In the Fortune 500, Clean Energy is Good for Business

Fortune 500 companies are at an all-time high in terms of value – some $17+ trillion dollars as of this time last year. The explosive growth of tech businesses in particular, Google, Amazon, Apple and many more, has set the standard for modern capitalism in terms of profits and advancement up the Fortune list. But one key to success for these companies has flown relatively under the radar: the sustainability-driven push towards using renewable energy.

This past March, the American Council On Renewable Energy (ACORE) used day one of its annual National Renewable Energy Policy Forum to highlight the work being done by corporate leaders to power their operations increasingly using clean, renewable energy. With over 150 companies having signed the White House’s American Business Act on Climate Pledge – covering $4.2 trillion in annual revenue and a combined market capitalization of over $7 trillion – Corporate America’s commitment to clean energy is undeniable and growing rapidly. ACORE’s Corporate Procurement Working Group Executive Meeting: “Advancing Corporate Energy Solutions,” hosted many of these businesses, and highlighted several critical challenges and opportunities ahead of the sector as this trend continues.

Dan Utech, Deputy Assistant to the President for Energy and Climate Change and one of the leading champions behind the White House’s push to highlight corporate sustainability work, led off the day with a keynote address on ACORE’s initiative to tackle the policy, finance and market-related barriers to increased levels of renewable energy deployment by corporations. Utech noted that, with approximately half of the Fortune 500 already having corporate carbon reduction targets in place, government is in an ideal position to be able to help continue this momentum, rather than needing to serve as a prime mover on corporate sustainability efforts.

This sentiment was echoed later in the day by David Friedman, Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, U.S. Department of Energy. Friedman emphasized that leadership was very much coming from the private sector, and that the biggest climate achievements will be made when industry can make money from solving climate issues, rather than from creating them. Given DOE’s remarkable track record of success with public-private partnership in the clean energy space, it was encouraging to hear appreciation for the follow-on sustainability work being done at some of the largest companies in the world.

After Utech’s intro, the workshop moved through a series of panels designed to educate participants on the state of the renewable energy markets, draw out issues critical to the ongoing success of corporate sustainability initiatives, and engage the audience in a back-and-forth discussion about the recipe for successful renewable energy procurement strategies for corporations. Here are a few of the major themes coming out of the day:

• Going Green Makes Good Business Sense: A repeated message from some of the largest companies involved with ACORE’s workshop, such as Amazon, Facebook, Google and Wal-Mart was that buying renewable power is not just a feel-good strategy, it’s a smart business strategy. Shareholders, customers and investors are demanding sustainability from Fortune 500s, and costs are low enough that renewable energy deals can be structured to save these companies money on their energy-related OPEX.
• Buying Renewable Energy Needs to be Easier: It’s not all sunshine and roses for businesses “doing well by doing good,” however. One of the major retailers participating at ACORE’s event noted that they like to ensure their renewable energy deals are “additive,” i.e. funding newprojects on the grid, rather than buying from existing renewable assets. This entails a significantly more complex process to fulfill energy procurement goals than say, purchasing renewable energy credits (RECs). As there is no one-size-fits-all playbook for corporations seeking renewable power, many of them are running up against similar challenges. These challenges range from a current lack of IRS guidance on tax issues related to these deals (although said guidance is expected to be forthcoming), insufficient instructions for effective engagement with power utilities, the best applicability of hedging opportunities and more. Clearly, there is plenty of work to be done by groups like ACORE to suggest best practices and guide companies procuring renewable energy.
• Policy Still Matters: No surprise, but public policy and regulatory limits remain major barriers for companies tackling the task of going green. At one point in the discussion, a big box retailer at ACORE’s workshop noted that third party ownership is a make-or-break issue for their procurement efforts. In states that prohibit such ownership of solar assets, for example, procurement simply isn’t going to happen. The Clean Power Plan also made regular appearances throughout the day’s discussion. Most of the participants expressed their appreciation for the EPA’s push to clean up the power sector, and critically, these companies noted that the Supreme Court’s recent stay of the plan would have no negative impact on their plans to procure renewable energy. A number of business leaders also pointed to the critical need to address potential double-counting of the environmental attributes (i.e. how corporations and states can be credited for using renewable power, currently done through RECs), and whether or not the utility sector is able to effectively accommodate these new corporate players in the electricity markets.

The day also featured a finance-focused panel with leading clean energy financiers. With clean energy financing and investment at all-time highs in 2015, it’s no surprise that Wall Street is watching this new trend of corporate renewable energy procurement closely. The panelists from a number of institutions, including US Bank, GE Energy Financial Services, and Citibank, discussed a number of issues surrounding corporate procurement. Panelists talked through the potential financial risks unique to these deals, the methods of financing of corporate purchases, the potential need for additional entrants into tax equity markets and overcoming the barriers to entry and the opportunity for financial innovation to satisfy the capital demands of this growing market.

To learn more about ACORE’s Corporate Procurement working group, its March 16th meeting, and it’s plans for the rest of 2016, or to get involved, please contact James Hewett. If your company is working on strategies for sustainability and wants to stay ahead of policy, finance and market strategy pitfalls, we’d encourage you to reach out.