Recent trends demonstrate a rapid growth in corporations directly buying renewable energy from wind, solar and other renewable energy generators. Renewable energy capacity under corporate power purchase agreements (PPAs) doubled each year from 2012 to 2015. For wind energy generation, corporate purchasers constituted 52% of capacity contracted through PPAs in 2015, up from only 5% in 2013. Many corporations are looking to increase reliance on renewable power to meet internal sustainability or environmental policies, and dramatic decreases in renewable costs have increasingly made renewables competitive with traditional power sources. The long-term nature of most PPAs can be attractive to businesses seeking the stability of fixed electricity costs, while renewable developers gain a dependable off-taker, often a critical component of securing financing.
This trend was punctuated by the recent announcement by MGM Resorts International that it plans to pay $86.9 million for the ability to exit Nevada Power’s utility service and purchase its own electricity on the wholesale market. Some states, including Nevada, require approval from state regulators and the payment of an exit fee before being able to purchase power directly from generators across utility transmission lines. As the largest purchaser of energy from Nevada Power (at nearly 5% of annual energy sales), MGM determined it was worth paying the substantial exit fee to control its ability to directly purchase renewable power.
Corporate purchasing of renewables is growing across a variety of sectors and markets. Large corporations contracted for 3.6 gigawatts (GW) of power in 2015 and the first quarter of 2016, a three-fold increase over 2014. Small and mid-sized corporations may lack resources or buying power to support stand-alone PPAs, but recent trends suggest a growing market for aggregating resources. A group of nonprofit organizations in the US, called the Renewable Energy Buyers Alliance (REBA), has been formed to facilitate the process of grouping smaller companies together to achieve economies of scale. And while large technology companies have led the way in recent years, pharmaceuticals, industrials, and retailers have also entered the renewable energy market.
Overall, with the rapidly falling price in renewables and corporate policies encouraging more sustainable business practices, it appears likely that the rise of corporate renewable PPAs will continue.