The Dutch Wind Consortium: A Prospective Template for Aggregation of Corporate Renewable Power Purchases
Distributed, renewable energy generation capacity is being installed on utility customer sites in Western Europe as fast, or faster, than is the case in any world region. Some of Europe's, and the world's, leading multinational corporations are at the forefront of this fundamental wave of power and energy industry change and disruption.
A pioneering group of four multinational corporations banded together in 2013 to create the Dutch Wind Consortium. Forming an innovative partnership to join forces so as to enhance the efficiency, returns and risk/reward profile of their growing portfolios of renewable power purchase agreements (PPAs), AkzoNobel, DSM, Google and Philips – the Dutch Wind Consortium's four members – signed their second wind PPA in Dec. 2016, an agreement to off-take the electrical power produced by the 34-megawatt (MW) Bouwdokken Wind Park.
Corporate renewable power purchases are a specialty of the Rocky Mountain Institute's Business Renewables Center (BRC). In a recently released case study, RMI's BRC explains how and why the Dutch Wind Consortium can serve as a new, replicable model capable of accelerating corporate investment in renewable energy resource development and use.
Challenges and Rewards
The RMI-BMC Dutch Wind Consortium case study is based on interviews conducted this June with key individuals at AkzoNobel, DSM, Google and Philips involved with the creation and running of the Dutch Wind Consortium. The case study itself is organized into three brief sections and two appendixes.
The first section briefly explain the nature of AkzoNobel, DSM, Google and Philips' businesses and their sustainability commitments. The second and third sections discuss the benefits and challenges associated with the consortium model and the process via which the consortium serves as a means of aggregating, scaling up, diversifying and enhancing the operational efficiency and returns on investment associated with each of the four members' renewable power purchase commitments, respectively.
AkzoNobel initiated the process that resulted in the Dutch Wind Consortium's creation. The Netherlands-based, multinational chemicals manufacturer sought out and was able to convince DSM, Google and Philips that the potential rewards outweighed the risks.
Each of the four Dutch Wind Consortium's corporate members take equal, 25% shares in the electricity output associated with each renewable PPA. RMI BRC sets out four main challenges associated with like-minded corporations joining together to jointly identify, negotiate and conclude renewable poer purchase agreements as follows:
- Partner selection
- Complexity of transaction
- Governance structure
- Ongoing management
Counterbalancing those are four main benefits:
- Economies of scale
- Saving and sharing costs
- Portfolio diversification and risk management, and
- An easily replicable structure
From conception to the signing of a first renewable PPA
It took about 36 months before the Dutch Wind Consortium completed its first renewable power purchase agreement – to off-take emissions-free, environmentally friendly electrical power from the 102MW Krammer Wind Park project. Signing its second – the PPA from the 34MW Bouwdokken Wind Park project – took just six months.
Creating a governance structure required a majority of consortium members' time and effort during those first 36 months. It was not time wasted, RMI BRC reports. “This time investment paid off: the consortium partners put in place a flexible, non-incorporated consortium that allows for simple procurment of multiple PPAs.”
“Working in a consortium enables individual companies to tackle bigger projects. Once you put the structure together, that can be quite powerful, as it allows for replicability,” said Google director of data center energy and location strategy Gary Demasi.
A consortium agreement that sets out the basic terms and conditions of cooperation for each of the four members is executed along with each renewable PPA entered into. Dutch Wind Consortium meetings involving a steering group, a working group and a rotating chair are held periodically. That makes for a lean, yet efficient governance structure, according to BMI RMC's report.
It was the opportunity to invest in an actual project that spurred consortium members to accelerate creation of the consortium's governance structure, and make it as streamlined as possible while still covering all the necessary details and serving as what in all aspects appeared to be an effective mechanism for aggregation of renwable PPAs.
“The key catalyst in narrowing down the options for the consortium’s governance was an attractive projectopportunity that came up, forcing the consortium partners to act,” DSM Project Director Sim van der Linde said.
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