Five global brands sign joint 42.5-MW energy deal, creating a new blueprint for renewable energy aggregation
This week, five global companies announced a new approach to renewable energy procurement that could change the game, particularly for companies with smaller energy needs. Bloomberg, Cox Enterprises, Gap Inc., Salesforce and Workday — with guidance from LevelTen Energy and its renewable energy procurement platform — have closed 42.5 megawatts of a 100-megawatt North Carolina solar project by global renewable energy developer, service provider and wholesaler BayWa r.e.
The group of companies, which has dubbed itself the Corporate Renewable Energy Aggregation Group, is the first example of businesses aggregating similar, relatively small amounts of renewable energy demand to collaboratively enter into a virtual power purchase agreement (VPPA), collectively acting as the anchor tenant for a large offsite renewable energy project. This unprecedented coordination between five international businesses lays the groundwork for other corporates to procure renewable energy cooperatively, maximizing value and reducing risk.
The group, with support from the Business Council on Climate Change (BC3) and the Business Renewables Center, began collaborating in late 2017. Many potential renewable energy purchasers have historically been faced with a key problem: Businesses looking to procure smaller energy loads have been unable to contract directly with large offsite renewable energy projects due to limited energy demand — this has restricted business’s ability to pursue the development of new renewable energy projects. To solve this problem, the group evaluated several mechanisms for aggregating smaller amounts of renewable energy demand to afford them the collective buying power that is typically necessary to contract directly with a large offsite renewable energy project.
The eventual solution chosen by the group was a uniform VPPA contract and a single, shared legal counsel to negotiate and finalize the transaction. This helped to further streamline the final phases of the transaction. The new, simple structure allows the buyers to contract for relatively small pieces of the BayWa r.e. solar project, keep transaction costs low, and learn best practices from each other. The group hopes other buyers see this structure as a viable way to enter the large offsite renewable energy market, helping to accelerate corporate procurement of clean energy and expand renewables deployment in the U.S.
“BayWa r.e. is excited to be partnering with Bloomberg, Cox Enterprises, Gap Inc., Salesforce and Workday to support their sustainability and carbon-reduction goals. This is truly a milestone in corporate energy procurement. We greatly admire the collaborative Corporate Renewable Energy Aggregation Group for rethinking how companies of all sizes can access cost-competitive clean energy; this model can be replicated for companies for years to come,” said Jam Attari, CEO of BayWa r.e. Solar Projects, LLC. “For BayWa r.e. this novel deal is not only the right new model for corporate energy procurement, but an example of our commitment to a significant, strategic investment in key markets to support the growing demand for renewable energy by corporations in the Americas.”
The deal was coordinated by LevelTen Energy, which aggregates both buyers and sellers across national and regional renewable energy portfolios. Through LevelTen's renewable energy procurement platform, buyers and sellers provide dozens of key criteria related to their purchase needs and project specifics, triggering LevelTen’s proprietary Dynamic Matching Engine to process this information in real time, to create the ideal aggregation options for all parties. The LevelTen Energy platform processes more than 8 million data points across nearly 1,600 projects on a daily basis to help all energy buyers evaluate value, risk and other critical criteria required to properly pursue renewable energy procurement opportunities.
“Five buyers coming together to procure near equal slices from this project is yet another critical milestone in the expansion of the renewable energy procurement market,” said Bryce Smith, CEO of LevelTen Energy. “Historically, a lack of transparency, high costs and little flexibility meant only a select group of Fortune 500 buyers with immense resources could participate in this type of transaction. Kudos to these buyers for their vision and commitment toward not only impacting their own carbon goals, but also toward paving the way for many others.”
In 2018, a Bloomberg New Energy Finance report revealed that signatories of the RE100 initiative — who have all set targets of 100 percent renewable energy by 2030 — have a long way to go. For the initiative’s 128 members to meet their goal, they will need to spend an estimated $94 billion — enough to procure 172 TWh of renewable power and add 87 gigawatts of new wind and solar power capacity. Aggregate deals could be an important tool for achieving that.
“Gap Inc.’s share of the project will be used to offset the energy footprint of all Athleta stores and operations,” said Chris Samway, SVP & CFO of Athleta, a B Corp-certified subsidiary of Gap Inc. “Through innovation and collaboration across industries, business can do more to create a healthier future for our people and our planet.”
“At Salesforce, we are committed to taking a leadership role in the fight against climate change and ensuring a just transition to a low-carbon economy,” said VP of Sustainability Patrick Flynn. “This collaboration is not only an important step toward advancing Salesforce’s commitment to reaching 100 percent renewable energy by 2022, but an innovative approach that demonstrates a company of any size can play an essential role in transitioning our planet toward a clean energy future.”