Once the realm of hippie environmentalists, renewable energy has gone corporate.

“Nearly half of Fortune 500 and 60% of Fortune 100 companies have established aggressive climate and clean energy goals,” a new white paper from the Edison Electric Institute and leading environmental groups notes. “An increasing number are setting 100% renewable energy goals.”

In 2015, large corporate customers contracted for a record 3.2 GW of renewable energy — over 21% of the 16.4 GW of reneawbles added to the U.S. grid last year — reports the paper, “Creating Renewable Energy Opportunities.”

“The contracts signed in 2015 tripled corporate contracts over 2014, which themselves had doubled over 2013,” it notes. “Of 4,000 MW of wind energy contracted through power purchase agreements (PPAs) in 2015, large corporate customers signed more than half of them (52%).”

The report is the product of a landmark partnership between the Edison Electric Institute, the World Wildlife Fund (WWF) and the World Resources Institute (WRI). Together, the organizations comprise the Utility-Corporate Buyer Collaborative Forum (UCBCF), which aims at connecting large corporations with renewable energy demand to utilities that can serve it.

“It is still too hard for corporates to buy renewables in most markets and utilities and corporate buyers are finding real value in learning from each other,” said Letha Tawney, director of utility innovation at WRI Director of Utility Innovation Letha Tawney. “They are working on how to simplify transactions and work with regulators and policymakers to create new options like green tariffs.”

If they can capture it, the expanding corporate demand for renewables presents a big revenue opportunity for utilities, Tawney and other stakeholders told Utility Dive. But if they do not grasp it, some power providers could see large companies look elsewhere for their clean power supply.

Origins of the Buyer Forum

EEI, the trade group for the nation’s investor-owned electric utilities, is the latest member of the UCBCF.

WRI and WWF have been working with Rocky Mountain Institute (RMI) and Business for Social Responsibility (BSR) since 2013 to connect corporations with renewable energy providers. They came together at the urging of early would-be buyers of renewables like General Motors, Volvo, Hewlett-Packard, Cisco, Target, Walmart, Hilton, and Kaiser Permanente. The corporates wanted help finding product.

The first utility participants were MidAmerican Energy, PacifiCorp, and NV Energy — all owned by Warren Buffett’s Berkshire Hathaway Energy (BHE).

The three-part partnership created two working groups. One was part of a WRI initiative, led by Tawney. It aims to finding ways for regulated utilities to serve corporate customers. Another was the Business Renewables Center (BRC), led by Rocky Mountain Institute Managing Director Hervé Touati. It supports corporate buyers in navigating the complexities of project selection, PPA negotiation, and procurement in deregulated markets.

Together, the working groups wrote a set of six Buyers Principles that continue to define what the private sector needs utilities to offer in a renewables contract.

In the fall of 2015, a modest workshop planned for the groups turned into a participants’ summit that drew 137 attendees. With gathering momentum, EEI’s interest, and the formation of the UCBCF, a new umbrella organization was created and a 2016 summit was scheduled.

Last month, the Renewable Energy Business Alliance (REBA) summit in Seattle drew a full house of 300 participants, Tawney said. Some had to be turned away.

“It is really encouraging to see so many corporate buyers coming to the energy markets and saying they want renewable generation,” said Blaine Collison, network services managing director at renewable energy broker Altenex, a founding member of the BRC. “This market is going to do nothing but accelerate.”

The ultimate goal is to see 60 GW of renewables contracted by corporate buyers by 2025.

Renewables in regulated markets

Utilities see the move to renewables as a necessity, an opportunity, and a challenge, the EEI white paper reports. In response, the utility industry has become a leader in utility-scale renewables and is partnering to modernize the distribution system for the integration of distributed energy resources.

Through REBA and the UCBCF, utilities are working on ways to meet corporate customers’ demand for renewables without imposing costs on other customers. A standard rate structure that sets prices according to the cost of service “does not easily accommodate the custom supply deals that large customers want,” the paper adds.

