Commercial, Industrial, Sourcing Renewables - June 27, 2018
RE Sourcing Forum Wrap-Up: Collaborating to accelerate growth in RE adoption
The theme tying together Smart Energy Decisions’ Renewable Energy Sourcing Forum’s spring event was the sense that large corporates working together—with peers, developers, and utilities—can dramatically accelerate renewable energy sourcing. Particularly as it relates to expanding options for renewable energy, Forum attendees concluded that they can do more by collaborating throughout the industry.
Across the Forum, which took place June 18-20 in San Diego, Calif., it became clear that this cooperation is essential as the industry moves towards a broader array of procurement options including green tariffs and aggregation programs to expand renewables. Attendees included corporate buyers from more than 40 companies and executives from 29 suppliers who participated in general sessions, common interest roundtables, case studies, and one-to-one meetings, all with the goal of advancing the use of renewable energy.
With experience levels among attendees ranging from those looking for their first renewable energy deal to those with more than five completed deals under their belt, networking and sharing of information were especially rewarding, as more experienced members of the Smart Energy Decisions community were happy to share their experiences with those just getting started.
"We’re thrilled with the collaborative spirit and open sharing of information that filled our Spring event in San Diego," said John Failla, founder and editorial director of Smart Energy Decisions. "The recognition that we’ve created something special with these events is greatly appreciated and we’re fully committed to expanding on that spirit of collaboration at the Fall event in Florida."
Here are highlights of sessions from the Renewable Energy Sourcing Forum:
"The Future of Renewable Energy Sourcing"
In his opening keynote, Brian Janous, general manager of energy strategy at Microsoft said, "It’s great to see the variety of buyers here today. We’ve spent a lot of time thinking about how to bring more buyers into the market, broaden the tent." Aggregation, he said, is one way to bring smaller buyers together on large deals. "You can’t just do a 2 MW wind project. You have to go bigger to bring the cost down."
Green tariffs are another avenue Janous believes more companies should explore. "Simplicity and risk allocation are the key issues. How do we take these contracts and radically simplify them?" he asked, adding, “There are 40 or so companies that have actually done these types of deals. We need 400. That’s where we need to be as an industry."
Noting that technology is one of the primary barriers to any type of innovation, Janous said, "As that applied to renewables, it’s very clear that we’ve built a better mousetrap. Renewables have won. It’s the least cost in almost every situation all over the world. That part is solved." The next step, he says is to continue to accelerate the growth of renewables.
"Innovation in utility green tariff programs"
In a panel discussion featuring executives from three utilities discussing their experience in developing green tariff programs, a paradigm shift was noted by all three panelists (pictured: Grant Wilkerson, left; Ryan Kiley, center, Will Einstein, right).
Will Einstein, director of new product development at Puget Sound Energy explained, "All three of us have virtually the same roles that didn’t exist five or ten years ago inside of our utilities, which is thinking about new business models and opportunities, new things we can do to serve our customers." Finding that customers wanted to buy in larger quantities and wanted to "green up their entire portfolio," the utility developed their Green Direct program, which currently aggregates close to 75 megawatts of renewables among customers with smaller loads. Einstein added, "What’s really interesting is that getting the company to think about differentiated products for our customers."
Ryan Kiley, director of product development at Consumers Energy agreed: "Even though it sounds obvious, it’s kind of a new path for a utility, starting with the customer and what their needs and wants are and designing a program to fit those needs. Our path was starting with the customer, making a commitment and then finding a way to make it happen." His utility just completed their first green tariff program.
At Westar Energy, Grant Wilkerson, energy director of market design and compliance, said his company started very simply with green RECS. Now, he said, the programs have evolved along with customer demand. "We are expecting approval in the next month for a green renewable wind program that will replace fuel on the customer’s bill—they can choose how much they want to be green." While the program offers lower costs, it does come with a longer commitment of 15 to 20 years.
Wilkerson noted that customer participation through all phases of the process has been key, explaining that after the utility designs a package, it must be approved by state regulators. "Some customers supported our filing for the tariff, which helped with the regulators."
"A supplier's perspective on the future of renewable energy sourcing"
The idea of an evolving market was discussed by Matt Walz, CEO of REC Solar a Duke Energy Renewables Company, who explained, "In a business model, if you don’t evolve, you are extinct," he said, Illustrating the point with images of yellow cabs struggling in the wake of Lyft and Uber, and Borders giving way to Amazon.
Walz noted that utilities in the past, "the word customer wasn’t used, it was ratepayer. Today the customer is front and center." Current investments at his company revolve around three areas: modernizing distribution systems, clean technology and clean generation, and customer-driven solutions to give them more options within our service territories to give them what they want out of their energy needs.
Viewing the current energy market, Walz said, "The bar for what is expected in the market has continued to go up and I think it will continue to go up at a faster and faster pace. If you are not advancing your energy strategies and sustainability goals, I can tell you, your competitors are." His advice for the audience: "Don’t walk into someone else’s solution – be creative, be thoughtful, be curious about what you want to accomplish and how it connects to the overall strategy of your organization. Then go with the route that finds the right smart energy decisions for you and your company."
"The path to 100% RE: Salesforce’s blueprint for success"
Patrick Flynn, senior director of sustainability at Salesforce opened his presentation by saying "To me, climate change is the biggest, most important, most captivating challenge humans have ever come across. And we are essentially out of time. We need every institution from the govt to the private sector, public sector, everyone to pull on the yoke as hard as they can in all the ways they can right now. And I’m totally hooked on figuring out how to do that together."
