US leads corporate green PPAs despite climate doubts

Along with the UK, the country is seen as having spearheaded a market that could soon get a boost from a handful of Asian and Latin American nations.

In spite of its climate-sceptic president, forces that have made America a champion of corporate renewables PPAs are not set to subside, a report by Norton Rose Fulbright suggests.

The amount of corporate renewables deals – as measured by the contracted capacity of corporate PPAs, green power purchases, green tariffs and outright project ownership – rose from 50MW in 2012 to 3.44GW in 2015, according to data by the Rocky Mountain Institute’s Business Renewable Center. Tech giants like Apple, Google and Amazon were responsible for much of the rise, but the market is now opening up to other sectors, the report notes.

Some of the main drivers behind the boom are here to stay: US companies’ commitments to increase renewable energy procurement, the diversity of technologies available, expertise in structuring transactions and working across different states, and utilities’ reluctance to offer PPAs of the kind developer want. 2015’s sharp increase also owes much to an expected expiration of some subsidies, though these were eventually extended beyond 2020 (explaining why, at 810MW, 2016 was more tepid).

Corporate PPAs have also proven popular in the UK, where they were seen as a way to lock in more stable revenue at a time when the subsidy regime did not fully mitigate market price volatility. With subsidies phased out for onshore wind and solar, the study argues, developers in such sectors remain keen on UK corporate PPAs.

Yet growth may come from a handful of other countries, which display some of the dynamics that have helped propel the US and the UK to the top of the league.

The report had much to say about Mexico. “While residential rates are subsidised, industrial rates are not, meaning Mexico’s largest businesses have seen power costs more than double over the past decade,” its authors stated, suggesting latent demand is present. “Mexico is currently undergoing a second significant energy market reform, and one of the changes is to modify the way corporate PPAs can be contracted.”

Brazil, Chile and Argentina were also described as having good potential, alongside Asia, notably India. Rising grid tariffs and falling capital costs of renewable generation have recently given an edge to the Indian PPA market, the report noted. “Some states have further incentivised corporate PPAs by reducing or waiving off-grid charges on renewable generation, which has made corporate PPA prices cheaper than grid prices.”

Other would-be champions included China, Sweden and South Africa.