It's been a big month for climate action.
Enough countries joined the Paris Agreement for it to enter into force, an amendment was approved to the Montreal Protocol to phase out hydrofluorocarbons (HFCs), and a new global deal on aviation was forged to curb the fastest growing sector of emissions. It was a momentous month for global climate action.
However, as new climate policies and agreements begin to take effect, businesses already had their eye on the ball. Last year, companies in the U.S. signed more than 50 percent of wind contracts. Corporate renewables deals have doubled year-over-year for the last several years.
Picking up on these trends, a new report from the Corporate Eco Forum (CEF) and World Wildlife Fund (WWF), "Corporate Renewable Energy Procurement: A Snapshot of Key Trends, Strategies, and Practices in 2016," finds that corporate purchasers of renewable energy are displaying an unprecedented level of ambition and leadership buying clean energy at a scale that could prove to be a key piece of the climate puzzle.
In 2015, U.S. corporate buyers collectively contracted nearly 3.5 GW of renewable energy, compared to 13 GW total of renewable energy installed last year.
What's driving the renewables rush
Of the 37 companies surveyed by CEF and WWF, representing nine sectors with more than $1 trillion in combined annual revenues, more than half have a renewable energy target — and half of those with a renewable energy target are aiming for 100 percent renewable energy.
The survey highlights a few key trends dominating corporate leadership on renewables:
1. Maximizing the impact of purchases
Companies increasingly want their renewable energy purchases to be above and beyond what would have occurred without them; they want to support new build that drives greater impact.
Traditionally, unbundled Renewable Energy Credits (RECs) have been the predominant purchasing instrument. Unbundled RECs are still the largest single instrument used by companies (27 percent of purchases) but direct purchases (Power Purchase Agreements [PPAs], virtual PPAs, and onsite projects) are now nearly two-thirds of purchases.
This shift toward direct procurement among those surveyed confirms that leading companies are looking to capture the energy pricing benefits of renewables alongside the environmental benefits.
2. Companies are looking to utilities to provide options
While most corporate purchases still do not involve a utility, more companies are entering the market and looking for easier options to directly buy renewable energy. Particularly in places where they have few options, utilities are being called upon to deliver more bundled, cost-competitive renewable energy offerings.
Utility green tariffs showed up for the first time in this survey as a mechanism companies are using to purchase renewables and they were rated as the second highest policy priority to pursue after access to third-party PPAs.
3. Companies are focusing on key markets
Companies that participated in the CEF/WWF survey indicated that California, North Carolina, New Jersey, Texas and Virginia are the current hot spots for engaging in renewable energy policy.
Access to third-party PPAs was universally the top priority across states but companies are looking to a variety of policy mechanisms to increase access to more procurement options, depending on the state.
Closing the void
Analysis shows that using the Clean Power Plan (CPP) to address electricity sector emissions would help the U.S. achieve just 50 percent of the necessary emission reductions to meet its pledge under the Paris Agreement.
With companies’ demand for renewable energy already reshaping the electricity landscape, the potential for their contributions to close the gap should not be underestimated.
Ambition is growing and implementation is accelerating as companies are moving fast to fulfill their public climate and renewable energy goals, including an unprecedented number of companies setting 100 percent renewable energy goals.
As more companies set targets, take advantage of emerging procurement instruments and directly purchase cost-effective renewables such as wind and solar, U.S. companies have a tangible role to play in driving down U.S. emissions and closing the ambition gap.