Over the last few years, a common question we’ve heard from our energy and sustainability clients is how should they be thinking about renewable energy. Their drivers include: new corporate goals around renewable energy or setting science-based carbon targets, seeking price stability on energy spend, resiliency considerations, and desire to be a market leader. Concurrently, renewable energy sourcing options available to organizations embarking on an enterprise renewable energy strategy continue to expand with five noteworthy developments.

First, the market continues to increase utility scale renewable energy contracting options, most notably via the evolution of the power purchase agreement (PPA). The PPA structure is now available through a virtual arrangement, which is a long term, financial contracting mechanism intended to provide electricity price stability without physical delivery of electricity. The industry, comprised of renewable energy developers, corporate buyers, and service providers, is also continuing to develop PPA structures that will attract more and different types of commercial and industrial buyers, including aggregation options. Aggregation contracting structures are largely intended to bring smaller energy load and new entrant buyers into the fold. Finally, there are new products emerging such as different PPA models and financial institution solutions. These new products are intended to lower the complexity and transactional cost of procuring utility scale renewable energy and thus expanding the marketplace. Yet, even with efforts to simplify and de-risk PPA and virtual contracting structures, many organizations still find current contracting options difficult or not aligned with their desired risk profiles. The following options are often much less arduous for such buyers.

Dispersed site teams often have the best institutional knowledge of efficiency opportunities that exist at their locations

Second, electricity utilities and suppliers are providing more green tariffs options to their customers. This is an encouraging development in renewable energy procurement solutions. Green tariffs have several different forms and, similar to a PPA, require due diligence be performed to ensure the option(s) available meet an organization’s renewable energy and energy cost criteria. These criteria often include: whether or not the buyer retains the environmental attributes associated with the electricity provided, the location of the project in relation to operations, the length of contract term, and what, if any, cost premium is associated with the new tariff.

Third, directly connected renewable energy options, such as rooftop PV and other newer technologies, remain an important component of most enterprise renewable energy strategies. An increasing number of vendors are able to provide solutions globally. This is beneficial to organizations with large operational portfolios who are performing the sourcing effort from a central location, often corporate headquarters. Furthermore, it is becoming more common to include newer technologies, such as battery storage options, when implementing onsite solar, especially in regions with high electricity time-of-use and demand charges. And, for larger developments or operations in areas with grid reliability concerns, exploring microgrid solutions are becoming increasingly practical.

Fourth, for organizations with aggressive renewable energy procurement goals, such as 100% renewable electricity for their operations, procuring unbundled environmental attributes remains a core part of their strategy. Unbundled renewable energy attributes are contractual mechanisms wherein the renewable energy claim is unbundled from the physical electricity delivery (e.g., Renewable Energy Certificate, or REC). Recent market developments, including an increase in the number of organizations with such 100 percent renewable electricity goals, have injected significant volatility in this market due to the sheer volume of buyers seeking these attributes, most notably in the United States and European Union. After some time of stable renewable energy attribute commodity pricing, the current volatility, largely characterized by price increases, has existed for over a year now with only minor periods of cooling (i.e., price reduction). We see this volatility as the new normal as more companies set renewable energy goals and leverage unbundled attributes to meet a portion of those targets.

Fifth, leading organizations are increasingly factoring energy efficiency into their renewable energy roadmap. Weaving together a holistic energy strategy assists organizations in achieving their goals in the most cost effective and efficient manner. Dispersed site teams often have the best institutional knowledge of efficiency opportunities that exist at their locations. Low cost and no cost energy efficiency opportunities, such as lighting and controls upgrades, are still in abundance in most real estate portfolios. Tapping into, and augmenting, the local expertise of the site teams as an enterprise strategy is developed is key to setting meaningful targets and—importantly—achieving those targets.

In summary, the number of organizations setting, and working towards achieving, renewable energy goals will only continue to grow. More companies, especially those with large electric loads, will join their peers in developing and executing on goal achievement plans that are aligned across multiple facets of their organizations. The reasons for setting these goals may differ from organization to organization, but the intended results are largely the same: taking control of energy spend, becoming a more resilient organization, and showing leadership to their employees, stakeholders, and customers.