September 23, 2020 - By Jeff Colvin, MP2 Energy LLC
Redefining Corporate Renewables Procurement Strategy: Simplified, Effective and Accessible
For over a decade, renewable energy has been gaining prominence with leading global corporations. At the launch of the Renewable Energy 100 (RE100) in 2014, only one U.S. company pledged to source 100 percent of its electricity from renewable energy. That count has grown to over 240 global companies today and climbing. While climate legislation has stalled at present at the international and federal levels, corporations have taken it upon themselves to further align their sustainability goals with the global carbon reduction thresholds set by the Paris Climate Accord. In fact, today, the Science Based Targets Initiative—a partnership between the UK’s CDP, the World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact (UNGC)—has 912 corporate members committed to sustainability and innovation in their carbon reduction efforts. This has created a new standard for sustainability goals that are verifiable, measurable, and most importantly, future-proof.
Even with declining renewable generation cost and increased pressure from shareholders to demonstrate sustainability progress, many organizations continue to struggle to execute on their sustainability strategies. This is primarily due to the inherent complexities and risks associated with the most prominent wholesale renewable energy products: Power Purchase Agreements (PPAs) and Virtual Power Purchase Agreement (VPPAs). Early adopters of these renewable vehicles have been exposed to significant commodity risks, had to decipher complex wholesale energy contracts with strict commercials terms, and faced accounting issues that can be prohibitive for companies to adopt.
The market has since matured, and energy companies are moving to provide customers of all sizes access to innovative and simplified renewable energy solutions that help them attain their sustainability goals.
Retail Off-site Renewable Energy - A Powerful and Effective Procurement Solution
In deregulated markets such as ERCOT and PJM, there lie unique opportunities to offer customers retail-delivered renewable energy solutions that would not be possible inside a regulated electricity market. One such solution that has already been put into place for major power consumers in Texas combines a physical PPA from an off-site renewable resource with the convenience of a retail agreement. This structure offers unique benefits:
- One simplified agreement with a single counterparty: the customer is able to transact with just one company and execute one retail agreement, as opposed to needing two partners (a renewable developer and an energy provider) under a VPPA structure.
- Access to wholesale electricity without market risks: the customer is able to avoid many of the typical market risks associated with a wholesale electricity agreement, as well as customize it to its unique needs (e.g. non-standard contract terms, solar generation integrated with retail contract, generation node to hub basis risk, etc.).
- Ability to purchase green power directly: the customer is procuring verifiable, trackable, physical renewable energy, the most transparent sustainability dividend available.
Proven Results: Cargill, Incorporated, Ardent Mills, LLC, and MP2 Energy
One company that’s reaping the benefits of an innovative approach to its sustainability initiatives is Cargill, a global corporation engaged in food, agriculture, financial services, industrial materials, and more, along with Ardent Mills, the premier flour-milling and ingredient company serving customers throughout North America.
MP2 Energy structured and jointly negotiated retail off-site renewable agreements with Cargill and Ardent Mills, in parallel with Shell Energy North America (US) L.P (SENA) as it negotiated the commercial terms of the physical offtake from Misae Solar I, one of the largest solar parks in Texas. Through MP2, Cargill and Ardent Mills agreed to purchase both renewable energy and renewable energy credits (RECs) from Misae for a period of 67 months, beginning in May 2021. As SENA offtakes the energy, MP2 firms and shapes it to match Cargill’s and Ardent Mills’ respective energy profiles across their Texas locations, and delivers it to meet the desired renewable energy target the customers specified.
These supply agreements represent Cargill’s and Ardent Mills’ first deregulated physical renewable energy offtakes in North America and include a specific objective to meet 90 percent of customers’ aggregate electric load across all its Texas facilities with renewable energy from a new, location-specific, renewable generation resource.
The deal not only meets Cargill’s and Ardent Mills’ renewable energy requirements but also will deliver 760,000 MWhs over the life of the agreement and offset 56,000 metric tons of Scope 2 CO2 emissions annually.
A New Strategy for a New Era
Economic volatility, heightened public scrutiny, and public comments by governmental bodies heretofore uninvolved in environmental issues, such as the Federal Reserve Board, are all flashing indicators that every company, no matter its size or industry, must adopt vibrant sustainability practices or face the wrath of the free market and/or regulatory groups. In such a revolutionary time, cutting-edge methods like the retail-delivered renewable PPA strategy are a means of differentiating from the herd while effecting real change for both the environment and the bottom line of the corporate energy customer.
Not only are retail-delivered renewable PPAs eco-friendly because of the sources of the electricity, but their structure also enables the development of new renewables projects. As these types of transactions become more popular, more developers are incentivized to partner with retailers to offer similar products, giving customers even more options and decreasing the distances green energy must be transmitted, improving the profitability for all parties involved and reducing Transmission & Distribution line losses.
Retail suppliers are perfectly positioned to partner with corporate customers in this critical mission. With the benefit of working directly with wholesale energy companies who have strong balance sheets, ample capacity, industry knowledge, and their own commitment to a sustainable future, retail suppliers like MP2 are able to provide flexibility on term, size, and product structure. The time to make the switch is now and with many of yesterday’s barriers to adoption now resolved, such as the inability to track or quantify results, corporations have no reason not to seize a competitive advantage in the form of a forward-thinking renewable energy strategy.
For more information, go to MP2 Energy.
At MP2 Energy, Jeff Colvin, EVP, Sales, has built up both the Pricing and Sales teams, improved training and coaching efforts, deployed a CRM solution, built and released a scalable Renewable Energy platform and has been critical in leading a Sales Team that increased sales year over year every year that he has been in the organization. Most recently Jeff onboarded a new channel, a Large C&I National Direct Sales Team, something very different for MP2 historically, a business built on the backs of its Retail Brokers and Consultants. Jeff joined MP2 Energy in 2016; in April 2020, he was promoted to EVP, Sales to help guide, direct, and lead the commercial C&I business and the overarching strategy of MP2 within Shell.