advisors bring market expertise in project selection and risk management but are also skilled at stakeholder education and engagement. 

Many of the elements described in this blog are both pitfalls and keys to success, depending on whether they are present or absent. Whether your company is just beginning to think about large-scale renewable energy or is looking to build upon your existing sustainability efforts, being aware of potential barriers to success and having a clear roadmap to achieving goals will ensure an informed decision-making process.

Did you find this information helpful? If so, we invite you to download our white paper, Proactively Managing Risks to Accomplish Your Renewable Energy Goals, to learn how to navigate 6 key risks when considering large-scale renewable energy PPAs for your company.


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