Pens at the Ready:From Paris to Power Purchases

Energy and Climate Report provides current, thorough coverage of clean energy, efficiency, and climate change legislation, regulation, policy, legal developments, and trends in the U.S. and...

By Andrea Vittorio

April 21 — While the world’s policy makers get ready to sign a new deal on climate change, many big companies are already signing deals of their own as they start to capitalize on the trillion-dollar low-carbon energy investment opportunities that the agreement represents.

The climate pact, reached in Paris at the end of last year, is set to be officially signed in New York City on Earth Day. Meeting its ambitious goals to rein in heat-trapping emissions would require an estimated $12.1 trillion of investment over the next quarter century in wind, solar and other alternatives to fossil fuels.

Companies such as Google and Ikea say they are doing their part by driving what’s become an extraordinary uptick in corporate purchasing of renewable energy.

Google became the first company in the U.S. to sign a large-scale renewable power contract in 2010. Since then, it’s “catalyzed a whole industry” as more companies do the same, said Michael Terrell, Google’s senior policy counsel for energy and sustainability.

“What’s most exciting to us is to see how many companies are getting in the game,” he said in a press briefing April 20. In 2015, companies collectively signed more than 3 gigawatts in renewable deals, which Terrell said accounted for “a very significant portion” of the new renewable capacity that was installed on the U.S. grid that year.

Going for 100

“I think you’re only going to see these efforts accelerate” in the wake of the Paris accord, he said.

In the runup to the treaty talks, a group of about a dozen big companies pledged to eventually be powered entirely by renewables as part of a campaign called RE100. Now, there are 58 companies on board, including tech giants like Google and Microsoft as well as major retailers, from Ikea to Wal-Mart (183 ECR, 9/22/14).

Corporate commitments have come against a backdrop of record-breaking clean energy investment, which reached $328.9 billion globally in 2015 and is now seeing twice as much global funding as fossil fuels, and improving cost-competitiveness, according to Bloomberg New Energy Finance.

Companies with 100-percent renewable goals are on average halfway there, mainly using a combination of power purchase agreements (PPAs), renewable energy certificates (RECs) and direct investment in their own projects.

Corporate Renewable Deals

Delivering Returns

Ikea, one of the group’s founding members, produces enough on-site solar and off-site wind power to cover 70 percent of its energy consumption today and wants to become energy independent by 2020.

The world’s largest furniture retailer—which says it has a “friendly competition” with Google over who is installing more renewables—is also cutting energy use and costs by installing more efficient lighting at its stores, for example.

“We’ve been really pleased, not just from a sustainability point of view but from a financial point of view,” Ikea’s chief sustainability officer Steve Howard told Bloomberg BNA. “These have proved to be a good, smart set of investments, delivering good returns for the business as well.”

Fortune 100 companies with clean energy and climate targets reported a collective $1.1 billion in annual savings in 2012, a recent study showed.

Buyers’ Market

Big corporations are becoming more vocal about what they want to see from utilities, regulators and other power providers. In the summer of 2014, Wal-Mart and Facebook joined 10 major U.S. corporations to issue a set of “renewable energy buyers’principles” outlining how to make it easier for them to purchase renewable energy (133 ECR, 7/11/14).

“The truth is these companies aren’t in the energy business,” Marty Spitzer, who directs U.S. climate and renewable energy policy at the World Wildlife Fund, told Bloomberg BNA. “They’d rather just be able to buy the products they want off the shelf.”

So WWF and the World Resources Institute have been working with individual utilities and a trade association for investor-owned utilities to develop new products they could offer to big corporate buyers. Now, not only is the speed of corporate renewable purchasing accelerating, the type of transactions happening is also changing as companies go from bypassing utilities to coordinating with them for the first time.

Deals with utilities accounted for more than one-tenth of corporate transactions in 2015. “We’re going to see more of these utility-corporate deals,” known as green tariffs, “going forward,” Spitzer said.

Policy Advocates

Companies are also actively supporting renewable energy policies at the state and federal level, including the president’s signature Clean Power Plan. The plan, which set new carbon pollution limits on the nation’s power sector, has been put on hold by the U.S. Supreme Court.

But a number of high-profile tech companies, whose demand for energy is climbing along with the demand for data, recently came to its defense in an amicus brief.

Anne Kelly, who as a senior program director at the nonprofit Ceres helps turn companies into policy advocates, called the move by Amazon, Apple, Google and Microsoft “stunning.”“These are companies that are deeply committed to the low-carbon economy and just want to see the transition happen,” she told Bloomberg BNA.

More than 100 other businesses are showing their support for the power plant rules and other energy policies implemented under the Paris Agreement as part of a “low-carbon USA”statement issued this week.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com