When US telecommunications giant Sprint set out to buy the power it needs to meet its target of sourcing 10% of electricity from renewables by 2017, it encountered a few surprises along the way. The biggest was just how hard such a seemingly simple task proved to be.
The complexity and expense of navigating through its options and getting deals done was far beyond anything the company anticipated, says Amy Hargroves, Sprint's director of corporate responsibility and sustainability. "We know cost-competitive renewable energy exists, but the problem is that it is way too difficult for most companies to buy."
Sprint is not alone in its frustration with the status quo. It is one of 12 blue-chip companies that have joined forces to push for market changes that will allow them to get the renewable energy they want at the scale they need. The group issued a set of renewable-energy buyers' principles in July laying out their expectations.
"By partnering with this influential group of companies we believe we are sending a strong and unequivocal signal to the marketplace that there is a significant unmet demand for renewable-energy projects," says Curtis Ravenel, global head of sustainability at Bloomberg.
Household names
The group, which includes such household names as Facebook, Johnson & Johnson, General Motors and Walmart, has a combined renewable-energy demand of 8,400TWh a year through to 2020. But that is just the beginning, says Bryn Baker, manager of renewable energy at global conservation organisation WWF, which worked with the companies to develop the principles. Many have longer-term targets of supplying as much as 100% of their electricity needs with renewables.
Although the principles grew out of a conversation about US-based challenges, many are multinational corporations looking for solutions that apply across their operations. "They are not just thinking about procuring renewable energy in the United States," says Baker. "Companies are going as aggressively after renewables in China and Brazil and throughout their supply chain as they are in the US. Many of the challenges they face and the potential solutions are very much applicable globally."
The challenges are numerous. In a market dominated by vertically integrated regulated utilities, simply accessing renewable energy is an issue. For the most part, the system is not set up to grant consumers a choice. Nor does it give utilities much leeway in carving out a specific subset of customers and procuring a specific type of electricity on their behalf.
"It's not news to most utilities that their largest customers want this," says Baker. "I think the challenge is that it's unclear what they do about it."
A handful of utilities have taken some first steps to working this out, convincing regulators to sign off on new types of tariffs that allow them to sell clean energy directly to large end-use customers who want it. But they do have their limitations, says Brown.
Duke Energy in North Carolina, for example, launched a pilot programme in December, known as Green Source Rider, that only applies to new load coming on to its system. The reason is that the utility has already lined up the resources it needs to serve existing customers, says Duke spokesman Randy Wheeless. "One issue with offering this programme to existing load is that if it got too popular, and everyone wanted new renewables for their load, suddenly do you start to have stranded investment in your existing generation?"
Finding ways around that issue will be important if corporate customers are to meet their renewable-energy goals, says Baker. "I think one of the most important conversations to follow on from these principles is how can we improve the structure of these green tariffs so that they are not just limited to new load?"
Price protection
Another important conversation is around rates and how the tariffs can be structured to pass along both the costs and benefits of renewable generation more effectively. "One of the advantages renewables offer is protection from price volatility due to fluctuating fossil-fuel prices," says Baker. "I think customers would like to find a way to better share in that benefit."
Flexibility is also key. Some companies want long-term, fixed priced contracts, while others are not in a position to make that kind of commitment. "Having a broker in the middle, like a utility, that can structure different lengths of packages is an ideal solution," Baker says.
By finding ways to give customers what they are looking for, utilities will increase the likelihood that companies will work with them, rather than around them, she adds. Already, auction site eBay has won the right for large consumers in Colorado to contract directly with renewable-energy generators. Prior to that, only utilities in the state were legally able to buy electricity from independent power producers. There is also a growing interest in installing on-site generation.
"This is about these companies wanting to add their perspectives to discussions under way across the country about new utility business models and the future of the electricity system, which is undergoing a huge amount of change right now," she says. "I think there is an opportunity for customers, utilities and competitive suppliers to look forward into the future to where some of these business models are headed and how to get ahead of that future and capitalise on the opportunity."
Outside the traditional regulated utility markets, customers have more options for acquiring the renewable energy they need. But they are not finding it any less complicated. "I'd say at a general level, the challenges in competitive or deregulated markets are more on the side of how do we make these transactions simpler and more standardised," says Baker.
Matching
One difficulty is matching suppliers and their projects with potential buyers. "It's a little bit like drinking from a fire hose for the companies in terms of the number of opportunities they are offered. The challenge is in narrowing those down and find those that work best for them and their circumstances," says Baker.
Sorting through their options and meeting their goals deal-by-deal takes time and money - not something these companies want to do. "Some companies have built up the capacity and are quite sophisticated about going after these opportunities but, at the end of the day, they're not in the energy business and they don't want to be," she says.
The market could do more to improve the way buyers and sellers react, but progress is being made. The Rocky Mountain Institute, a US sustainable energy think tank, plans to launch a business renewables centre designed to connect corporate consumers with suppliers and provide information and resources to help companies navigate through the process of selecting projects and finalising deals. "I think that is going to be a hub of activity over the coming months and years in trying to streamline a lot of these market dynamics," says Baker.
The release of the buyers' principles has generated a lot of interest from other companies looking for a way past the challenges of incorporating more renewable energy into their electricity supply, says Baker, but it is only a first step. "It is not just about putting the principles out there, but actually working together to try to accelerate change," she says. "This group has a huge amount of purchasing power, and it is enough to start to shift markets."
THE CLEAN DOZEN - A COMBINED NEED OF 8,400TWh/Year
Bloomberg Privately-owned financial software, data and media company, employing around 15,000 people in nearly 200 offices around the world
Facebook Online social networking service valued at more than $100 billion when it went public in 2012
General Motors Multinational automotive manufacturer that employs more than 200,000 people and produces vehicles in 37 countries
Hewlett-Packard (HP) Multinational information technology corporation, leading manufacturer of personal computers
Intel Semiconductor chip maker corporation with total assets exceeding $90 billion
Johnson & Johnson Multinational medical devices, pharmaceutical and consumer packaged goods manufacturer
Mars Third-largest private US company, makes confectionery, pet and other foods
Novelis Leading producer of rolled aluminium, global leader in drink can recycling
Procter and Gamble Consumer goods multinational with total assets rated at nearly $140 billion in 2013
Recreational Equipment Private retailer of outdoor recreation equipment, sporting goods and clothing. Sales topped $2 billion in 2013
Sprint Third-largest US wireless network operator, with over 50 million customers
Walmart Multinational retail giant with more than 11,000 stores in 27 countries.
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