Simplifying the Procurement of Offsite Renewables
Sustainability is here to stay. Many corporate clients are ready to move beyond procurement of national renewable energy certificates (RECs) to achieve sustainability objectives. Companies increasingly want to be able to point to a specific renewable facility they are receiving their energy from because it presents a more powerful sustainability message for their employees, customers and other stakeholders.
Since 2014, corporations have driven the development of more than 15 GW of new renewable projects. In 2018 alone, almost 7 GW of new renewable energy came online due to commitments by corporations, but unlike in prior years, that commitment came from a number of major corporations, not just the large tech companies like Apple, Microsoft and Facebook who have historically driven the growth of this market.
Bob Kinscherf, vice president of national accounts, recently represented Constellation at the Wall Street Green Summit, where he spoke on the topic of “Simplifying the Procurement of Offsite Renewables” to businesses of all sizes.
Companies increasingly want to be able to point to a specific renewable facility they are receiving their energy from because it presents a more powerful sustainability message for their employees, customers and other stakeholders.
Bob discussed the virtual power purchasing agreement (vPPA), a powerful and increasingly common way that businesses contract for offsite renewable projects. For all of the positives of the vPPA structure, it comes with a significant amount of risk – risks that are taken on by the final retail end users. In Bob’s discussion, most Summit attendees were not aware of many of the risks that come with signing complex (100-plus page) agreements.
For example, risks might include, but are not limited to:
- Unit contingent risk. vPPA customers pay a fixed price for energy only when the wind is blowing or the sun is shining, and these hours and quantities do not align with customers’ actual usage profiles.
- Variable generation risk. If other solar or wind farms are pumping out a lot of energy in the same area, the market price can decrease significantly, and you would have to pay a power purchasing agreement (PPA) price that is higher than the market price.
- Basis risk. The risk of a price difference between power prices at the PPA delivery point and the power price at your load’s location.
Constellation thoroughly understands these nuances and in contrast to the virtual PPA structure, Constellation Offsite Renewables (CORe) products were designed to simplify the process and mitigate these risks. With CORe, Constellation enters into the PPA for the customer, removing the need for an energy buyer to have in-depth knowledge of tariffs, retail energy prices and regional anomalies.
Instead of signing a complicated 100-page virtual PPA, the customer would sign a short retail power agreement. Bob also dove deeper into the concept of “aggregation,” which allows businesses to subscribe to smaller portions of utility-scale projects as part of a larger customer-buying pool, and how working with Constellation can assist in this area as well.
Constellation currently offers two offsite renewables solutions:
- CORe – A business can integrate offsite renewables from an existing asset in its region into its Constellation electric supply
- CORe+ – A business can support development of a new build renewable asset through its Constellation electric supply
Simplified contract language and integration into your energy bill make clear what you are signing up for and the risks you won’t have to worry about. This simplicity can be a large benefit to customers who would rather focus on running their business than on managing wholesale market commodity positions.
To learn more about the sustainability and risk management benefits realized through CORe products, visit our website.