BUILDING DEMAND FOR RENEWABLE ENERGY

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1 WRI s Clean Electricity Work WRI mobilizes large corporate and industrial users demand for clean electricity. Learn more about our work at wri.org/charge BUILDING DEMAND FOR RENEWABLE ENERGY World Resources Institute (WRI) works with large-scale buyers, regulators and utilities to build demand and increase clean energy use. With its partners, WRI facilitates decisions about business models, purchasing approaches and policy structures that help scale clean energy around the world. Globally, renewable energy technology costs are falling, making solar and wind power more economically viable and cost-competitive. 1, 2 But there are still challenges to the transition to clean energy. To transform the energy sector and shift to a low-carbon economy, we need to identify and employ strategies that increase the share of renewables consumed by the largest energy users, those who have economic negotiating power and can pave the path for others. WRI s clean electricity work is centered around three goals: GOAL 1 Empower large-scale energy buyers to deploy renewable energy technology. The commercial and industrial (C&I) sector, comprised of large-scale energy buyers, consumes the majority of electricity within the economy. In the United States, the C&I sector accounts for approximately 62 percent of electricity consumption. In India, it is responsible for 70 percent. Focusing on these large-scale energy users can help bring more renewable energy technologies to the grid. Sector Proportion of Electricity Consumption 2% 5% 26% Commercial 38% 36% 23% Industrial ³ 4, 5 Residential/Domestic United States % India % Transportation Other

2 BUILDING DEMAND FOR RENEWABLE ENERGY GOAL 2 Bring buyers together to support their success and demonstrate the potential of clean energy technologies. Many corporations have renewable energy goals, including a large portion of the Fortune 100 and Fortune 500. Sixty-three percent of the Fortune 100 companies had set renewable energy, energy efficiency, and/or greenhouse gas emissions reduction targets, along with 48 percent of Fortune 500 (240 companies), as of spring The demand of these buyers can create large markets for clean energy technologies that can attract new suppliers, financing models and policy solutions that make clean energy more affordable and accessible. 63% of Fortune 100 Companies & 48% of Fortune 500 Have set energyrelated targets GOAL 3 Bring these experiences to utilities, policymakers and financial institutions that can support an expanding market and support national and subnational renewable energy targets. For example, the Government of India has a target of deploying 175 gigawatts (GW) of renewable energy by 2022, comprised of 100 GW from solar, 60 GW from wind, 10 GW from biomass and 5 GW from small hydro. 7, 8 In the United States, 29 states have Renewable Portfolio Standard programs that require an increase in renewable energy production, and an additional eight states have set renewable energy goals. 9, 10 By leading on renewable energy procurement, corporations can help go above and beyond these state mandates to help support a clean energy transition. Large energy buyers can be coordinated to support affordable clean energy solutions. Forums that bring together large-scale buyers, utilities and regulators in the United States and India are helping to align electricity policy with private sector mobilization to affordably support clean energy goals and targets. Building demand can support transitioning to reliable, affordable and clean energy. ENDNOTES 1 IRENA Renewable Power Generation Costs in REN Renewables 2016 Global Status Report. Paris: REN21 Secretariat. 3 Data Source: US Energy Information Administration Data Source: Government of India: Central Statistics Office Energy Statistics Note: The Commercial category of consumption in the India data includes Agriculture, consistent with the analysis on Bloomberg New Energy Finance s India Country Profile. country-profiles/ind. 6 Calvert Research and Management, CDP, Ceres, WWF Power Forward 3.0: How the largest U.S. companies are capturing business value while addressing climate change. 7 RE100. n.d. India. [Accessed 5/12/17] 8 Bloomberg New Energy Finance Country Profiles: India. [Accessed 5/12/17] 9 National Renewable Energy Laboratory State & Local Governments: Renewable Portfolio Standards. html [Accessed 5/12/17] 10 National Conference of State Legislatures State Renewable Portfolio Standards and Goals. [Accessed 5/12/17] Supporting Corporate Renewable Energy Procurement WRI s energy work has facilitated dialogue between large energy buyers, utility companies and regulators. See WRI s case studies for more information.

