It is now mainstream for consumer-facing companies to buy renewable energy, with nearly two-thirds of Fortune 100 companies having set ambitious renewable energy goals. In addition, 48% of all Fortune 500 companies have targets in place regarding renewable energy, carbon reductions, or energy efficiency—this number is up from 43% in 2014. According to the Rocky Mountain Institute, about 8 gigawatts of renewables on the grid today have resulted from C&I demand. Just this month, Target™ announced it will buy 100 megawatts of output from an Infinity Renewables wind farm in Kansas. The clean wind generation will offset power use at 150 Target stores in the area.
Not only are large companies making sustainability commitments, they are also setting ambitious targets and timelines. For example, Anheuser-Busch announced earlier this year that it plans to make the transition to 100% renewable energy by 2025. When discussing the impetus for this target, AB InBev Chief Executive Carlos Brito said, “Cutting back on fossil fuels is good for the environment and good for business, and we are committed to helping drive positive change”.
The rapid advancement of technology has driven the costs of wind and solar down to the point where they can compete on cost with fossil fuel resources. Now there is not only an environmental case for procuring renewable energy, but also a business case. While the production tax credit (PTC) has contributed to the economic viability of wind energy, the PTC will be phased out in the coming years. In many future scenarios, even without tax credits, wind energy is likely to be cost competitive with other sources of new generation, including fossil fuels.
There are several factors that have driven this corporate push for more renewable energy. First is the rise of data centers. While most of the United States is experiencing a flattening load growth, data driven companies are increasing their electricity usage rapidly. Data centers are large consumers of power, and new data centers are popping up all over country. Low load growth creates economic challenges for utilities. Because the data centers provide much needed customer growth, utilities are willing to offer energy solutions that are in line with what the C&I customers want. As a growing number of C&I customers are seeking renewables, they are shaping the utilities’ decisions in regards to renewable energy procurement. In fact, according to a June 2016 report from ACORE, in much of the U.S. it is now more economic to power data centers and factories with renewable energy contracted through long-term power purchase agreements (PPAs) than through their local utility rate.
Secondly, because wind turbines do not burn fuel to operate, long-term wind energy contracts can serve as a hedge against future gas price increases. As PPAs allow the ability to lock in a low rate for an extended period of time, C&I consumers are better able to forecast costs. In recent years, increasing numbers of PPAs have been executed by non-utility purchasers. According to the American Wind Energy Association, in 2015, 52% of all wind energy PPAs executed were non-utility buyers.
Lastly, there is increasing pressure from the public for companies to reduce their environmental footprints. This involves setting emissions reduction targets and sustainability commitments. One of the most effective ways for companies to meet these targets is to purchase large amounts of renewable power through PPAs. Not only can these contracts be for large quantities of power, but they can also be for up to 20 years, providing long-term progress towards emissions reduction.
Check back with us soon to read how transmission infrastructure can play an important role in getting to a cleaner energy future.