Within the past two weeks we’ve seen power purchase agreement (PPA) announcements from Google, Apple, Kaiser Permanente, and GM, that, when combined with an earlier announcement from Amazon Web Services, amount to nearly 600 megawatts (MW), or just shy of half of 2014’s total corporate PPA commitment.
If you’ve been paying attention, you know that these commitments are the latest in a string of announcements signaling the explosion of both wind and solar development in the U.S. In the past decade, renewables have increased exponentially in volume, shifting the overall national grid from a measly 2% non-hydro renewables to closer to 8-9%. While the U.S. still falls far short of other nations—like Germany, for example—there is a clear and dramatic shift underway in the U.S. energy infrastructure.
Fundamentally, this growth can be attributed to two factors: falling prices and federal tax incentives. Prices have been driven down dramatically due to improvements in technology in both wind and solar and increased demand, particularly in residential solar, which has grown more than 600 times since 2008. Layer on top of heightened demand the tax relief of the Production Tax Credit (PTC) for wind and the Investment Tax Credit (ITC) for solar, and we find ourselves at a historic juncture where the price of “green” power is now on par with, or even cheaper than, “brown” power in many markets.
A new infographic from WRI helps explain how now might be a smart time to invest in either onsite renewables or a PPA. For users with a large energy appetite, PPAs can be a source of considerable cost savings, as the price of renewables is relatively stable compared to fossil fuels, which are consistently on the rise and fluctuating.
It’s the financial savings potential of PPAs that is leading early adopters like Google to continue to procure renewables via the PPA mechanism. In its recent press statement about its combined wind & solar PPA strategy, health care giant Kaiser commented that it is confident the PPAs it has committed to are “likely to save us money and lock in prices.” Long-term projections on PPA pricing indicate that the largest buyers could save millions over the course of a 15-25 year deal.
Combine this with—at last—good news out of Washington. The 2016 Obama budget proposal includesan indefinite extension of both the PTC and the ITC, critical components to keep the renewables industry thriving. While it is certain that a conservative Congress will undoubtedly whittle away at the overall effectiveness of the President’s strategy, it is promising nevertheless.
In the meantime, hungry corporate buyers continue to push the boundaries of this new energy frontier. What will the rest of 2015 hold for PPAs? If historic trends point towards anything, it’s that 2015 will be another record-breaking year in commercial renewable energy purchasing.