Lily Donge

07-Jun-2017, 3:30-4:00PM

1A- Deal Considerations for Financing Renewable Energy by Corporations

Lily Donge

Rocky Mountain Institute

Since 2013, over 6,000 MW of new, large-scale wind and solar power projects in the US have been enabled by non-energy corporation power procurement representing roughly $15 billion of long-term commitments.While originally lead by large balance sheet, globally prominent technology companies such as Google, Apple, and Microsoft, the corporate power buyer community expanded rapidly in 2015 and 2016. Over 30 corporations have now executed these long-term power purchase agreements (PPAs), some with multiple deals, with power purchase commitments averaging deep into the seven figures per deal. The non-profit Rocky Mountain Institute (RMI), created its Business Renewables Center (BRC) in 2013 to nurture this corporate deal space, with 94% of all deals since BRC inception involving a BRC member or sponsor company.

While originally driven primarily by renewable energy commitments, these deals are penetrating broader commercial and industrial segments, increasingly being driven by fundamental economics.In addition, several universities and other large public entities have also completed such deals.

Energy managers often serve as deal champions, but a broader deal team must be assembled including accounting and procurement.It is important for all team members to be aware of key financing considerations that their negotiation counterparty, the wind or solar developer, faces, which can either be go-no go, or affect PPA pricing by altering risk (affecting financing cost of capital).These include:

  • PPA provisions that ensure the financier’s capture of the primary incentives, the federal Production Tax Credit (for wind) or the Investment Tax Credit (for solar).
  • Fixed volume vs. unit contingent (i.e. all production) procurement
  • Full capacity vs. partial capacity procurement, including requirements to include other power buyers for same project
  • Set price vs. pricing collars
  • Term
  • Point-to-point congestion risk

Track: 1- Policy, Trends & Local Initiatives | Session: 1A- Incentives & Financing

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