Renewable Energy For Every Enterprise

January 8th, 2018

Sometimes the world changes and few notice it; for a few years.  Despite creating the first successful controlled flight with “Flyer 1” near Kitty Hawk, North Carolina, in 1903 the Wright brothers’ breakthrough remained relatively unknown for several years.   I think something similar maybe happening with renewable energy.

MIT is multi-year Member-client of the Sustainability Roundtable Inc.’s Sustainable Business & Enterprise Roundtable business service which is missioned to accelerate the development and adoption of best practices in more sustainable business.  In 2016, MIT worked with the non-profit “A Better City” in Boston to join with two other organizations, the Boston Medical Center and the Friends of Post Office Square (the owner of a park and parking lot in downtown Boston) to accomplish one of the first “Aggregated Procurements” of large scale, off-site, renewable energy in the United States among unaffiliated enterprises (earlier, U.S. federal agencies in 2015 and, in 2016, American University and George Washington University and Hospital completed Aggregated Procurements of large scale, off-site, renewable energy).

This enabled three diverse enterprises including MIT as a leading university, Boston Medical Center as the “hospital of last resort” in Boston and the Friends of Post Office Square a for-profit urban park and parking lot, to cause the development of 60 megawatts (MW) of new solar energy across 650 acres in Summit Farms North Carolina. Specifically, by aggregating their procurement of new, off-site, renewable energy these three enterprises were able to advance towards their environmental sustainability goals through capturing the economies of scale and transaction sophistication that had previously been enjoyed only by the world’s largest and most successful for-profit corporations.  And in doing this these three organizations were able to pioneer what increasingly amounts to a new type of renewable energy for every high-credit enterprise. One that does not require the interested enterprise to have substantial land or roof space or naturally occurring renewable energy resources on-site or even within the same electricity grid.  Indeed, this type of renewable energy transaction – which has only recently become available to the overwhelming majority of high credit energy users that are not among the worlds largest private energy users – has been the transaction that has enabled dozens of the world’s most sophisticated and best known companies to publicly commit to using 100% renewable energy.

1. The Move from “Unbundled” RECs to More Credible “Bundled” RECs 

Six developments have recently come together to create the opportunity seized by MIT that is increasingly available to every creditworthy enterprise that wants to meet its responsibility to be “part of the solution” in a move to a more sustainable world.  The first development is the move by leading corporations and institutions from “unbundled” Renewable Energy Credits (“RECs”) to “bundled” RECs.

A good definition of a REC is that it is “the birth certificate” of a renewably produced megawatt hour of energy.  Several years ago many leading corporations began to realize: for their claims about renewable energy to have more impact and credibility, they needed to move to buying only RECs that were “bundled” to specific megawatt hours of new renewable energy they were procuring.  And whether the renewable energy project is on one’s roof or thousands of miles away, it is through buying and “retiring” (i.e. committing not to re-sell) the REC that enables an enterprise to credibly claim it caused the REC’s one MWh to be produced.  Furthermore, to help develop national markets for RECs and to better finance renewable energy to displace fossil fuels, the standard setters for RECs permit them to be bought by any enterprise with energy demand in the same national market the REC is produced.  This has made a decisive difference for some off-takers like the consortium led by MIT which could not find a project that they modeled as likely to be economically winning for them in the same grid they had demand.  Although initially reluctant to look beyond their own grid, MIT and partners where impressed by the opportunity to displace a greater amount of fossil fuels in the distant North Carolina market which enabled the project to credibly report a greater net reduction in GHG emissions than would have been provided by a project of the same size in New England. (See: SR Inc Member Briefing on the Impact of Renewable Energy Purchases on Energy and Greenhouse Gas Goal-Setting & Reporting). For a more in-depth examination of the move to bundled RECs, see SR Inc’s blog post: “Not All RECS Are Created Equal”.

