- Issue: Spring 2017
- Author: Laura Paskus
Three and a half years ago, Steven Skarda traveled from Procter & Gamble’s corporate engineering office in Ohio to WWF’s headquarters in Washington, DC. He faced a challenge: The multinational company had set ambitious renewable energy goals for its US-based facilities in response to the climate crisis, and as the company’s lead on climate and energy issues, it was Skarda’s job to figure out how to hit those targets. WWF said it could help.
Procter & Gamble had at that point been focusing its efforts on a manufacturing site in Georgia, and WWF had already convened conversations with Georgia Power and other large corporations with operations in the area— including The Coca-Cola Company and Mars—about getting more renewables onto the grid in the state. But Procter & Gamble still wanted more solar and wind power for its operations.
At the time, regulated monopolies like Georgia Power offered few or no options for customers to buy renewable energy directly, and weren’t planning to offer them. Few utilities knew that more corporations wanted renewable energy to power their operations. With pressure from customers, employees, and shareholders— and based on a growing realization of the impacts America’s electricity footprint has on the climate—many corporations were already trying to reduce their reliance on fossil fuels and cut greenhouse gas emissions. Not only that, but as the price of electricity from renewables continued to drop dramatically, it made sense for the bottom line, too.
But even in places where utilities were interested in diversifying and meeting their customers’ needs, public utility commissions and other stakeholders often weren’t on the same page. That kept individual companies from getting what they wanted—and also prevented large-scale changes across energy markets.
Watching this play out, Marty Spitzer, who directs WWF’s work on climate and renewable energy, says that while some companies had been talking one-on-one with utilities about renewables, they just weren’t getting as far as they wanted, as fast as they needed. “The conclusion we came to was that we needed more companies in the game,” he says. “Their voice needed to be louder.”
At the meeting in DC, Skarda was joined by representatives from 13 other corporations and three other nongovernmental organizations: BSR (Business for Social Responsibility), Rocky Mountain Institute (RMI), and World Resources Institute (WRI). The meeting was “a chance for everyone to decide what hurdles they all faced and how they could work together to overcome them,” says Spitzer.
From Skarda’s point of view, Procter & Gamble wanted to help transform the electricity industry, and was ready to get started. “I give a lot of credit to the WWF team,” he says. “They understood how powerful it was to have all of us in the room.”
The group immediately put that power into play with two new initiatives to help companies quickly buy more green power.
Participants decided to create a public statement of principles that outlined what they needed from utilities, utility regulators, and the renewable energy marketplace. And they planned to create a resource center that could help companies buy renewables directly in the few US states where that was allowed.
Yet even after the meeting, Skarda was skeptical: “I remember having a conversation with Marty and saying, ‘Where are we going with this?’”
The group quickly proved the seriousness of its intent. The principles they hammered out included cost competitiveness; greater choice in procuring renewable energy; the ability to have real impact by adding new renewable energy projects to the grid instead of just buying from existing projects; and the opportunity to work with utilities and regulators to expand buying choices.
“The principles far exceeded my imagination about what would be possible,” says Skarda. In fact, he says, they’re “transforming how the utility industry thinks about renewable energy.”
Today, more than 60 iconic, multinational companies that represent enormous demand for renewable power have signed on to the Corporate Renewable Energy Buyers’ Principles. Together, these companies project enough demand for renewable energy by 2020 to power 4.2 million American homes.
For companies navigating their own purchases of wind and solar farms, the business resource center aimed to make those transactions simpler and faster. Known for technical analysis and detailed studies of market transactions, RMI took the lead in creating the Business Renewables Center, which launched in early 2015. Member companies, both buyers and sellers of renewable energy, now number nearly 170.
The Buyers’ Principles and the Business Renewables Center are the core initiatives of what has become the Renewable Energy Buyers Alliance, or REBA. The alliance connects the work of WWF and RMI with WRI, which leads state-level dialogues between corporate buyers and utilities, and BSR, which runs an initiative that helps data centers boost their renewable power use. Through REBA, the organizations work together to make renewables more readily available and accessible to large-scale energy buyers.
The alliance’s goal is to help US corporations add 60 gigawatts of renewable energy capacity to the grid by 2025. That’s a lot of power—equivalent to half of all the wind and solar energy added to date.
All this makes REBA, says Spitzer, an alliance of global significance.
