4 ways to advance corporate renewable strategies during the COVID-19 pandemic

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1) Don’t hesitate on quality projects

[...]  Risks of project delays fueling uncertainty in the tax equity market, investors are looking to close on good deals while they can, which means prioritizing strong, in-progress projects. Beyond potential financing risks and higher costs, equipment supply shortages are expected to increase the costs of early stage projects. As the production of primary material declines and Chinese manufacturers operate with reduced factory utilization, market analysts expect prices for solar PV modules to climb as much as 10-20% throughout 2020.

Projects with existing module and other solar hardware contracts in place will be largely shielded from these price increases, increasing the likelihood that near-term projects will offer better returns than those further down the pike. With less demand, lower financing costs, and lower materials costs, early moving corporate buyers should expect to see better pricing and hold more negotiating power than late-moving buyers that adopt a “wait and see” approach.

2) Don’t miss out on green tariff opportunities

Even before COVID-19 upended public health and the global economy, utilities around the country were quickly expanding green tariff programs to attract and retain energy-intensive customers. There are now 19 states that offer green tariffs, more than double the number of states with green tariffs in 2017.

While they rarely offer the cost-savings opportunities associated with utility-scale VPPAs, many corporate buyers are attracted to the stable pricing, lower risks, shorter-term options, and easier contracts that green tariffs typically afford over virtual power purchase agreements. Through the first five months of 2020, we’ve already seen major green tariff announcements by GM, GCC, Textron Aviation, Toyota, Dow Chemical, City of Charlotte, and Google.

Now, in the wake of the COVID-19 pandemic, we expect demand for green tariffs to sharply tick upwards among risk-averse companies looking to procure “additional” renewable energy without large capital expenditures or significant market exposure. However, like quality PPA project options, there is a limited supply of green tariff products available. Many of the existing green tariffs around the country are already fully subscribed, and remaining utility programs are expected to fill quickly. [...]

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3) Evaluate green retail products in competitive markets

[...] Like green tariffs, many retail suppliers offer firm block or full requirement renewable energy options that can mitigate the shape and volume risks that COVID-19 has exacerbated among VPPAs. Most suppliers will originate and finance renewable projects under a green retail contract, which can further mitigate some of the credit risk faced by companies experiencing COVID-related credit downgrades. Also like green tariffs, green retail products typically require significantly less human capital and legal costs than utility-scale PPA and VPPAs. Lastly, green retail products are typically associated with local projects. As corporate buyers integrate renewable purchases into a broader sustainability program, regional GHG emission impacts and local economic benefits become more material. [...]

4) Closely measure nodal pricing trends

U.S. corporate buyers have shown an increasing appetite for solar PPA projects. Through May, solar represented 85% of corporate PPA activity in 2020, a steep increase from 22% in 2017. Falling solar costs and an expiring ITC certainly contribute to the uptick in demand for solar projects, but so does a maturing buyer’s market. Solar production tends to peak during hot summer days when corporate energy cost and consumption peak, alleviating some shape risks. Solar PPAs also tend to be less susceptible to basis risk than wind PPAs because solar projects can be located closer to urban demand centers than utility-scale wind projects. With less shape and basis risk, solar PPAs generally make better hedging instruments than wind PPAs for most corporate buyers. [...]

Author: Brian Dooley

Source: https://www.renewableenergyworld.com/2020/07/15/four-ways-to-advance-corporate-renewable-strategies-during-the-covid-19-pandemic/

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