2.  The Development of Virtual Power Purchase Agreements (“VPPAs”) structured as Contracts for Differences (“CFDs)

The second development that picks up on the corporate move from “unbundled” to “bundled” RECs is the development of a sophisticated financial transaction over the last six years that has enabled top corporates with massive energy demand to procure sufficient “bundled” RECs to credibly claim that they are on the path to 100% renewable energy.  Without the emergence of this transaction form that has been led by companies like Apple, Facebook, Google and Microsoft and now even Bank of America and Goldman Sachs, it is unlikely that the growing number of top U.S. corporations publically committing to 100% renewable energy would be making those commitments.

This second development is the development of a transaction form that is, specifically, a Virtual (i.e. off-site and unconnected to the energy consumed by an enterprise) Power Purchase Agreement (“VPPA”) structured to operate as a Contract for Difference (CFD).  This is a purely financial transaction that does not in any way affect the production or distribution of the electrons flowing into an enterprise’s facilities.  It instead enables a high-credit corporate off-taker to commit to a minimum price (i.e. the “VPPA price”) for the production electricity at a new, remote, renewable energy project.  This enables the renewable energy developer to get her renewable energy project financed and constructed.  The developer then sells the energy produced by the project into the local market.  If she sells the resulting energy for more than the minimum VPPA price the corporate off-taker contracted for, she provides both the more credible “bundled” RECs created by the project and the margin above the minimum VPPA price to the corporate off-taker.  If the developer cannot sell the resulting electricity into the local market at a price equal to the VPPA price, the corporate off-taker still receives the “bundled” RECs and spends money to provide the developer at least the minimum VPPA price.

Consequently, very large corporate energy users who were tech savvy enough to understand why renewable energy tech produced electricity was going to provide more stable pricing and increasingly beat electricity dependent of fossil fuels on price, began five or six years ago to commit to what were initially twenty five (25) year term minimum VPPA prices and contracted for the difference (positive or negative) of the local marginal price the developer was able to realize.  Very few, if any, made these long-term commitments unless their relevant, large internal and external  teams modeled the relevant forward market prices and concluded that, over term, the commitment would provide them a positive Net Present Value “NPV”.

In this way, “super-intense” corporate energy users in the U.S. developed a no necessary first capital, positive NPV contract that provided them both a hedge (in their distinct internal bookkeeping) against their conventional energy buy (e.g. if the local price the renewable energy developer could realize was below the VPPA Price, that would be good news of any proximate conventional energy buy they had on the same grid) and more credible, more clearly “additional,” bundled RECs. The largest and most sophisticated corporate energy buyers had found a way to leverage the building advantage of renewable energy technology to have their more credible, bundled, RECs “cake” (which helped them better align with those customers, employees and investors who cared about their environmental sustainability goals) and “eat it too” while they also contracted for a needed energy hedge – all while driving what modeled in multiple scenarios to be a substantially positive NPV over term.

Unsurprisingly, VPPAs structured to operate as CFDs proved very popular among the rarefied “super intense” corporate energy users.  This transaction form has propelled the development of more than 8 GWs of renewable energy and has become a principle driver of “utility scale” renewable energy development in deregulated wholesale U.S. markets as an increasing number of corporates and now some public institutions use the resulting “bundled” RECs to offset energy demand that is in the same grid as the renewable energy project as well as, in some instances, energy demand that is remote and often in regulated electricity markets.  An entire non-profit trade association – the Rocky Mountain Institute’s  Business Renewables Center  which SR Inc’s Renewable Energy Procurement Services (REPS) is proud to sponsor – is now dedicated to helping corporates and others learn how best to take advantage of VPPA/CFDs so as to create 60 GWs of new renewable energy.

For all the mounting collective scope of developments financed through VPPAs structured as CFDs (and regularly simply referred to as CFDs) less than fifty companies – all among the largest in the world – have had the necessary scale, expertise and intense energy demand to use CFDs to cause the development of what are regularly more than 100 MW in capacity (e.g. 1000+ acre Solar development).  Consequently, sophisticated market leaders understand that the very large single off-takers who have pioneered CFD renewable energy developments are the tip of a much large iceberg of demand from far more numerous high-credit, sustainability minded, enterprises that will need to aggregate their demand together to capture the economies of scale and transaction sophistication afforded by “utility scale” (e.g. greater than 30 MW) renewable energy developments.