Pioneering efforts are underway with regulated utilities across the country to structure green tariff programs that allow utilities to serve their biggest customers and protect the interests of the rate base, Tawney said.

The six principles call for any contract to offer price predictability, price competitiveness, and simple, transparent terms through a fixed price contract.

They also call for the renewable energy credits (RECs) for the generation to go to the corporate buyer instead of the utility. That verifies the project’s additionality, which means it would not have been built without the corporate investment.

Utilities in action

NV Energy’s Green Energy Rider and Duke Energy’s Green Source Rider were the first green tariffs exercised and both attracted corporate customers to utility renewables programs, Tawney said. But each met only four of the Buyers Princples. Both were priced at a premium and neither offered simplified financing mechanisms.

For this type of green tariff to work for other regulated utilities, there must be customers who want more renewable energy and are willing to pay a small premium for it, said Jonathan Weisgall, vice president of government relations Berkshire Hathaway Energy (BHE), NV Energy’s parent company.

“That type of customer is growing, as more and more companies have public sustainability goals and are making clean energy pledges,” he said.

More recently, Dominion Virginia Power has developed separate deal structures for projects with Microsoft and Amazon that are similar to green tariffs and show promise. Neither is through the utility’s green tariff program, which Dominion is working with REBA members to improve.

For Amazon, “[Dominion] is acting as the power broker for a PPA,” Tawney said. “It is the only deal I know of in which the regulated utility is essentially offering a virtual PPA structure and the financial upside of a virtual PPA on the utility bill.”

The virtual PPA is a contract in which the power is generated and sold in an unregulated market and attributed through RECs to the corporate buyer.

“There is some risk in a utility brokering a virtual PPA, but it seems to suit Dominion,” Tawney said. “They have retained the customer relationship and there are other opportunities available.”

The Microsoft deal is somewhat unusual, as it is priced at a premium is and likely to only have limited appeal to other companies, she said. “But it is an exciting public-private partnership between the Commonwealth [of Virginia], Microsoft, and Virginia Power.”

Xcel Energy’s Renewable*Connect in Minnesota and Solar*Connect in Colorado, now awaiting approval by state regulators, were designed in conjunction with REBA members to better meet corporate needs, Xcel Regional Vice President Aakash Chandrarana said.

Both offer any customer a 1-year, 5-year, or 10-year fixed price contract for 100% renewable energy. The Minnesota contract is 70% wind and 30% solar. The Colorado plan is entirely solar, he said.

“The buyer picks the term and the RECs are retired. That verifies the additionality of the purchase,” he added. “It also includes a neutrality charge that avoids any cross-subsidy by other customers.”

The first year price is above market, but Xcel’s projections forecast an escalating retail electricity that will will make the Connect contracts’ fixed prices “neutral to the customer by around year five and an effective hedge at a discounted price by year ten,” Chandarana expects.

Xcel anticipates regulatory approval for both by the end of this year, he added.

Puget Sound Energy (PSE) in Washington state has been developing a green tariff that could be the first to meet all six principles, Tawney said. It is in regulatory stasis because it is attached to a project that is struggling with unrelated issues.

“Because it is not moving forward on the schedule they want, PSE will likely soon put a different project forward with a reworked structure,” Tawney said. “They are working on it internally to figure it out and talking to customers about what an alternative green tariff may look like.”

Rocky Mountain Power, another BHE subsidiary, is working with REBA members to understand how it can design a green tariff under Utah. Recent utility reform legislation opened the door for a new green energy program, Tawney said.

“The Sustainable Energy and Transportation Plan bill directed Rocky Mountain Power to file a renewable energy tariff, which we’ll do by the end of May,” Weisgall said. “We’re drafting the filing right now and intend it to be attractive to large commercial and industrial customers who want renewable power in Utah.”

These utilities and others, are “inventing something new and will not hit the mark every time,” Tawney said. “Continuous reworking is crucial to figuring out how to create more and better utility-corporate partnerships and cost-effectively move to more renewables.”