3 WRI s Clean Electricity Work WRI mobilizes large corporate and industrial users demand for clean electricity. Learn more about our work at wri.org/charge INDIA Building Demand for Renewable Energy World Resources Institute engages large buyers, regulators and utility companies to build demand and increase clean energy use. Through the Green Power Market Development Group India (GPMDG), World Resources Institute (WRI) and its partner, the Confederation of Indian Industry, facilitate discussions and on-the-ground action developing business models, purchasing approaches and policy structures that will help scale clean energy in India. Enabling Policy In the Indian state of Karnataka, the state s regulatory agency (Karnataka Electricity Regulatory Commission, or KERC), enacted a groundbreaking policy in 2014 to remove some of the major barriers to solar power development. Known as KERC Order S/03/01 Wheeling Charges, Banking Charges & Cross Subsidy Surcharge for Solar Power Generators, the policy builds on the existing Open Access model, which allows certain consumers to obtain electricity from independent generators while transmitting power through the state s grid. A more complete explanation of the KERC Order and the Open Access model can be found in WRI s Working Paper, Assessing the Impact of Karnataka Electricity Regulatory Commission s Open Access Order for Solar Power Generators in Karnataka. Despite the Open Access model, buyers and developers were still faced with fees for utilizing the grid that fluctuated sometimes significantly from year to year. Buyers didn t know what costs would be locked in over a project s lifetime (often years) and were hesitant to commit to projects. To address this, a group of large energy buyers led by GPMDG engaged with the regulatory commission to inform them of the challenges buyers faced. The regulator, eager to stimulate solar growth in the state, considered the buyers feedback and offered an exemption from paying certain charges for a period of 10 years, long enough to make buyers and developers comfortable with investing in and establishing solar projects. This KERC Order made solar energy more viable for developers and consumers and provided long-term clarity on costs. The state is already seeing an increase in commissioned megawatts for solar power since the Order was passed. Commissioned MW for Solar Power Projects in Karnataka, Megawatts (MW) KERC Order S/03/01 Wheeling Charges, Banking Charges & Cross Subsidy Surcharge for Solar Power Generators passed in August Commissioned megawatts (MW) for solar power projects (including but not limited to those using the Open Access model) have risen dramatically since the policy was passed in Data Source: Karnataka Renewable Energy Development Limited (KREDL)

4 INDIA Building Demand for Renewable Energy Case Example: Bangalore International Airport Bangalore s Kempegowda International Airport had been planning on setting up a solar project long before the KERC Order was passed. The airport has ambitious renewable energy goals, aiming to become the largest solar-producing airport in the country. But the KERC Order and the falling costs of solar provided the final push to develop a project of both on- and off-site elements. The airport floated a tender, received proposals and solicited technical assistance from WRI to benchmark and evaluate the proposals. The result is a 16 MW solar project, comprised of four elements: approximately 13 MW to be procured through the grid (equivalent to 20 million kwh in any given year, which can be +/- 10 percent depending on solar radiation), 2 MW planned to be installed next to the runway, 0.5 MW each on the carport and a building rooftop. The 0.5 MW building rooftop project is already up and running, while the 2 MW next to the runway and 0.5 MW on the carport are under construction. The remaining 13 MW were in the final stages of negotiations in spring While specific pricing is confidential, WRI expects these solar projects will reduce the airport s electricity costs. B U YER: Bangalore International Airport Airport in Karnataka serving the greater Bangalore region UTILITY: Bangalore Electricity Supply Company Distribution utility for the city of Bangalore and eight districts in the State of Karnataka REGULATOR: Karnataka Electricity Regulatory Commission Regulates the state s electricity sector Case Example: CleanMax Solar CleanMax, a solar developer in India, had traditionally been focused on rooftop solar projects, but was one of the first companies to develop a solar park when they saw the opportunity the KERC Order provided. The solar park, Karnataka s first, is a 30 MW project. While the park was being developed, CleanMax approached several IT organizations to propose Power Purchase Agreements (PPAs), one of which was Mindtree Limited, headquartered in Bangalore, with an office approximately 150 kilometers away from the solar park. Commercial buildings, such as Mindtree s IT complexes, typically have limited roof space for onsite solar power plants to satisfy their significant energy demand. Solar supplies from solar parks are therefore an attractive way to source renewable energy. For companies like Mindtree with an interest in furthering their sustainability through solar power, a regulatory environment like Karnataka s is attractive, as it establishes long-term certainty for both generators and off-takers of power, and thereby facilitates the long-term contracts needed to finance solar projects. B U YER: Mindtree Limited Technology services company, headquartered in Bangalore DEVELOPER: CleanMax Solar Largest on-site solar power provider in India UTILITY AND REGULATOR: Bangalore Electricity Supply Company Karnataka Electricity Regulatory Commission Mindtree s purchase helps support the establishment of the 30 MW solar park. The Mindtree campus in Bangalore will be receiving 2 MW of solar power from this park, which is expected to meet over 75 percent of its energy demand, while reducing the campus electricity costs. Karnataka Solar Farm. Image by CleanMax Solar.

