Workshop F Shades of Green Industry Trends, Emerging Strategies - - PDF document

Workshop F

Shades of Green – Industry Trends, Emerging Strategies & Case Studies Exploring the Best Practices in Integrating Renewable Energy with Electric Supply

Tuesday, February 18, 2020 10:45 a.m. to Noon

Biographical Information

Todd Altenburger, Director of Energy Solutions, AEP Energy 303 Marconi Blvd. Suite 400, Columbus, OH 43215 Mobile: 614.507.5941 taltenburger@aepenergy.com Todd Altenburger is a Director of Energy Solutions at AEP Energy, focusing

• n the delivery of long-term results for large customers throughout the US.

Todd is a Certified Energy Manager and has worked with many diverse customers including Universities, Tech companies, Government agencies, and of course Manufacturers. Todd is an expert in the development and implementation of energy solutions across the areas of retail commodity supply, behind-the-meter assets, and renewable energy integration. Todd received his Master of Business Administration from the McDonough School of Business at Georgetown University, DC, and his Bachelor’s Degree in Electrical Engineering from the University of Toledo.

Proud Sponsor

24th Annual Ohio Energy Management Conference

AEP Energy is a competitive retail electric service provider and a competitive retail natural gas service provider and an affiliate of Ohio Power Company (AEP Ohio). AEP Energy is not soliciting on behalf of and is not an agent of AEP Ohio.

AEP’s Clean Energy Future

Source: https://www.aep.com/about/ourstory/cleanenergy

OUR PLANS

AEP is at the forefront of the energy industry’s

• transformation. We’ve developed next‐generation

sustainability goals to guide us as we create a brighter energy future.

AEP Energy is a competitive retail electric service provider and a competitive retail natural gas service provider and an affiliate of Ohio Power Company (AEP Ohio). AEP Energy is not soliciting on behalf of and is not an agent of AEP Ohio.

AEP’s Clean Energy Future

Source: https://www.aep.com/about/ourstory/cleanenergy

Highlights of our clean energy strategy include:

• Reducing carbon dioxide emissions by 80% by 2050
• Adding more than 8,600 megawatts of wind and solar
• Investing $2.3 billion in renewables through 2024
• Educating customers on how to optimize their energy

efficiency

• Advocating for and enabling wider usage of electric vehicles

AEP Energy is a competitive retail electric service provider and a competitive retail natural gas service provider and an affiliate of Ohio Power Company (AEP Ohio). AEP Energy is not soliciting on behalf of and is not an agent of AEP Ohio.

AEP’s Clean Energy Future

Source: https://www.aep.com/about/ourstory/cleanenergy

And, Who is AEP Energy?

• Deregulated subsidiary of American Electric

Power (AEP) serving customers in ~30 states

• Multiple business units
• Retail supply in PJM
• Wholesale supply in multiple ISOs
• Behind‐the‐meter (BTM) assets across the U.S.
• Renewables across the U.S.

And, Who is AEP Energy?

• Renewable Energy Solutions include:
• Behind‐the‐meter assets like solar
• Renewable Energy VPPA provider in (11) states
• “Sleeved” Renewable Energy PPA electricity supplier
• Integrated Renewable Energy electricity supplier
• RE Portfolio creation for customers with existing PPAs

PPA = Power Purchase Agreement

And, Where is AEP Energy?

Sustainability

Let’s Start with Sustainability

“Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

United Nations, (1987) Our Common Future ‐ Brundtland Report. Oxford University Press

Let’s Start with Sustainability

“Sustainability is now incorporated into two‐thirds of companies’ core missions and signatories of the UN’s Principles for Responsible Investment represent over half of the world’s institutional assets.”

https://www.odgersberndtson.com/en‐us/insights/the‐rapid‐rise‐of‐the‐chief‐sustainability‐officer

Sustainability is much more than just Renewable Energy:

• Are your facilities as energy efficient as they can be?
• Beyond energy efficiency, what more can you be doing Behind‐The‐Meter (BTM)?
• BTM projects should be the first place to start in any sustainability goal.
• “A kWh saved is a kWh earned.”
• Are you recycling waste to the greatest degree possible?
• Can you be doing the same (or more) with less resources?
• Are you tracking Scope 1, 2, 3 carbon emissions to improve in the future?

Wait, What are Scope 1, 2, and 3 GHG Emissions?

There are three types of GHG emissions EPA tracks and works to reduce.

Source: Business Renewables Center

Other Considerations in Sustainability

• Energy Management and Storage is evolving and will be an

important consideration in future facilities planning.

• Battery technology is improving and (non‐renewable) BTM assets can

provide a value beyond just hitting RE and carbon‐reduction targets.

