The U.S. Department of Defense is the second-largest buyer of renewable electricity through deals meant to lock in long-term supply and provide incentives to developers of wind and solar projects, according to a database of more than 600 corporate power-purchase agreements (PPA) tracked by Bloomberg New Energy Finance. Only Google is a bigger buyer. The revelation provides one of the starkest examples yet of the same clean energy imperatives driving companies, cities, universities, and other federal agencies.
First, renewable power has become cheap enough to compete with conventional sources in many places, particularly the Great Plains, where wind farms dot the landscape from Texas to Minnesota. Companies looking for power are commissioning the deals—traditionally with utilities—as a long-term hedge against variable electricity prices. At the Pentagon, the military has committed to acquiring up to 3 gigawatts of renewable capacity before 2025. The Air Force and the Navy lead the armed services in commissioning clean energy projects.
Retired Navy Vice Admiral Dennis McGinn, now an assistant secretary for energy, installations, and environment, said economic security is “inextricably” linked with energy and the environment. “You can't consider one without considering effects on the other.”
Second, and even more surprising, is that in locations where renewable energy is competitive but not necessarily cheapest, energy consumers are still pursuing carbon-free power. This is often driven by corporate sustainability or climate pollution goals. There's a calculus at work for each entity, between changing prices and changing institutional missions.
The Pentagon is finding that clean power is often just better, without even considering the climate benefits. It helps the military execute its mission in big and small ways, like something as simple as lightening the load soldiers carry onto the battlefield. Not surprisingly, Congress, the White House, and the Joint Chiefs of Staff have all encouraged the military to clean up its energy sourcing.
Here’s the big picture:
1. Everything is changing
By inking these deals, big institutions are fueling a revolution in the energy sector. This chart shows how the sources of U.S. electricity have changed since 2000. The light-blue and yellow wedges that open up toward the top right of the chart show the rise of wind- and solar-generated electricity.
Some of the organizations buying clean power are doing so despite the fat-and-widening brown band above, which shows the expansion of gas resources from the shale boom. Most of the overall wind and solar capacity has been ordered up by utilities, and the deals struck by big brands, big agencies, and big schools make up barely 10 percent of the total installed wind and solar capacity. But many of these green energy users spend a lot of money on marketing and communications and aren't shy about touting their progressive stance on climate friendly solutions.
BNEF projects that the renewable and natural gas booms should lead the U.S. to meet President Barack Obama's 2030 climate emissions goal, which seeks to cut power-sector carbon dioxide emissions to 32 percent below 2005 levels—regardless of whether a court challenge to his Clean Power Plan succeeds.
2. Who’s buying clean power?
To some extent, the usual suspects. The top 20 purchasers of renewable electricity include many of the large technology, consumer goods, and retail companies that are regularly toasted for their electrical hygiene.
Google’s activity amounts to almost 26 percent of the total capacity built by the other 350 institutions in the BNEF database combined. It’s also the leading face of the leading industry. Technology has out-bought manufacturing, retail, and the rest since 2013. The sector purchased 1.78 gigawatts in 2015, which was more than the entire country bought in 2014, some 1.63 GW.
Activity is expected to slow this year, after a mini-rush propelled by the expiration of a wind production tax credit and the expected lapsing of a solar investment tax credit. However, in December both credits were renewed, so green investments may pick up again.
3. Where is it going?
This map shows where corporate PPAs have resulted in new renewable energy projects.
The Great Plains corridor is lit up with large-scale wind farms. Each mammoth installation can churn out enough electricity on average to power 35,000 homes. California drives much of American solar development, with many projects also finding homes in the Mid-Atlantic and Midwest.
Graph: Bloomberg New Energy Finance
4. Doing the “right” thing
"Corporate sustainability" can be described in many ways—as cost-saving, confusing, or public-relations greenwashing. The BNEF data suggest another label might be tossed in: It’s working.
By taking on commitments to reduce or stop pollution, executives are demonstrating that there's more to economic decision-making than short-term pricing. Companies and other institutions are committing resources to green power at a time when conventional electric power—fueled by abundant natural gas—has reduced prices to near-historic lows. Reasonable people can disagree over which revolution has been more dramatic, the clean energy one or the shale gas one. But going by the numbers alone, gas has made conventional power very cheap.
The surprising thing is that many companies—always with an eye on the numbers—aren't going by short-term numbers alone. Challenged by a climate change skeptic at a March 2014 shareholder meeting, Apple Inc. Chief Executive Officer Tim Cook shut down the criticism, saying, “If you want me to do things only for [return on investment] reasons, you should get out of this stock.” Even Wal-Mart Stores Inc.’s sustainability program has put the Bentonville, Ark.-based company on the map of American renewables.
"Every corporation has a different reason for doing PPAs, with sustainability, corporate values, and the price hedge and stabilizing effect on costs all being part of it," said Neha Palmer, Google's head of energy strategy, global infrastructure. "It's clear we are not the only ones finding value in doing these types of activities."
Several companies in the U.S. database have committed to meeting scientifically determined climate goals. Mars Inc. (ranked 13), Procter & Gamble Co. (15), Owens Corning (16), and L’Oréal SA (175). Many actively buy PPAs around the world. In December, Google bought 781 megawatts of wind and solar power in the U.S., Chile, and Sweden, the same week Microsoft Corp. secured 175 MW of wind power to run an Illinois data center.
“There’s no question: The spark for corporate purchasing of renewables continues to be sustainability goals,” said Jacob Susman at EDF Renewable Energy, who has worked on deals with Yahoo! and Procter & Gamble.
Corporate buyers may make up 50 percent of demand for the next several years, he said, but that may change: “The historically low cost, and still declining, of wind and solar adds fuel to the fire