The 2015 Paris Agreement, negotiated under the United Nations Framework Convention on Climate Change, sets goals to make the world carbon neutral by mid-century and to limit global warming to well below 2 degrees Celsius— aiming for 1.5 degrees. Quickly getting on track to reach these goals would provide the best chance to avoid the worst impacts of climate change. The agreement, which went into effect in November 2016, included emission reduction targets from nearly 200 nations and is the most ambitious and important global commitment to curb climate change in history. By its design, it also creates the opportunity for nations to continuously strengthen their climate actions over time.
Strengthening country actions over time is critical because even if the new US presidential administration doesn’t withdraw from the Paris accord or roll back federal policies designed to meet US commitments—which it has promised to do—on a global level, a gap remains between pledges made in Paris and what scientists say is necessary to avoid the worst climate impacts. In effect, even if all countries’ commitments set in Paris are met, the agreement would only get us halfway there.
To help close that emissions gap, REBA’s 60 gigawatt goal is intended to reduce emissions beyond the US’s Paris commitment. But with the new administration’s support for the Paris deal uncertain, Spitzer says, this bold 60 gigawatt goal may end up having to help replace US government action.
And by making the business case for renewable energy, Spitzer says, corporations give policy-makers courage to align emissions reductions with what scientists say must be done to prevent catastrophic changes and protect public health, water supplies, and economies.
All this makes voluntary corporate action critical, says Spitzer. “Business, he says, “is going to be particularly important for reducing actual emissions and helping rally both the public and government leaders to take more serious steps to solve the climate crisis.”
Renewable Energy Economics
Today the business case for renewable energy is clear.
“Many companies are very motivated by wanting to do the right thing,” says Letha Tawney, director of utility innovation at WRI’s Electricity Initiative. “But it sure helps—and makes the whole effort more sustainable in the long term economically—if they’re deriving a business benefit.”
Tawney recalls watching the price of renewables falling during 2012 and 2013. “We looked at that and thought, ‘Our entire renewable energy strategy needs to change,’” she says. “And we saw a shift in the corporate buyer’s strategy: Now a CFO is interested because it makes business sense, not because it’s good PR, though that’s important, too.”
Today, top corporate decision-makers are becoming sophisticated players in electricity markets. And they’re thinking about price certainty. Fossil fuel-based electricity prices are volatile; with wind and solar energy, once a facility is built, long-term prices are essentially locked in, because the ongoing cost of the “fuel” (the wind and the sun) is zero.
Taking advantage of lower power costs and locking in those lower prices, says Tawney, makes corporate buyers more competitive. It also expands the number of people at the table advocating for renewable energy technologies.
Every renewable energy project has direct and indirect impacts on the market and economy, says Lily Donge, a principal with RMI who leads the Business Renewables Center. As electricity from wind and solar energy continues to become even cheaper, and technologies continue to improve, the free market will drive more project expansion. And every time companies demand new wind and solar projects, she says, they’re also creating new jobs and boosting local economies.
“There’s a ripple effect: A company’s customers and employees can become increasingly aligned on a common vision” says Donge. That’s a fairly new phenomenon, she says.
Facebook was involved in discussions about the Buyers’ Principles from the beginning. “Our business is all about connecting people,” says Bill Weihl, Facebook’s sustainability director. “Running those services requires significant infrastructure that uses a lot of energy, and we’re committed to powering all that connectivity with the smallest footprint possible.”
The company had worked privately with WWF and WRI in the past, he says, but it wanted to do more. It didn’t want to just sign on to another letter or statement of support. Its employees wanted the company to create change directly. About five years ago, says Weihl, Facebook committed to powering its infrastructure with 100% clean energy. And while no one expects the change to occur overnight, they do want it done quickly, while also adding meaningful amounts of renewable energy to the grid.
When looking to build a new data center, for example, the company isn’t just looking for land or a workforce—Facebook also wants assurances that the region’s utility can supply renewable energy. And not just for itself. “When we move into a new area, we’re not just looking for a contract for ourselves: We like to see market access open up to as many other companies as possible,” says Weihl. “When we or other companies have gone into North Carolina or Oregon to build data centers, other companies tend to follow.”
That’s where REBA and the Buyers’ Principles come in, says Weihl. Facebook found it could get further, faster, by working with other companies than by trying to do it on its own.
Like Facebook, General Motors (GM) uses a lot of energy. Each year, the company spends about a billion dollars on utilities, including water, gas, and electricity, says David Tulauskas, GM’s director of sustainability. “We’re always looking at reducing that cost,” he says.
Tulauskas, too, has been part of REBA discussions since the beginning. “If you build it, we will come,” he jokes, pointing out that during early discussions with WWF and WRI, a lot of time was spent talking about “pain points” that would need to be alleviated to create a more harmonized, systematic approach to procuring more renewable energy.