• Technology leaps like AI, IoT, blockchain are important to track

to improve the double bottom‐line.

• The original “Green” ($$$)
• Demand‐based (Transmission and Capacity) component costs are on

the rise, and deploying solutions at these can improve profitability.

Renewable Energy PPA 101

• RE PPAs are long‐term contracts made between asset developers

& off‐takers for large wind and solar facilities.

• Off‐takers may be utilities, corporate buyers, service providers,

banks, non‐profits, etc.

• PPA rates/terms are negotiated prior to financing & construction.
• Not all contracted PPAs may ultimately get built.
• PPAs can include the delivery of physical power to a

customer/provider but always involve a “fixed‐for‐floating swap” aka “contract for differences” with some off‐taker.

• The off‐taker doesn’t have to be the ultimate customer.

Renewable Energy Considerations - PPA 101

• Financial only PPAs are known as “synthetic” or

“virtual” PPAs (VPPAs).

• There is a regular (financial) net settlement between

the project owner and the PPA off‐taker, whereby the

• ff‐taker receives or pays the difference of the fixed

PPA price and the market (floating) price.

• There are risks in considering this strategy.

Renewable Energy Considerations - PPA 101

• PPA terms can vary, but 15‐years is a pretty common term length.
• Wind PPAs may differ from Solar PPAs
• Everything is negotiable…to a point.
• Other important considerations of IFTM RE Solutions:
• Focus here is US market only, but global needs and capabilities may

matter.

• Priorities and Timing varies between for‐profit and non‐profits companies.
• Need to consider significance of energy expenses as % of overall expense.
• Credit matters when thinking about long‐term REPPA + retail relationships.

Renewable Energy Considerations - PPA 101

A Grossly Incomplete List of PPA Risks (Post Construction)

• Price Risk – The PPA off‐taker will pay (lose) during times when the hourly

market price settles below the fixed PPA price.

• Shape Risk – There may be a negative correlation between attractive

(high) price settlements and times of peak PPA asset production.

• EX1: A wind PPA may generate a lot of MWHs, when the price is cheap.
• Basis Risk – The settlement location of the PPA price is critical. There

could be a huge difference in settling a PPA against “bus‐bar” pricing, (more liquid) Hub pricing, or (specifically correlated) load‐zone pricing.

Renewable Energy Considerations - PPA 101

Renewable Energy Trends

Source: REBA State of the Market – Fall 2019

• New buyers are getting involved.
• More than 85 unique companies have transacted since 2014.
• 50% of the individual buyers in 2019 were first‐time buyers.

Renewable Energy Trends

Renewable Energy Trends

Corporate Renewable purchase commitments continue to rise:

Source: REBA State of the Market – Fall 2019

Source: REBA State of the Market – Fall 2019

The diversity of RE buyers is constantly evolving.

Renewable Energy Trends

More Solar and Wind projects are coming soon to PJM.

Source: https://www.pjm.com

Renewable Energy Trends

• Diversity of technology matters.
• Wind is no longer the dominant source of RE generation in PPAs:

Renewable Energy Trends

Renewable Energy In the News

• Failure in meeting goals can have consequences.
• In an increasing socially‐conscious world, this work really matters:

Source: https://www.cnbc.com/2019/09/20/global‐climate‐strike‐facebook‐amazon‐and‐twitter‐workers‐walk‐out.html

“Several hundred other businesses are supporting the strike by giving workers time off, closing corporate

• ffices or otherwise drawing

attention to the strike, according to the American Sustainable Business Council.”

Source: https://www.cbsnews.com/news/global‐climate‐strike‐ businesses‐close‐their‐doors‐in‐time‐for‐climate‐strike‐2019/

Renewable Energy’s Impact

• Example of RE Commitments: RE100 (http://re100.org/)
• International companies include Anheuser‐Busch InBev, Apple, Bank of

America, Dell Technologies, eBay, Facebook, Google, Johnson & Johnson, General Motors, Nike, P&G, Starbucks, Target, Walmart, etc.

Renewable Energy Commitment to “RE100”

• Example of RE100 Commitments: (http://re100.org/)
• Timing varies to 2050 org goal.

Renewable Energy Commitment to “RE100”

Renewable Energy Supply Chain

• Customers are increasingly aware of sustainability & corporate

social responsibility, and they are directing purchases in kind.

• Are your most important customers making RE commitments?
• Are these customers asking for supply chain RE improvements?
• Is your organization prepared if/when that time comes?
• Is your competition?

