What do corporate PPA deals mean for storage?

US hospital

Companies in the US healthcare sector, including Kaiser Permanente, are among those supporting renewable energy and storage developments (Source: Pexels)


US healthcare giant Kaiser Permanente pledged last week to go carbon neutral.

Not much to get excited about there, right? Yes, it’s good when a company that runs 39 hospitals commits to renewables, but barely a week goes by without some giant firm making a big promise to buy only renewable energy at some point in the near future.

But look closer. Kaiser Permanente underpinned this commitment by announcing a series of agreements with NextEra that would lead to the construction of 131MW of solar power, 50MW of wind, and a 110MW battery system. All three of these schemes are due to come online by the end of 2021. It’s an interesting move.

Wind and solar PPA deals

I’ve been writing about corporate PPAs over the years for A Word About Wind. Over that time we have seen corporate interest in buying electricity from wind and solar farms blossom. It was happening before the Paris climate deal that was agreed in late 2015, but that deal has certainly accelerated that trend.

There are a few key reasons why solar and wind businesses have been able to take advantage of this interest from corporates. Some of those energy buyers have been attracted to renewables because of the PR benefits, especially in the earlier days – let’s say 2012 to 2014 – but they have also seen the price of renewables fall fast too. Larger firms have been keen to commit to competitively-priced renewable energy.

This has undoubtedly helped firms in both of these sectors. Across the world, governments have been cutting centrally-set feed-in tariffs as they look to cut their subsidy bills, which has squeezed the margins of investors in wind and solar. However, a growing number of corporates are now stepping in and signing attractive long-term power deals. They work for the project owner and buyer, both of which get vital financial certainty.

The Rocky Mountain Institute highlighted earlier this year that firms in the Fortune 500 had agreed 10GW of off-site renewable energy deals in the US between 2015 and mid-2018; and I covered the growth of such deals in an AWAW report in July. These deals – more commonly known as power purchase agreements, or PPAs – are proving a real boon for those working in wind and solar.

What this means for storage

Companies in the US healthcare sector, including Kaiser Permanente, are among those supporting renewable energy and storage developmentsThis is where this gets interesting for those working in the storage sector – and is why we think the Kaiser Permanente deal is worthy of your attention.

By agreeing to buy solar and wind power, the company has also enabled NextEra to start building a 110MW battery storage scheme. Many investors that we speak to don’t yet see a strong business case for adding storage. Check out the highlights of our chat with Greencoat Capital’s Richard Nourse earlier this year. But, in this case, NextEra thinks it can work

Kaiser Permanente is looking to use the electricity from these 181MW of solar and wind projects to help power 27 of its 39 hospitals. To do that, it has to be certain the electricity will be there when it needs. That’s where the battery comes in.

In our view, more of these corporate PPAs are set to include a storage component. We won’t claim Kaiser Permanente is the only one to do so. We have seen prominent schemes in Australia that are matching wind capacity with solar and storage too, and others too.

And this is a good thing for storage because these PPAs can help those in the sector to take the most competitive storage technologies to commercial maturity. If there are more PPA deals including storage then that means more chances to learn and reduce costs.

The new Energy Transition Outlook Report published by advisor DNV GL last week shows the scale of cost reductions that are potentially on offer in the storage sector. It said that “for several regions after 2040, storage capacity will be crucial”, and that storage technology could match the level of cost reductions that have enabled wind and solar to compete hard with incumbent fossil fuel players in the last few years.

Now I don’t suppose I need to tell you the scale of the prize that’s on offer here. You have more experience in the storage sector than I do – but I’m keen to learn if you want to chat at richard@energystoragereport.info

That said, I do think the wind and solar sectors offer a great example of the power of PPAs with corporate energy buyers. More of these deals can only help storage companies to learn – and thus make the financial savings that are so desperately needed.

Personally, that makes it a hugely exciting time for me and the rest of the team at The Tamarindo Group to be looking more at storage, and we’re privileged to be able to walk part of the way with you.

If you’re keen to chat more about editorial then you can either contact me on my address above, or the rest of the team at editorial@energystoragereport.info, and introduce yourself. Equally, if you’d like to find out more about commercial opportunities at ESR, we’d be happy to discuss that with you too.

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