Posted in GreenBiz
April 21, 2022

Q1 2022: The hottest trends in corporate renewable energy procurements


Corporations continued to ink new renewable energy deals during the first quarter of 2022, but spiraling costs for power purchase agreement (PPAs) are making deals harder to find — and ink.

Still, the first three months of the year brought innovations in the types of energy resources contracted, with an uptick in corporate interest in geothermal. Here’s an analysis of renewable energy procurement trends in Q1 2022.

Q1’s notable corporate procurement deals

Higher prices notwithstanding, Q1 saw impressive new deals, both in capacity and in new players in the mix. Here are some notable mentions:

  • The quarter’s largest deal came from Verizon. The company announced a suite of seven new virtual power purchase agreements (VPPAs), which it calls Renewable Energy Purchase Agreements, with a collective capacity of 910 MW. The new deals bring the company’s procurements to 2.6 gigawatts since December 2019, according to a release.
  • Other telecommunication companies had a strong showing as well. AT&T announced two VPPAs, collectively reaching 155 MW, and Comcast inked a deal for 250 MW of solar.
  • U.S. aluminum producer Alcoa inked a pre-sign agreement for 573 MW of wind in Spain. The deal, which is working on securing permits, is the latest industrial manufacturer to look for ways to green its operations. Skyrocketing energy prices in Europe has lead to energy expenses accounting for 60 percent of the total costs of primary aluminum production, leading the company to search for new energy options.
  • Meta (the tech giant formerly known as Facebook) inked three new deals with a collective capacity of 581 MW.

Clean energy procurements get more expensive

Like everything else, the cost of procuring renewable energy is on the rise. The increase from last year is a staggering 28.5 percent, according to an analysis of the marketplace conducted by LevelTen Energy.

The cause of that increase is a confluence of factors on both the supply and demand side, as well as rising soft costs.

It’s not an overstatement to say that just about every aspect of project development has become more challenging than just 2 short years ago.

On the supply side, renewable energy technologies have been impacted by supply chain disruptions, with the cost of some components skyrocketing. For solar, this has been compounded by a U.S. crackdown on imports from specific Chinese producers tied to horrific human rights abuses and forced labor practices. And don’t forget, the U.S. also has imposed a tariff on imported solar panels, which the Biden administration just extended for four years (although with some requirements eased).

Meanwhile, demand is on the rise. More corporations were already looking to ink deals to meet clean energy targets, leading to a run on the market. This has been exacerbated since the start of the Ukraine war, with more organizations looking to double down on renewable energy investments and get off fossil fuels. All this has led to a pinch on the availability of contractors to build projects.

Finally, soft costs are also rising, with issues such as an interconnection backlog and permitting resistance adding to the price tag. Interconnection costs can sometimes double over the course of a project, Rob Collier, vice president of energy marketplace at LevelTen, told Utility Dive.

A new report from Lawrence Berkeley National Laboratory find that the interconnection backlog is becoming a key barrier to the clean energy transition. While there are enough planned projects to bring the U.S to 80 percent clean energy by 2030, if the past is a predictor of the future less than a quarter of them are likely to be built.

“It’s not an overstatement to say that just about every aspect of project development has become more challenging than just two short years ago,” wrote Gia Clark, senior director of developer services at LevelTen, in the executive summary with its analysis.

The result is project online dates continuing to slip into the future. Edison Energy’s market update report finds 30 percent of new projects are offering longer waits to come online compared to one year ago. The number of projects expecting to come online 2025 or later spiked by 90 percent.

What can corporations do? Support the Build Back Better Act. Without policies, it’s likely PPA prices will continue to rise. Corporations know how to lobby Congress when they want something. So do that.

Geothermal is in the mix

The buzz around geothermal has been growing. With its unique properties, it’s easy to see why.

Geothermal could serve as a firm, clean energy resource — meaning it isn’t intermittent, like solar and wind — and offers promising opportunities to retrain a fossil fuel workforce that is good at drilling stuff.

This quarter, we saw an uptick in the number of deals between geothermal projects and energy providers. California-based community choice aggregator Peninsula Clean Energy entered into a 15-year PPA for 26 megawatts of geothermal energy from Nevada. Sacramento Municipal Utility Districts in California entered a 10-year agreement for 100 MW of capacity. And a German energy provider entered a 20-year deal near the city of Mannheim.

It isn’t unheard of for geothermal to be the resource in a renewable energy deal — but it is rare. Based on past research we’ve done for our quarterly procurements tracker, the only U.S. corporation to have inked a geothermal agreement was Controlled Thermal Resource in Q1 2020, when the lithium project developer was betting it could extract lithium from geothermal brine from California’s Salton Sea.

While geothermal isn’t a go-to energy resource for corporations just yet, these early deals indicate that the technology may be maturing, fitting more use cases and getting more affordable. Given the imperative to deploy more dispatchable clean energy technologies, corporations should certainly consider how they could ink deals to encourage the development of more geothermal projects.

A word about the clean energy tracker

You may notice that this quarter’s Clean Energy Deal Tracker doesn’t include our iconic Clean Energy Deals Leaderboard.

When GreenBiz began tracking corporate clean energy procurement trends four years ago, the task was relatively straightforward. Only a handful of companies were procuring renewables through PPAs, and there had only been a couple of dozen deals total. When organizations went through the complex and laborious process of structuring a deal, they wanted people to know. They published press releases and shared details.

Today, corporations have truly changed the renewable energy landscape. They’re responsible for more models and contract structures to make renewable energy accessible to more types of companies. The contracts are becoming so diverse and commonplace that organizations are talking about them less. And when they are, information is often reported in varying formats.

This is great news for the maturation of the clean energy market. But it makes the job of compiling deals much more complicated and increasingly limited. As a result, we are sunsetting the leaderboard and will instead focus on analyzing top trends.

[Interested in learning more about energy marketplace news, trends & analysis? Subscribe to our free Energy Weekly newsletter.]

April 21, 2022 at 02:35PM

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