Renewable Energy Supply Chain

• VPPAs are prominent, but more customers are thinking locally/regionally.
• Is RE contribution from a Texas asset good enough for an OH company?
• In Open markets, retail integration and RE‐netting over the long‐term is

starting to become a more common practice for customers.

• RECs can be monetized, but more customers want to keep/retire them.
• Consultants can play a part in the procurement process.
• Payment for services can take many shapes.
• VPPAs can be split between multiple off‐takers.

Renewable Energy Trends – Evolving Strategies

• Smaller buyers may not be able to “anchor” a large RE project.
• Aggregation strategies are deployed in order to access large‐scale RE:

PPA is for 42.5 megawatts of a 100 megawatt North Carolina solar project.

Source: https://www.bloomberg.com/company/press/bloomberg‐cox‐enterprises‐gap‐inc‐salesforce‐workday‐close‐new‐renewable‐energy‐aggregation‐deal/

Renewable Energy Trends – Evolving Strategies

• Corporate buyers are not the only ones getting more involved:
• Meanwhile, Ohio’s RPS has been dialed back.

https://www.columbusunderground.com/opinion‐commit‐columbus‐to‐100‐percent‐renewable‐energy‐by‐2035‐lr1 https://www.sierraclub.org/press‐releases/2019/03/cincinnati‐becomes‐100th‐us‐city‐committed‐100‐percent‐clean‐renewable‐energy https://insideclimatenews.org/news/21092018/cleveland‐100‐percent‐renewable‐energy‐cities‐map‐climate‐change‐plan‐industrial‐history

Renewable Energy Trends

• With the passing of Ohio’s HB6, the renewable energy mandate has been

reduced and will be (currently) eliminated as of 2027.

Renewable Energy Trends

Renewable Energy Considerations “What Should I Do?”

Renewable Energy Considerations

• Start with a goal – What is the measurable target to achieve?
• What is the timing of that target?
• How does your org intend to hit that target by deadline?
• How & When will your org communicate your commitment?
• The best place to start is always behind‐the‐meter (BTM), but

doing a Renewable Energy project of meaningful scale BTM is extremely difficult.

• Do you have land available for a sizable solar array?
• Is a BTM wind project logical at your location(s)?
• Do those projects make sense for your organization and facility?
• Is a BTM renewable project the best use of capital?

Renewable Energy Considerations

• Once BTM RE opportunities have been exhausted, focus elsewhere.
• Consider the “Evolution of Renewables”

Note: Considering “Onsite RE Gen” in the middle here as indication of likely available scale.

• Understand where your organization is and where it wants to be on

this evolution.

• Are REC (renewable energy credit) purchases alone good enough?
• National RECs are cheap but are still cost additive by nature.
• Specific locational RECs (alone) can be limited in volume and very expensive.

• Regulated “Green Tariff” options are not available everywhere
• For example: Ohio!
• In markets where Green Tariffs do exist, they can be very expensive.
• Beyond RECs, Onsite, and Tariffs, look In Front of The Meter (IFTM)
• Doing IFTM Renewables = PPA
• Does your company need to demonstrate Additionality?
• Additionality: “If not for my company, this RE facility wouldn’t exist.”

Renewable Energy Considerations

• A big long‐term RE goal requires a big long‐term solution.
• How important is financial certainty in long‐term energy decisions?
• Can your organization contract for a long‐term?
• Are you interested in managing a new P&L via traditional VPPA?
• “Do you want to be in the energy business?”

Renewable Energy Considerations

• Most customers want RE solutions if the cost is

competitive, but very few customers want to be active energy business participants.

• The state of OH is not going to do it for you, and instead of

going it alone…

Renewable Energy Considerations

• Many customers are engaging Integrated Renewable Energy (IRE)

solutions as a way to simplify transactions.

• IRE solutions partners can assist customers by:
• Transferring the risk of hitting specific RE goals.
• Eliminating the difficult and lengthy RE PPA RFP process.
• Diversifying RE spend beyond just one asset, one technology, one area.
• Removing derivative accounting concern from traditional PPAs.
• Delivering a solution that is in‐line with (or cheaper than) historic

electricity supply cost.

• Allowing customers to purchase electricity “as it has always been done.”

Renewable Energy – The Bottom Line

• Start now – Understand current position and future opportunities/risks and

the urgency related to the timing of considering RE.

• Decide what level of RE commitment (if any) is right for your organization.
• Engage with a RE expert or many experts to work through options.
• Reinforce the RE plan throughout your organization to confirm buy‐in.
• Look for continued communication on the subject as other participants

commit to and pursue delivering upon RE goals in the future:

• Manufacturers
• Cities
• Hospitals
• Airports

In Summary

• Universities
• Tech (Data centers)
• Government?