In deregulated markets

Roughly two-thirds of the U.S. is served by deregulated wholesale electricity markets open to competitive PPAs, according to RMI’s Touati.

“In those markets, if a corporate buyer wants renewables, it doesn’t need its local utility,” he said. “It can contract with an independent power producer. About 90% of the corporate purchases of renewable electricity are through that kind of PPA.”

Utilities in regulated markets are not bad actors, said Tuoati, a former E-ON executive. They would like to meet their corporate clients’ demand for renewables, but without a green tariff they cannot, said Tuoati.

“Regulatory restrictions prevent them from building or contracting for renewables without imposing costs across their rate base and that is not acceptable to the regulators or the utilities,” he said.

The BRC’s focus is deregulated markets. There are two kinds of contracts, Tuoati said. One, sometimes called a physical PPA, provides proximity by contracting for the output of a specific local facility. The other, which some call a virtual PPA, connects the buyer with renewables generation wherever a new project can be built.

With either PPA, a contract between a corporate buyer and a developer is fundamental to renewables growth because the guarantee of an income stream for the term of the contract allows the developer to obtain financing, he said. It also guarantees the corporate buyer additionality, or the certainty the investment is adding new renewables.

“In physical PPAs, the utility and the regulators are left out,” Tuoati added. “A virtual PPA allows a corporate buyer to do the deal through the utility or an electricity trader that might be a large energy company like Shell or a bank like Morgan Stanley.”

The intermediary shares any risk associated with the project, Tuoati said. But only about 20% of corporate buyers use intermediaries.

Altenex acts as a buyer’s agent in identifying, analyzing, and executing PPAs, Collision said. “They come to us for help and often will acknowledge that they don’t know what they don’t know.”

Altenex tracks the 4,000-plus projects in the North American development pipeline and helps direct its clients to specific projects that match their needs.

Green tariffs are not where its clients tend to go because they are typically not looking to pay a premium price but to reduce costs, Collision said. “Most corporate buyers who prefer the tariffs do so because they want to demonstrate to their customers they are investing where they live and work.”

The threat to utilities

In regulated markets, existing customers cannot go elsewhere so there is no direct threat that the utility will lose load, Touati said. The indirect threat is that new corporate customers such as data centers with very big loads will not relocate to that market. “The utility will not lose load but it will not get new load and, with flattening load, that is a threat,” Tuoati said.

In deregulated states, the threat is to producers of conventional generation, he said. “Renewables are dispatched first by system operators. With corporate buyers financing renewables additions, conventional generation will lose market share.”

Utilities in regulated states are responding to the indirect threat by creating green tariffs but they are doing so too slowly, he said.

There are two advantages a tariff has over a PPA, Tuoati acknowledged. The first is proximity. The other is that it alleviates the potential risk a corporate buyer incurs in contracting directly with a developer.

“The PPA with a developer is an 80 page contract and requires expertise to understand what risks might be in it. A green tariff or contract with an intermediary is four pages,” he said. “It is easier to negotiate a four page contract than an 80 page contract.”

There is a need for both, he added, “but I have not found any corporate buyer that wants an 80 page contract if they can get a four page contract. They don’t like the complexities but they sign the more complicated contract because green tariffs are not  widely available and they can get the renewable electricity through a PPA sooner.”

Even with EEI joining, the threat to utilities may be increasing.

Altenex sees the corporate market moving toward “standardization or at least best practices,” Collision said. To speed that process, it just made public its proprietary 46-page PPA template, which has been through internal vetting "by a dozen or more Fortune 1000 companies,” he explained. “It has cleared a high bar and found to be best in class at protecting corporate buyers from risk.”

Making PPAs safer could make them more appealing, leaving less opportunity for utilities.

“Corporate America is not patient,” Tuoati said. “If the CEO says bring the company to 50% renewables in five years, the executive has to take the best available option.