3.  The Systemization of Aggregated Procurement of Large Scale, Off-site, Renewable Energy

As Herve Touati, Managing Director of the Business Renewables Center observed when speaking on of the global renewable energy industry: “The industry realizes that aggregation is its next and highest priority.  It is the nut to be cracked.”  And the move towards aggregating the procurement of multiple, high-credit, enterprises is the third development enabling a new type of renewable energy for every enterprise.  Google which has pioneered a great deal in this space, pioneered aggregated procurement in Northern Europe and Microsoft and REI have partnered with a utility based aggregated procurement in Washington State.  But the U.S. Federal Agencies, DC area university and hospital and the MIT, Boston Medical aggregated procurements are among the first to be announced as completed in the U.S.

Like several others, SR Inc Renewable Energy Procurement Services (REPS) – which is lead by Advisors with decades of private sector experience in large scale renewable energy development, procurement and contracting – are leading aggregated procurements currently underway in the U.S. These aggregated procurements underway enable high credit corporate off-takers who may require only 10 MW or even 5 MW in a given power market to join with five (5) to ten (10) similarly high-credit off-takers to cause a 50 to 100 MW project to be built to provide them with more credible “bundled” RECs as a well as a hedge against any proximate conventional energy buy they may have, through a commitment each off-taker models as providing them a positive NPV in most all likely forward scenarios (e.g. in a forward market with both historically high and low natural gas prices). They also enable participating enterprises to help systemize aggregated procurement as a new ever more repeatable and scalable type of renewable energy transaction that creates clearly “additional” renewable energy and provides clear attribution.

As with MIT’s aggregated procurement, each off-taking enterprise will have its own CFD contract with the renewable energy developer.  SR Inc REPS team leaders, who have deep  financial, legal and technical expertise including a six-year-plus SR Inc Member-client who founded and led Cisco’s global energy and sustainability function, have long found it advantageous for procuring enterprises to require developers to negotiate a detailed, if legally non-binding, Letter of Intent before making final selection of a developer for expensive legal negotiations of a VPPA/CFD which rightly includes in-house and specialized outside counsel for a corporation’s first VPPA/CFD transaction.  This requires meaningful more work for the SR Inc REPS  team but is enables an integration of multiple corporate off-taker needs into a single, shared, LOI and aligns with SR Inc REPS role as a single negotiating partner representing the aggregated off-takers opposite the competing developers.

What SR Inc REPS is seeing in the confidential aggregated procurements it is conducting with and for SR Inc for Member-clients and other high-credit corporates, is pronounced buyer’s market.  As one top developer stated when they learned of the pricing and downside financial protection provided by some of largest, directly competing, developers: “it is good to be buyer in this market.”

4.  The Levelized Cost of Utility Scale Renewable Energy Is Now Less Than Fossil Fuels In A Growing Number of U.S. Markets

Although several factors are driving the current buyer’s market, none is more important than the fact the cost of producing “utility scale” renewable in the U.S. continues to drop dramatically.  This is the fourth development driving the development of a new type of renewable energy for every interested enterprise.  As Lazard noted in their 11th annual report on the Levelized (i.e. unsubsidized) Cost of Energy (“LCOE”) released in Q4 2017, in certain U.S. markets, utility scale wind and solar now costs less to procure through new development, unsubsidized, than buying from existing coal and even natural gas plants.  And with the recent GOP tax bill largely sparing substantial (i.e. 26-30% but declining) federal tax credits for wind and solar developments and the current very low interest rates, this makes the risk-adjusted financial case for utility scale renewables very compelling.

5.  Necessary VPPA/CFD Term Lengths Have Been Reduced from 20 Years to 15, 12 or even 10 Years 

The fifth and sixth developments are simple but of shaping importance.  They were not mentioned at the otherwise excellent presentation at the USGBC’s GreenBuild  Conference this October about MIT’s aggregate procurement.  Both play a key role in creating a new type of renewable energy for every enterprise.  The fifth development is that a growing number of completed CFDs and dozens of competing bids for the aggregated procurements SR Inc REPS is leading, make it clear that the initially 25 year, then 20 year required VPPA term has been reduced to 15, 12 or even 10 years.  Significantly, in the most compelling U.S. markets these much reduced terms are being offered on deals with impressively low VPPA prices that make a positive NPV very likely and, indeed, “in the money year one” against average trailing twelve month conventional electricity prices.  This reduction in term to 15 or 12 years opens the CFD market to exponentially more enterprises who refused to contract for twenty years.