5 WRI s Clean Electricity Work WRI mobilizes large corporate and industrial users demand for clean electricity. Learn more about our work at wri.org/charge UNITED STATES Building Demand for Renewable Energy World Resources Institute engages large buyers, regulators and utility companies to build demand and increase clean energy use. Through the Renewable Energy Buyers Alliance, World Resources Institute (WRI) and its partners World Wildlife Fund, Rocky Mountain Institute and Business for Social Responsibility bring together a network of energy buyers, suppliers and policymakers for discussions about business models, purchasing approaches and policy structures that will help scale clean energy in the United States. Green Tariffs Companies in states with regulated electricity markets often find they have limited options to purchase renewable energy. Green tariffs are emerging as an option for customers in these regulated markets. A green tariff is a price structure, or an electricity rate, offered by a local utility and approved by the state s regulatory commission that allows eligible customers to source up to 100 percent of their electricity from renewable resources. Green tariffs enable customers to purchase the energy from a renewable energy project, at a large scale (often 20 MW or more), along with the Renewable Energy Certificates (RECs) to show they are using renewable energy. Green tariffs structures vary across the United States. A more complete discussion of these various options can be found in WRI s Issue Brief, Emerging Green Tariffs in U.S. Regulated Electricity Markets. The U.S. Renewable Energy Map: A Guide for Corporate Buyers shows some of the U.S. renewable energy options as of May To date, green tariff deals have brought in 900 MW of new renewable energy, providing ways for utilities and regulators to support and benefit from a clean energy transition by responding to growing clean energy demand from customers. U.S. Renewable Energy Map: A Guide for Corporate Buyers Utility Renewable Energy (RE) Deals Green tariff(s) and executed RE deal(s) through tariff Green tariff(s) but no deal(s) through tariff to date Considering a green tariff (proposal with the PUC) One-on-one RE deal(s) between companies and utilities, but no green tariff to date Electric retail choice easily available No known direct large-scale RE access available

6 Case Example: Dominion Virginia Power and Amazon Web Services Amazon Web Services (AWS) has several data centers in Virginia. Although AWS can directly enter into independent contracts with renewable energy facilities in Virginia, the company must then sell this energy onto the electric power market in this case PJM rather than consume it. AWS s data centers must source their power from Dominion Virginia Power (DVP), the state s retail electric utility. Recognizing that the energy supply of these data centers was essential to achieving AWS s commitment to source 100 percent renewable energy, the company approached Dominion seeking options. In collaboration with AWS, Dominion created an alternative to their existing green tariff, Schedule RG, and proposed an improved option, a market-based electricity rate known as Schedule MBR. Schedule MBR provides a link between production and consumption. Under Schedule MBR, large corporate buyers can contract with independent renewable energy facilities and pay a retail electricity rate through Dominion that closely matches the PJM market prices the renewable energy projects earn. Through this electricity rate, Schedule MBR essentially acts as a hedge against volatility in the electricity pricing market. Amazon s Solar Farm US East 2. Image by Virginia Solar LLC. UNITED STATES Building Demand for Renewable Energy B U YER: Amazon Web Services (AWS) Amazon.com s cloud computing division UTILITY: Dominion Virginia Power (DVP) Retail electric utility in Virginia and North Carolina REGULATOR: Commonwealth of Virginia State Corporation Commission (SCC) Utility regulator in Virginia s regulated electricity market While Schedule MBR can be used to access any energy from the PJM market, the intent was to provide more access to renewables. With its approval last September, AWS was able to enter into five new solar farm agreements. These solar farm deals will generate 180 MWh of new solar power, enough energy to supply more than 36,000 U.S. homes in a year. Schedule MBR establishes a mechanism for customers to access the type of fuel source they desire. This mechanism is sought by other regulated utilities, many of which are looking to create a similar market-based product. Case Example: Facebook and the Public Service Company of New Mexico Facebook approached the Public Service Company of New Mexico (PNM) with plans to site a new data center to be powered with renewable energy, and asked the utility to propose a new model that would allow them to purchase renewable energy in the state. PNM responded by developing a green tariff. Facebook ultimately decided to build the new data center in New Mexico, using the green tariff. Under Facebook s arrangement, PNM will initially procure 30 MW of renewable energy and Facebook will work to procure additional renewable energy to meet its average daily load of 110 MW. The data center will also attract an initial capital investment of more than $250 million and create 4,000 5,000 jobs. Rendering of Facebook s new data center in Los Lunas, New Mexico. Image by Facebook. BUYER: Facebook Social media company UTILITY: Public Service Company of New Mexico (PNM) Largest electricity provider in the state REGULATOR: New Mexico Public Regulation Commission Utility regulator in New Mexico s regulated electricity market The tariff that PNM developed, Rider No. 47, also called the Green Energy Rider, aims to attract new customers to the state that want large-scale renewable energy with a minimum contract demand of 10 MW. The longer-term contract allows for price stability and shows how green tariffs can draw new customers for economic development.