Author: Hans Royal helps the largest institutions and corporations transition to renewable wind energy.
As of May 2016, 28 corporations had publicly announced that they have entered into long-term offsite renewable power purchase agreements (PPAs). As an increasing number of diversified corporations are entering into these contracts in order to realize both the financial and environmental benefits, it begs the question – why wind?
State of the Industry
The U.S. wind industry has been growing steadily since the mid-2000’s. Major drivers have included favorable policy, such as state Renewable Portfolio Standards (RPS) and the federal Production Tax Credit (PTC), as well as decreasing build costs, industry maturation, and technology advancements. In 2015 8,598 MW of wind capacity was installed, representing a 77% increase over 2014 additions. This expansion comprised the single largest type of new generating capacity installed in the U.S. at 41%.
Long-term PPAs, often ranging in term from 10-20 years, have facilitated this growth by allowing project developers to obtain financing from debt, as well as sponsor and tax equity. Last year, the majority (59%) of the 8,598 MW of wind power generation was contracted with utilities and other entities under long-term PPAs. Of these long-term PPAs, non-utility entities – such as corporations – accounted for 52% of new wind power agreements signed. Non-utility participation is a rising trend, as traditional utility buyers have signed 78% of all long-term PPAs since 2013. The additional market share captured by non-utility buyers demonstrates the direct demand increase brought about by corporations eager to act as renewable energy offtakers.
Corporations are increasingly seeking these long-term PPAs in order to claim additionality. Additionality means that, “but for my action, a specific outcome would not have occurred.” In the context of renewable energy or green power generation, additionality indicates that without a green power purchase or investment, new renewable energy would not have been financed, developed, and added to the national grid. The concept and claim of additionality can benefit a range of factors that influence project development including fossil-fuel displacement, emissions avoidance, securing financing, and facilitating critical time-sensitivities.
The Rocky Mountain Institute’s Business Renewables Center, which strives to accelerate the adoption of renewable energy by corporations, recognizes that Corporate “PPAs are undoubtedly the driving force of additionality.” They reiterate that “[C]orporate renewable PPAs [that set] fixed electricity prices can help a renewable energy project secure financing and proceed to implementation, which it might not have done had the project been exposed to wholesale [spot] market price risk.”
Environmental & Social Benefits
Long-term PPAs are also attracting corporates because they have real environmental benefits. Renewable energy produces far fewer carbon emissions than fossil energy. According to the International Panel on Climate Change, life-cycle global warming emissions associated with renewable energy (including manufacturing, installation, operation, maintenance, dismantling, and decommissioning) are minimal. Compared with natural gas, which emits between 0.6 and 2 pounds of carbon dioxide equivalent per kilowatt-hour (CO2E/kWh), and coal, which emits between 1.4 and 3.6 pounds of CO2E/kWh, wind emits only 0.02 to 0.04 pounds of CO2E/kWh, and solar 0.07 to 0.2.
Renewables are also associated with broader social, environmental, and health benefits. The Lawrence Berkeley National Laboratory (LBNL) and the National Renewable Energy Laboratory found that renewable energy saved between $2.6 and $9.9 billion in 2013 by reducing harmful air pollutants such as sulfur dioxide, particulate matter, and nitrogen oxides. LBNL also estimated that greater renewable energy usage in 2013 prevented as many as 290 emergency room visits for asthma, 310 hospital admissions for respiratory and cardiovascular complications, 560 non-fatal heart attacks, and 64,000 work days missed.
A report by the Department of Energy’s Wind Vision further supported that growing wind power could have an enormous social impact on public health. Through 2050, wind could potentially prevent up to 21,700 premature deaths, over 10,000 asthma-related emergency room visits, and nearly 2.5 million missed school days. The cumulative savings for this improved health exceeds $100 billion.
So really, the question is – Why not wind?
Interested in learning even more about the benefits of a wind PPA? Reach out to our team of experts today – we’d be happy to have a conversation about whether a renewable energy power purchase agreement makes sense for your organization and how we can help.
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