Integrating Offsite Renewables into a Holistic Energy Management System

12 Sep 2016

We have reached a point where most businesses are aware of, and accept as truth, renewable energy’s environmental and financial benefits. Until recently, however, renewable’s upfront investment was too great for many organizations to even consider implementation. The availability of onsite solar power purchase agreements (PPAs), where developers absorb all of the initial costs in exchange for “ownership” of the power generated, has created a viable option for commercial and industrial (C&I) entities to reap the benefits of renewable energy.
 
While onsite PPAs have broadened the availability of renewable energy, many organizations don’t have the space or appropriate infrastructure to house onsite renewable projects. This market gap has spurred the growth of offsite renewable PPA offerings, and third-party consultants to help companies determine what makes the most sense for their unique business needs. The combination of the two have generated broader appeal and adoption of renewable energy for a wide range of companies. 
 
Offsite PPAs for renewable energy projects are especially attractive to large energy users, who are looking to complement or create a more holistic energy management system. Such PPAs allow organizations to lock in a consistent rate for several years, as opposed to being at the mercy of fluctuating, and sometimes volatile, rate increases. Additionally, renewable energy is less expensive in many markets than non-renewable sources; that extra savings will have a very positive impact on the bottom line.
 
Forward-looking companies such as Microsoft and Procter & Gamble, have signed PPAs with developers of large-scale renewable energy projects, and are already supporting their sustainability goals and making their future energy costs more predictable. These offsite renewable PPAs are no longer limited to the largest energy users. Smaller companies can also benefit from the energy savings offered by large-scale renewable PPAs, through an innovative program that warehouses PPAs for a period of time, and allows smaller chunks to be acquired by a variety of buyers. This program enables smaller buyers to benefit from the scale of larger projects (best pricing) via a collaborative approach.

Most people associate offsite renewable projects with wind turbines and solar panels in wide open spaces; depending on factors like topography, climate, or space limitations, however, wind and solar may not necessarily be viable options. Other sources can be vital components of an offsite renewable energy program, depending where the source is located. Such alternatives include:

  • Biomass, which is energy derived from organic materials, such as virgin wood, energy crops, agricultural residue, and food waste. For obvious reasons, biomass availability is most commonly found in more rural areas. 
  • Landfill gas (50 percent methane, 42 percent carbon dioxide, seven percent nitrogen, and one percent oxygen) can be captured as waste decomposes and is converted into energy.
  • Hydroelectric, which converts energy created by dammed waterways.

 Navigating the complications and nuances of securing a PPA for offsite renewable energy is not easy; in fact, the wrong choice can result in a disaster that unnecessarily increases risk, costs millions of dollars, and could tarnish an organization’s reputation (as well as its bottom line). More and more, companies are turning to renewable energy advisors to handle the myriad details that go into ensuring their PPA will achieve the technical and economic benefits of offsite renewable energy. In vetting an advisor, organizations should concentrate on the following areas: 
 

  • Track Record: Ask how many PPAs a prospective partner has helped clients execute, and be sure to inquire about specifics. They should be able to share information regarding the number, size and scope of transactions, and in which markets and industries these projects have been completed.
  • Market Access: A third-party energy advisor should be able to share the number of projects on which comprehensive economic and developmental intelligence is maintained—and how frequently it is refreshed. Learn how quickly they can share a short list of projects based on specific criteria, and how they develop these criteria. 
  • Analytics: The economic and risk analytics required to properly arm senior corporate decision-makers are one of the most critical capabilities an energy advisor needs to provide. Developer-supplied project data needs to be reviewed and normalized. An advisor should be able to explain how they evaluate and contextualize future energy prices, how they take weather variations into account, and how developer and project risk are evaluated and ranked. 
  • Developer Relationships: An energy advisor needs to be fully independent and invested in the best interests of the customer, not the developer. Inquire about their compensation structure with developers and whether or not it is subject to negotiation. It is also important to know if the energy advisor accepts compensation from developers to influence project inclusion or selection. 
  • The Team: Renewable energy analysis and execution requires a team with multidisciplinary knowledge and experience. For example, find out how many renewable energy transactions staff have executed before joining the firm. It is also important to know how the team handles accounting treatments of PPAs.

Organizations have unprecedented options to enjoy the many benefits of offsite renewable energy. Making sense of available opportunities and properly vetting third-party advisors, helps companies position themselves to make a decision that meets sustainability requirements, and has a positive impact on energy costs for years to come. 


Duncan McIntyre is the president of Altenex, an Edison Energy Company.

Altenex | http://www.altenex.com


Volume: 2016 September/October