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Friday, September 17, 2021

Financial officers lead the renewables revolution

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Rarely thought of as being the crusaders of the green power transformation, chief financial officers looking to lower energy costs could find themselves at the forefront of a renewables revolution.

The commercial and industrial sector accounts for two-thirds of the world’s end-of-use of electricity and as the appetite for more energy gets stronger, so does the need to fight back against rising energy costs.

CFOs are doing this by signing corporate power-purchase agreements (PPAs). These are contracts where power users agree to buy energy at a fixed price for a fixed term.

As well as fixing costs, PPAs guarantee a source of supply – offering the opportunity to reduce carbon emissions as well as bills.

Organisations like RES have been championing PPAs for the better part of a decade. It has provided PPAs to the likes of Google, Microsoft and array of other tech giants and telecom companies.

In recent years, these agreements have grown in popularity for businesses of all sizes and industries, but in the UK businesses have been slow to recognise the benefits of them. With energy prices expected to rise 40-50% in the next 15 years, the risk to business will rise too and so the need for protection is crucial.

Power costs are hard for businesses to control but a PPA with a company specialising in renewables development, construction and management, the costs are usually fixed at the commissioning stage.

Guaranteeing the supply and unit costs is great for the customer and the generator secures a long-term customer. As renewables continue to emerge as the cheapest method of generation, and the price gulf between non-renewable energy generation grows, the advantages and returns of PPAs are only likely to increase.

As those in charge of cash flow sign PPAs, they aren’t only receiving the kudos from management for cutting costs in the long term, but they are also driving further decarbonisation and giving their marketing colleagues an opportunity to steal the limelight from the likes of Google and Facebook.

The majority of tech giants and those such as Anheuser-Busch InBev and AstraZeneca all enjoy the media attention from going (or pledging to go) 100% renewable and customers and competitors take notice when a business meets and goes beyond their sustainability commitments.

This further solidifies the business case for PPAs as a third of consumers are more likely to engage with a business that meets its promises.

Ian Hunter, Managing Director of Support Services said: “Corporate power-purchase agreements are one of the quickest ways for a business to meet its green goals. Similarly to acts of government like the Climate Change Act or Paris Agreement, PPAs are acts of business that are driving real energy change, boosting the growth of the renewables sector and saving businesses money and protecting their future. The importance of PPAs cannot be understated; by reducing the risk of rising energy prices, they provide numerous rewards to consumers, generators and wider society.”

RES has recently reached a 1GW PPA milestone and to date, more than 20GW of PPAs have been signed internationally by businesses like Facebook, Apple and Royal Caribbean.

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