Expanding on the idea of working together to influence change, Flynn noted that "business is an incredibly powerful platform for change," He advised that “a good sustainability strategy should start within the four walls of the company—you need to get your house in order—but over time it should grow to really think about the leverage opportunities you have around you.” If you look at us, from operations to supply chain, public policy and advocacy to our products and technology and our resources, we do what we can internally but then we also look to see what we can amplify externally."
Speaking of Salesforce’s sustainability objectives, Flynn said, "What started as a goal for 100% RE in our datacenters in 2015 expanded to an RE goal for all of our operations." Noting that the company doesn’t own any of its data centers and only owns one of their office buildings, he said "this work that we are doing has the added complexity of working through a vendor, but this is also an added opportunity because when you lose some of the direct control you gain a lever that can really help multiply your impact." He referred to the company’s strategy as “multipronged,” as it involves "engaging with vendors, engaging with utilities, trying to get a three-part conversation going to understand each other’s constraints and objectives. We’ve got one objective: decarbonizing the energy grid."
"It’s complicated: assessing market risk for renewables"
How should corporates go about managing elements of variable generation and forward pricing risk? Thomas Flanagan, senior originator, wholesale origination at Constellation (pictured right, with John Failla), shared some advice for corporates when evaluating projects and opportunities. First, he explained, "This is an un-hedgeable risk. You can’t stop other renewable generators from putting more on the system in a certain area, so have someone else price this out and wear the risk for you." Second, prices will fluctuate in certain months, so "you should at least price in a mean value associated with this risk into your model." Finally, he said, "Make sure you are working with someone, whether it’s a consultant or broker, that can understand this risk and help you price that risk into your underlying valuation."
"Higher Ed: A long-term view on RE"
In his session, Dr. Wolfgang Bauer, distinguished professor and senior consultant at Michigan State University asked, "We cannot afford to live in a carbon-intensive economy anymore so what are we going to do?" In a university setting, he said, "Students actually push us in a direction that is very definite of being more friendly to the environment because they have much more future in front of them than we do."
For a recent project, Bauer explained the decision tree, a series of questions that were asked, including virtual or physical; small or big ("This is America so we’re going big!"), on- or off-site, owned asset or PPA; wind, solar, hydro, or bio; ground, carport or rooftop? The answers led to the creation of the "Largest Carport in North America," a Smart Energy Decisions Innovation Award-winning project covering 5,000 parking spots over 45 acres using 40,000 solar panels,
The bottom line, said Bauer, "is we have increased our RE by 10.4%, reduced our CO2 emissions by almost 30% and we saved 7% on our energy budget of $70 million a year, which is $5 million. It’s an all-around success story."
"Fifth Third Bank’s bold entry into RE sourcing"
In his introduction to this session, John Failla noted that "the traditional journey for corporates in RE sourcing has been to test the waters with RECs, then do onsite solar, then PPAs or VPPAs." Fifth Third, he noted, used a "go big or go home strategy" with a single PPA to get to 100%, announced in March 2018.
Charting his company’s swift rise to 100% RE, Scott Hassell (pictured right), director of environmental sustainability at Fifth Third Bank said, "I want to thank this community because we are a community here. There have been a lot of challenges but what has been really inspiring is (the industry’s) willingness to share their experiences and help each other." He added, "If there’s one thing I’d like you to take from this talk today is that I hope you realize you are not alone because this can be quite daunting. What was inspiring to me is that once we started this process, there were a lot of people who wanted to see us succeed, to be bold and figure this out. It’s not the easiest thing to do."
As a regional midsize bank operating in 10 states, said Hassell, "we made a decision that we want to be a leader, the one that people value and trust. For us, sustainability is part of achieving that vision. It’s part of engaging our employees."
Hans Royal (pictured left), director of strategic renewables at Schneider Electric, noted that "RECs get a bad rap but they are a useful tool if you are trying to get to 100%. It was definitely an important part of us creating a narrative."
"Collaborating to expand the market for RE"
In March of this year, General Motors and Switch emerged as leaders in a green tariff program in Michigan with Consumers Energy. Both companies are now matching 100 percent of their electric use at key operations in Michigan with wind-generated power.
In creating this program, both Rob Threlkeld (pictured right), global manager of renewable energy at GM and Sam Castor (pictured left), executive vice president at Switch, noted the importance of top-down support in their companies. Threlkeld explained the importance of "getting buy-in from the CFO and setting a structure in place. What that framework does is, as people change, you can still follow a process."
In developing the green tariff, Threlkeld explained, "We’ve been talking with Consumers Energy for quite some time around the renewables space. The subject of routine meetings evolved from reliability and cost to areas of sustainability and what can be done to advance renewables, the technology around electrification on EVs as well as procurement activities. What moved the needle, he said, "was having a disruptor, having Switch come into the state and really look at things differently." Consumers Energy began to look at how to deal with existing customers and new load customers and come up with a framework that works for both. "Switch reached out to us (and asked), how do we work together to evolve and make this come together."
At Switch, Castor said, "We were excited to be able to partner” on this program. "For us, Michigan was our first foray outside of Nevada in the U.S. It helped that we had stirred the pot pretty vigorously in Nevada with that constitutional amendment to break up the monopoly there."
Castor concluded, "Disruption is what’s coming. Energy is not going to be shielded from that. The world is going to continue to change."
In his closing comments, Failla announced the initial keynote speakers at the Fall edition of the Renewable Energy Sourcing Forum taking place October 1-3 in Ponte Vedra Beach, Florida. For details on the Fall edition of the RE Sourcing Forum, visit the event website at this link.
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