Want to sell more wind, solar power? Find corporate buyers

Contracts to sell electricity directly to corporate users are among the key demand drivers for wind and solar power, while the influence of state mandates wanes, according to a report Friday by Moody’s Investors Service.

Multiple factors are spurring corporate power deals, especially from companies that have set their own sustainability goals. And the shift comes as costs continue to fall. Power purchase agreements with wind farms are now available for as low as $15 per megawatt-hour, according to Moody’s, and $35 a megawatt-hour for solar.

“The economics are making it easier for new entrants to join,” Lesley Ritter, an analyst at Moody’s, said in an interview. Community choice aggregators are another new entrant, formed by counties or cities to encourage more clean power.

Corporations agreed to buy nearly 3.7 gigawatts of power generated by clean-energy projects in 2015, and another 2.5 gigawatts last year, almost all from wind and solar, according to Bloomberg New Energy Finance. Through Wednesday, corporations had bought 340 megawatts this year.

Technology companies led by Alphabet Inc.’s Google are among the biggest buyers of clean power. Companies are signing power purchase agreements, in part, for long-term visibility into their electrical costs. Some, like Google, are also keen to add more green electricity to grids. There have been at least 32 corporate buyers to date, Moody’s found.

“There are a ton of companies besides Google and Amazon that still have tremendous power needs and are possible targets for developers,” Kyle Harrison, a New York-based analyst at BNEF, said in an interview. “There’s still an addressable market for developers. It hasn’t been exhausted.”

State Mandates

The emergence of corporate buyers comes as states are meeting their clean-energy targets, renewable portfolio standards, or RPS.

“The drivers are no longer RPS,” said Swami Venkataraman, a Moody’s analyst in New York. “RPS procurement has pretty much ground to a halt.”

For now. Moody’s expects some states, including California and New York, will eventually increase their RPS targets. Declining federal wind and solar subsidies may also motivate utilities to buy more clean-energy.

“In 2018, you’ll see a big procurement boom from both utilities and corporate customers,” said Craig Cornelius, senior vice president of renewables at NRG Energy Inc. “Developers will be telling those customers: if we can’t commence in 2019, we won’t be able to get the full value of the subsidies.”

That means dependence on corporate buyers may not last long.

“They probably won’t be the only show in town,” Cornelius said.

About BloombergNEF

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