The demand for renewable energy from corporations is largely credited with the rapid deployment of clean energy resources around the world over the past decade.
In fact, corporations purchased a record 31.1 GW of renewable energy in 2021, up 24% year-over-year according to BloombergNEF.
That demand, coupled with pricing pressure and supply chain constraints, has made the corporate renewable energy procurement market increasingly tight for corporations with near and long-term net-zero targets.
Companies like Microsoft and Meta are competing with each other for a relatively small batch of available projects.
"We continue today to want to do more transactions than is available in the market," Urvi Parekh, Meta's head of renewable energy, said during a panel on corporate deal structures at the ACORE Finance Forum.
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Even though Meta announced it reached its goal of 100% renewable energy in 2020, the tech giant's electricity consumption is increasing 30-40% per year, Parekh said. That requires additional renewable energy projects to offset annual usage.
Microsoft shares similar challenges. But its goal of 100% hour-by-hour carbon-free electricity (CFE) by 2030 raises the bar even higher.
Patrick Taylor, Microsoft's principal program manager working on renewable energy procurement, predicted that the next wave of corporate procurement is "going to go far beyond volume and price," because corporations are setting more ambitious targets, like 24/7 CFE.
"(The next wave is) going to be about the other value that projects can bring, in terms of community benefits, the just transition, and real emission reductions in key markets," Taylor said. "I think as people are starting to develop the next batch of their pipeline, starting to factor in some of those components, as well as the value offering for corporates, will be really important.
"We appreciate new approaches to these types of things. We're all ears if people have innovative ideas. It's not just price and quantity anymore, for sure."
A panel on corporate procurement of renewable energy at the ACORE Finance Forum. From left to right: Matt Bogdan, Wilson Sonsini associate; Meghan Schults, executive vice president of finance and capital markets, Invenergy; Patrick Taylor, principal program manager, Microsoft; Urvi Parekh, Meta's head of renewable energy; Peter Zhu, managing director, Green Investment Group, Macquarie Asset Management. (Courtesy: ACORE) That approach is "incredibly refreshing," said Meghan Schultz, executive vice president of finance and capital markets for renewable energy and transmission developer Invenergy. For years, corporate renewable energy deals have only focused on "price, price, price, and a drive to the bottom," Schultz said.
But there is some rationalization taking place in the market, Shultz added, that is focusing on sustainable projects, jobs, and communities.
"It can't just be about price."
For all the doubts that corporations won't reach net-zero targets, there's no backup plan for Meta.
Parekh said the corporate procurement market must have adequate project supply because "there's not really an option where we just choose to miss" our targets.
