More Top Companies Are Going All In on Advanced Energy. Now, States Need to Figure Out How to Cash In
- Dec 12, 2016 8:00 pm GMT
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It’s no secret that advanced energy is increasingly affordable and reliable—and Corporate America has clearly caught on. Not only are companies purchasing renewable energy at a steady clip today, growing numbers are committing to purchase more in the future. A new market brief by AEE found that 71 Fortune 100 companies have now set a renewable energy or sustainability target, up from 60 just two years ago. Among the Fortune 500, that figure has remained steady at 43%, with 215 companies making firm commitments that, in part, depend on advanced energy technologies and services to fulfill. States can capture benefits from this burgeoning market demand for their own economic growth and electric system management. A new report from the Center for a New Energy Economy tells them how.
Corporate renewable energy procurement has become a headline-grabbing trend, but AEE’s 2016 Corporate Advanced Energy Commitments market brief shows that corporate purchasing is more than just a fad—it has rapidly become the new normal, and it’s here to stay. In fact, in every major market sector defined in Fortune’s lists at least two companies of the top three have set sustainability or renewable energy targets; in only two sectors (wholesalers and business services) not one of the three largest companies has set a target. While the trend is pervasive, some sectors are pulling ahead, like hospitality, chemicals, and apparel, while others lag behind, specifically, wholesalers, energy, and engineering and construction.
Of course, putting goals on paper does not grow advanced energy markets. For these commitments to translate into meaningful activity, companies have to follow through, and that is not always easy. Any company that has tried to purchase renewable energy in more than one state is well aware that the relative ease or difficulty depends on a particular state’s regulatory and policy landscape. Speaking to Greentech Media about Google’s announcement that it would reach its 100% renewable energy target in 2017, Neha Palmer, head of energy strategy at the company’s global infrastructure division, said, “Trying to navigate all those individual markets can be a challenge sometimes … you really have to tailor the approach to each individual market. It’s our hope that it can become a lot easier.”
Google is not alone in suggesting that these purchases can be far from straightforward. Microsoft is another company that is “making great progress towards our goal to use more clean energy each year, leading to our 100% goal,” according to Rob Bernard, Microsoft’s chief environmental strategist. But the company has had to put a lot of time and thought into developing creative and innovative solutions to make good on its promises. “We’ve found that partnering with utilities and governments in states like Virginia, Wyoming and elsewhere can bring new energy to the grid in a way that helps our business and the state. But there’s more work still to be done to accelerate the pace of this progress.”
Similarly, Patrick Flynn, director of sustainability at Salesforce, notes, “The more options available to us in a given state, the better and we’re always looking at new and innovative solutions.” Flynn said the company has made “great progress” towards its 100% renewable energy goal, “for example, with wind projects in West Virginia and Texas.”
Companies that have set targets like these “are committed to purchase renewable energy one way or another—it’s just a question of where and how, and that’s a race every state should want to win,” says Malcolm Woolf, senior vice president of policy at AEE. “Clearly, this trend isn’t going away. States that make it easier for companies to purchase renewable energy will be rewarded with new economic development, tax revenues and jobs.”
To date, states have had mixed success at navigating the trade-offs that come with corporate renewable energy procurement, but it doesn’t have to be that way. A new report by the Center for New Energy Economy at Colorado State University, Private Procurement, Public Benefit: Integrating Corporate Renewable Energy Purchases with Utility Resource Planning, explains that, by accounting for corporate targets during the utility resource planning process, states can resolve the challenges and realize the benefits of corporate investment in renewable energy.
“Utilities have been working with their large corporate customers for years to ensure good outcomes under demand-side management programs, and there’s no reason this success can’t translate to renewable procurement,” said Jeff Lyng, senior policy advisor at CNEE and lead author of the paper, which was prepared for the AEE Institute. “We see a promising opportunity for solutions that are not just mutually acceptable but mutually beneficial to utilities, customers, and developers, which is an exciting prospect.”
The paper explains that by considering corporate renewable energy procurement targets during the utility planning process, state leaders can minimize risks, spur economic development, help defer or avoid utility infrastructure investments, lower costs, and meet public policy objectives. This approach can also resolve some important concerns, such as how to appropriately allocate costs and benefits of corporate renewable energy purchases such that other customers are not negatively impacted.
CNEE outlines three pathways for states to uncover these benefits by ensuring that major corporate renewable energy investments are considered when assessing new utility resource needs. This can happen: (1) through the public utility commission (PUC); (2) through the legislature, by directing action at the PUC; or (3) through the executive branch, by collecting information about private sector investments and goals for consideration by the PUC. These three pathways all lead to the same outcome: a more transparent and forward-looking approach to corporate renewable energy procurement that takes into account the needs of all the various stakeholders.
Given the growing list of companies pursuing ever-higher levels of advanced energy, states should be in a flat out race to the top to remove barriers that stand between these companies and their commitments. With CNEE’s proposed planning pathway and a range of other policy options to choose from, states have no shortage of solutions to run with. On your marks…