6.  VPPA/CFDs Can Increasingly be Structured to Limit, Quantify and Reduce Corporate Off-taker Exposure to Financial Loss

The sixth and final development helping to create a new type of renewable energy for every enterprise is as subtle as it is important.  Increasingly, the best financed developers are offering corporate off-takers with transaction structures that limit and reduce the corporate off-takers exposure to financial loss.  Developers are increasingly willing to provide a “collaring” structure through which corporate off-takers surrender some of the upside margin that they might win above the VPPA price to the developer in return for reducing the corporate off-takers exposure to needing to pay up to the VPPA minimum price.

This relatively new final development enables corporate off-takers to quantify the total loss to which they could theoretically be exposed; which many corporate financial offices require regardless of how attractive the most likely NPV appears and how unlikely that potential loss looks.  Consequently, with utility scale wind and solar increasingly at cost parity with natural gas on a unsubsidized basis in certain markets and the required term now at 15 years and reducing and, finally, with the corporate off-taker exposure to market price risk now being increasingly bounded by “collared” transaction structures, there is growing argument that this is a new form of renewable energy for every interested, high-credit, enterprise that has begun to fly.  But ‘controlling that flight’ to ensure it advances an enterprise’s financial as well as environmental goals is of paramount importance and requires an experienced and focused internal and external team dedicated to ensuring that off-takers win all the advantages provided by this current, exceptional, buyer’s market.

Select Relevant SBER Executive Guidance & Tools:

Jim Boyle is CEO & Founder of Sustainability Roundtable, Inc. For nearly ten years, Jim has led full-time teams of diverse experts assisting world-leading corporations, real estate owners, and federal agencies in their move to greater sustainability. He has led in developing SR Inc’s confidential, industry specific, annual management assessment and recommendation process for more sustainable operations and real estate that is compatible with major public standards globally. Further, he has directed the development of hundreds of pieces of SR Inc original, case based Management Best Practices Research and Executive Guidance & Tools available in SR Inc.’s digital library.  Mr. Boyle also led in the creation of SR Inc’s Renewable Energy Procurement Services (REPS), which advises and represent Fortune 500 Member-clients and rapidly growing public companies across the U.S. and internationally in the development of Renewable Energy Strategies and the procurement of both on and off-site advanced energy solutions.   Before founding SR Inc, Mr. Boyle advised fast growth technology firms, private equity firms, and institutional investors as an adviser on real estate strategy and transactions, and before that, as a large law firm attorney assisting corporate and investment clients on complex real estate and environmental compliance-related issues. He co-led Trammell Crow Company Corporate Advisory Services in San Francisco and returned to his native Boston and Trammell Crow Company’s market leading team in Greater Boston where he received the Commercial Brokers Association’s Platinum Award for the highest level of commercial real estate transactions.  While at Trammell Crow Company, he incorporated and was the principal co-founder of the Alliance for Business Leadership, a MA based non-profit for CEO, investors and business leaders who share a commitment to public policy that advances a more broadly shared and sustainable prosperity.  Jim is a graduate of Middlebury College and Boston College Law School, who early in his career served as a federal law clerk, an aide to John F. Kerry in the U. S. Senate and on Vice President Al Gore’s campaign for President. He lives in Concord, MA with his wife and two children and writes and speaks regularly on best practices in more sustainable business through-out the U.S.

