US wind adapts as corporate demands shift
How can US wind companies adapt to changing corporate demands?
That is the topic we looked at on 12th August, when we were joined by a panel of experts to discuss ‘How are US firms going to step up their green power demands?’ in our webinar ‘Countdown to COP26’.
We hosted this one-hour discussion in conjunction with Holland & Hart, and featured voices from both sides of the buyer-seller divide. The webinar was hosted by Rochelle Rabeler, partner at Holland & Hart.
With COP26 set to be a major talking point in the run-up to November, we wanted to focus on the renewables issues that are currently foremost in US corporates’ minds; and the minds of the companies that supply their power.
The result was a conversation that ranged from the need to site wind and solar projects in areas of corporate power demand; evolutions in power purchase agreements (PPAs) as battery storage emerges; and why companies need to work more closely to solve the technical issues that will emerge.
Developers branching out
More than 26GW of clean energy projects came online in the US in 2020, according to the American Clean Power Association in July. These included 16.9GW of wind and 8.9GW of solar, and mean that US wind, solar and batteries now exceed 170GW of total installed capacity.
But our speakers suggested that development has been too concentrated in states such as Texas, and that developers will need to locate future wind and solar farms closer to the large corporates that want to buy their power.
Anne Foster, global head of ESG at Quinbrook Infrastructure Partners, argued that demand for renewables was growing but difficulties with building large transmission projects in the US remain: “It’s now a case of planning where we need wind farms to suit which customers,” she said. This could help avoid some of those grid problems.
Building nearer corporates' operational hubs would also help corporates to show that investing in renewables leads to local jobs and economic activity.
Corporates can influence these plans. Patrick Taylor, principal program manager at Microsoft, said the company’s goal for 100% renewable energy by 2025 was pushing developers to help it act fast – and brought with it other potential benefits too, such as a focus on a just transition: "Making sure the transition is more diverse and inclusive is a really big focus for Microsoft."
Batteries into PPAs
Our speakers also talked about the inclusion of batteries into the PPAs being signed by corporates. They said it is increasingly common for companies to pair their wind or solar farms with batteries, which helps to balance fluctuating renewables production.
But would corporates be willing to pay higher energy prices for these PPAs to factor in the additional costs of building batteries? Taylor said he thought so.
He said: “I always try to differentiate price from value because it’s not necessarily that the lowest price is the best value. A lot of these products are more effective at managing your energy price risk meaning we’re willing to pay extra as it can mitigate risks that we would otherwise have.”
But from the energy seller's perspective, the corporate demand in storage hasn’t reached that level yet, according to Kelly Snyder, senior director origination at EDP Renewables.
“From our experience at EDPR, the storage has really only been a factor thus far for utilities. We haven’t seen it in our corporate PPAs yet," she said, adding that it has been adding storage to some projects as well as building standalone.
Need for solutions
However, this apparent willingness to pay higher PPA prices doesn’t mean that corporates such as Microsoft would also take on the challenge of solving all technical issues associated with their PPAs. Taylor said partnership is key.
“From a developer perspective, the willingness to work creatively with us and think through some of these issues and help us build language into the agreements that give us the levers that we can pull on later down the line is crucial,” he said. “Bringing us ready-made solutions showing how a battery could help optimise and improve the profiles would be very helpful."
This means not just leaving Microsoft to solve the tricky technical problems.
He added that working together doesn’t just have to happen at a project level, but at higher political levels too, including at COP26.
“COP26 helps keep the politicians more honest in terms of saying this is a global forum where we can cooperate and come up with a set of shared objectives,” said Taylor. We'll see in November if his optimism is justified.