In 2016, GM completed its largest green energy purchase to date—making all of its facilities in Texas powered by renewable energy. “And we’ve made a commitment to go 100% renewable energy by 2050,” says Tulauskas, adding that renewable energy has been a “mainstream option” for GM for a long time. The company implemented its first low-carbon energy project, a landfill gas project at one of its factories, more than 20 years ago. And the company has accelerated its use of renewable energy for a couple of reasons, including GM’s significant focus on addressing climate change. The company wants to be a part of the solution, he says, especially as the transportation industry shifts toward the use of electrified vehicles.
“We want to make sure the grid is cleaner, because it maximizes the benefits of electrified vehicles,” he says. “We don’t want to transfer the problems from our tailpipes to smokestacks, so we’re taking kind of a holistic approach.”
He says the Buyers’ Principles laid out what could be done more consistently, what could be standardized, and how companies and utilities could streamline renewable energy projects.
Working with utilities through the Buyers’ Principles has opened new doors for many companies, says WWF’s manager for renewable energy, Bryn Baker. “Companies don’t want to be in the energy business,” she says. “They would much prefer to buy renewable energy through their utility, and therein lies the opportunity for collaborative conversation.”
Conversations between big companies and utilities are happening with greater frequency now, thanks to REBA and the Buyers’ Principles. Those conversations have also changed.
“When you bring to the utilities a group of the largest, most iconic buyers, and have them all in the room together, you can have a very different conversation with that utility about how they might want to think about moving their products and meeting their customers’ changing needs,” says WRI’s Tawney. She says that when these conversations first started, organizations like hers were still trying to explain why buyers found value in renewable energy and trying to address misconceptions about technological problems (like intermittent service) and price. “The nature of the conversations with the utilities has just changed enormously in the past two years,” she says.
Aakash Chandarana, vice president for rates and regulatory affairs at Xcel Energy, agrees. “There are some perceptions out there from time to time that utilities are not very innovative and that we’re not responsive enough to customers because we’re monopolies. I don’t think those are unfair assessments.” But more and more utilities are trying to create solutions, says Chandarana, who participates in facilitated dialogues with corporate buyers, “by listening to their customers and trying to understand what drives their choices.”
For example, Xcel had a new program recently approved for its Minnesota customers. By signing up for Renewable*Connect, Minnesotans will be able to “subscribe” to electricity from solar or wind facilities for one, five, or ten years.
“The longer you sign up, the more money you have the likelihood of saving,” he says. “Our customers like the certainty and transparency of knowing where their energy is coming from, and businesses can budget for what their energy costs will be during that period of time.” Such customer choice programs are becoming more common across the country, giving homeowners and businesses the opportunity to be part of the switch to renewable power.
Chandarana says the utility appreciated the invitation from REBA to enter into dialogue with corporate buyers. “To the extent that there’s desire to decarbonize and improve the environment, utilities like Xcel have a critical role to play in adding renewables to the system and providing the benefits of those renewables directly to customers,” he says. “With REBA, we can help bring products and services into the regional marketplace that our customers can use to make their sustainability goals and, at the same time, reduce their carbon footprint.”
Utilities, he adds, are also talking to one another more than in the past. “We can sit down together and understand what others are doing in their respective footprints, and see if there’s something new we can learn from each other,” he says. “As other utilities watch the reaction of customers, like to Renewable*Connect, they can pick up the phone and call us, and say, ‘How did you do that? How did you build that? What are the principles that went into that?’”
The acceleration of renewables procurement has astounded everyone working with REBA. But there’s still work to be done, says WWF’s Baker. That includes making it easier for small buyers to participate—by aggregating their demand and lowering the transaction costs—and bringing in more of the biggest energy buyers, like heavy industry, hospital networks, and the military. And ultimately, it needs to become easier for everyone to buy cheap, clean renewable energy, which means utilities use the flexibility they already have to offer renewables widely, or that utility rules and policies in some states across the country may need changing.
While REBA has focused on corporations, WRI’s Tawney thinks it’s going to have an impact across markets. If buying renewable energy makes sense for the largest corporations, like Walmart and Google, she points out, public utility commissions and cities will start realizing that it’s good for all ratepayers.
With prices still falling and the demand for renewables rising, Tawney thinks the market is going to continue expanding, regardless of policies or political uncertainty. “We need to drive a truck through the window that opened when the price of renewables fell—and we need to do it as fast as we can,” she says. “We don’t need to have a fight. It’s apolitical. It’s good common economic sense. And if you increase the number of people at the table, then it’s harder to stop.”
Learn more about Corporate Renewable Energy Buyers' Principles.