Brittany Doherty, Program Director, is responsible for helping to design and deliver SR Inc’s confidential, annual Strategic Advisory & Support Service and, in particular, its year-round multi-member online and in-person meetings throughout the U.S.,  as well as SR Inc.’s confidential annual Management Diagnostic & Assessment Service.  Prior to joining SR Inc in 2015, Brittany managed and wrote Sustainability Reports for the Town of Dartmouth, MA in accordance with the comprehensive, credible, and widely used, Global Report Initiative (GRI). Brittany graduated with a B.S in Organizational Behavior Management & Sustainability from the University of Massachusetts-Dartmouth, while actively developing a variety of sustainability initiatives for the university. Brittany served as the President of Net Impact at her university for three years, was a member of the Fair Labor Association Student Committee for two years, and also launched a pilot-teaching-program to integrate Sustainability into the global network of Junior Achievement. While Brittany was attending graduate school, earning a certificate in Environmental Policy, she worked as an Analyst for the Town of Dartmouth, assisting in the advancement of the Town’s economic, environmental and social policies. Outside of her work at SR Inc, Brittany has volunteered on the Sustainable Belmont Committee and assisted in the Town’s GHG Inventory project, as part of the Climate Action Plan. She also served as a valuable member of the Belmont Solar Campaign (BSC).

 

SR Inc’s Summit for Sustainable Operations VI: Envisioning Breakthrough in Sustainably Healthy Workplaces

December 22nd, 2017

Sustainability Roundtable Inc. (SR Inc) was pleased to host dozens of Member-Clients at the ART Hotel in Denver, CO on December 7th and 8th to discuss the Sustainable Business & Enterprise Roundtable (SBER) 2017 Chartered Research, and topics central to developing and driving progress towards greater sustainability and health in corporate operations. SR Inc’s 6th Summit for Sustainable Operations focused on three topics of ever-increasing importance: Renewable Energy, the Internet of Things (IoT), and Sustainably Healthy Workplaces. While later blog posts will summarize discussions on both Renewable Energy and the IoT, this post focuses on the Sustainably Healthy Workplace sessions.

SR Inc’s Playbook for Sustainably Healthy Workplaces

Throughout the day, Member Executives heard from experts and each other about what breakthrough success in Sustainably Healthy Workplaces (SHW) will look like in two and five years.  Delos, a research organization focusing on health and wellness in the workplace, (and providing the science behind the WELL Building Standard), is a 2017 SBER Premiere Thought Leader. Delos’s Dr. Whitney Austin Gray, Executive Director of Research and Innovation, kicked off the discussion with an overview of industry research clarifying the business benefit of improving the health impacts of buildings.  This science-based evidence serves as the underpinnings of the SBER Playbook for Sustainably Healthy Workplaces, which was shared with Member-Clients at the Summit.

SR Inc developed the Playbook for Sustainably Healthy Workplaces: Making the Business Case for Integrating Health & Wellness into Portfolio-wide Sustainability in accord with the SBER 2017 Charter Research Program working with multiple Member-Clients and collaborating with Dr. Whitney Grey and other research scientists. The Playbook provides executives responsible for large real estate portfolios with the information and tools necessary to demonstrate the benefits of healthy workplaces and build the business case for corporate investment in more sustainable, healthy workplaces portfolio-wide.

Breakthroughs in research techniques and technologies have allowed more accurate measurement of the impacts of the workplace environment on the health and productivity of workers. The SR Inc Playbook leverages these advances in evidence-based research and offers Member-Clients guidance and tools to integrate health and wellness strategies into their portfolio-wide sustainability programs.

Dr. Whitney Austin Gray, Executive Director, Research & Innovation, Delos

Following Dr. Grey’s presentation of the evolving relevant research, SR Inc’s Director of Research and Consulting, Peter Crawley outlined how the Playbook provides an innovative system to help Member-Clients address the challenges of designing, implementing, measuring and reporting on workplace health and wellness programs for the built environment. The Playbook, for example, has guidance and tools addressing Best Practices for establishing cross departmental governance structures, developing shared strategic goals and KPIs, performing a portfolio-wide health & wellness gap analysis, quantifying benefits and calculating ROI, and on-going performance tracking and reporting. A key theme of Peter’s presentation (and the Playbook), was a re-frame to a “human-centered’ approach to managing and measuring workplace programs. Peter reminded executives that the largest cost component for knowledge industry companies is their employees, and that improving their health and productivity quickly drops to the bottom line.

