12 Major Companies Sign Pact to Purchase More Renewable Power

(3BL Media/Justmeans) - Most businesses will tell you that their reason-to-be is to meet their customers’ needs. So when a group of major corporations that use a great deal of energy get together to sign a pact asking their utilities to provide more renewable energy, one would expect utilities to take notice.

That is the rationale behind the Renewable Energy Buyers’ Principles, which focuses on buyers’ unmet demand for more renewable energy. The principles were jointly created by the World Wildlife Fund (WWF) and the World Resource Institute (WRI) to help companies navigate the” increasing complexity and transaction costs” associated with large scale purchases of renewable power.

The twelve companies that signed the agreement are Bloomberg, Facebook, General Motors, Hewlett-Packard, Intel, Johnson & Johnson, Mars, Novelis, Procter and Gamble, REI, Sprint, and Walmart. All of these companies are driving towards carbon neutral operation.

It might be the cart leading the horse, but as Suzanne Apple of WWF says, “These companies are leading the market in creating demand for renewable energy. The Buyers’ Principles provide sound guidance to the market providers. Some of America’s largest companies are embracing renewable energy, and their collective demand requires the market to keep pace.”

The agreement includes a combined renewable energy target of 8.4 million megawatt hours (MWh) per year through 2020. The Buyers’ Principles contain six criteria that should significantly help companies meet these ambitious purchasing goals. These are:

  • Greater choice in procurement options,
  • More access to cost competitive options,
  • Longer- and variable-term contracts,
  • Access to new projects that reduce emissions beyond business as usual,
  • Streamlined third-party financing,
  • Increased purchasing options with utilities.

Buying renewable energy is not like buying hybrid cars. You cannot specify where a given electron comes from unless you generate it yourself. These companies will generally be buying from the grid. Because the grid is being powered by a variety of source including coal, natural gas and nuclear as well as wind, solar, and hydro, the best they can be sure of when they buy 100 kWh of renewable energy, is that 100kWh of energy is being produced somewhere, though they might not actually be the ones receiving it. Since a kWh of electricity produced by a windmill is exactly the same as a kWh produced by a coal plant from a functional perspective, the two are essentially interchangeable. What these buyers are concerned with is ensuring that global carbon emissions are reduced, which is achieved through this process. But ensuring that the appropriate amounts are being generated and keeping track of everything coming in and out of the grid is where the complexity lies. While the end user simply gets a monthly bill and a promise of renewable generation, what is happening at the other end can be quite complicated. For instance, when you buy coal-powered electricity, most of what you pay for is the coal being burned in a specific plant as well as the effort in transporting and handling that coal (and cleaning the emissions). That plant is probably large enough to provide you and all your neighbors with all the power you need. In the case of solar or wind, first of all, there is no fuel required. So what you are paying for is the amortized cost of constructing the equipment plus maintenance. But since renewable power plants are generally much smaller you are generally not financing a specific windmill, but many different windmills (or solar PV arrays). That means your payments must be dispersed throughout the grid. The logistics of tracking power and payments to and from various sources which are often owned by different companies is a challenge for utilities and system operators which has slowed the growth of renewable generation as demand grows at a rate faster than anyone expected. This is especially true as more companies pledge to increase their consumption of renewable power.

Says Kevin Rabinovitch, global sustainability director for Mars Incorporated. “The Renewable Energy Buyers’ Principles are a powerful way to bring energy suppliers and consumers together, enabling us to work creatively to maximize the inherent benefits that come from clean energy generation with more predictable costs.”

One other important thing that this agreement does is to send a signal to renewable power developers, assuring them that, “if you build it, they will come.”

Image credit: Stan Shebs: Wikimedia creative commons