Peter also explained how the Playbook enables Member-clients to integrate their efforts towards Sustainably Healthy Workplaces with the 5-component process (illustrated below) that SR Inc has, for many years, used to help Member-Clients to implement their Corporate Operations Sustainability Strategies.

SR Inc’s 5 Components for a Sustainability Strategy (color graphic) with corresponding tools from the Playbook (transparent graphic) *click for clearer image*

To learn more about the various tools and guidance provided in the Playbook, see this blog post from October dedicated to the subject. SR Inc is currently working with Member-Clients and industry experts to pilot the Playbook tools and guidance and encourages executives interested in implementing any aspects of the Playbook in the near term to contact us to develop a workplan.

Following both Whitney’s and Peter’s remarks, Member Executives shared their own visions for what great success in the area of SHW might look like at their companies 2 and 5 years down the road. Lenovo’s Director of International Real Estate, Deidre Buzzetto,

Deidre Buzzetto, Director, International Real Estate, Lenovo 

envisions workplaces with minimal assigned seating and a diversity of workspaces dedicated to specific work types and activities. In this activity-based workplace, employees will be able to select the workspace that most effectively promotes productivity for the task at hand. She admitted that it takes considerable time and energy to get people on board globally, and that a key to achieving this vision will be to ensure HR understands the clear and well-researched correlations between healthy workplace features and improved employee performance.

Hakon Mattson, Anthem’s Director of CRE Sustainability, prefaced his long-term vision for sustainability and health in the workplace by noting that he has a lot of support from Anthem’s leadership in this space, which has been a key to the success of the program. Currently, Anthem has a dedicated committee of employees tasked with determining how to make Anthem the choice employer for talent seeking jobs in the health insurance industry. Key to that effort is deciding how to most effectively report the features of Anthem’s sustainable and healthy workplace program and its benefits to employees. Ultimately, Hakon envisions Anthem providing consulting services to its customers and the public at large on how to set up a comprehensive workplace wellness program. Shorter term (i.e. in the next 2 years), Hakon hopes to achieve 3rd party health and wellness certification for all buildings in the portfolio over 25,000 square feet. Anthem recently committed to certifying all its sites under the Fitwel certification scheme, which is administered by the Center for Active Design. Furthermore, the company is considering pursuing WELL Building certification – a more comprehensive, performance-based certification – for new buildings.

Hakon Mattson, Director of CRE Sustainability, Anthem

T Rowe Price is in the process of implementing a number of health and wellness activities including subsidizing healthy food options and promoting use of onsite fitness centers. Similar to Deidre Buzzetto’s five year vision for Lenovo, Brian Dean, T Rowe Price’s Head of Corporate Real Estate and Workplace Services, told the audience that T Rowe Price aims to provide human-centric work environments to all employees by ensuring that every workspace is built to support the specific tasks employees are asked to do. The goal, he explained, is to make employees’ work “friction-free” by providing the amenities, services and environment that promotes productivity and eliminates stress, distraction and other inefficiencies in the workplace. Five years out, Brian hopes his team is receiving no hot or cold calls anywhere in the portfolio. This lack of complaints, he explained, says a lot about the environment his team is providing to T Rowe Price employees – a highly customizable workspace that enables a high-level of flexibility and occupant adjustability. In the shorter-term, Brian aims to make the workplace an enabler for greater work/life integration; for instance, making available onsite services to employees such as car detailing, dry cleaning, medical services, etc.

Brian Dean, Vice President, Head of Facilities, T. Rowe Price

Contributions from several other participating executives throughout the Session brought to light key concepts central to the evolution of workplace health strategies. One common theme that came up several times in discussion was the imperative for understanding specific workplace design features that promote happiness and performance, and specific metrics for evaluating their impact on healthcare costs, employee productivity, absenteeism, turnover, etc. One bold iteration introduced by Member Executives at the leading edge of this conversation is, not only to include wellness metrics such as employee satisfaction or healthcare costs in the cost/benefit analysis of a program, but to set aspirational goals specific to these metrics, such as achieving a “100% happy workforce within 5 years” or “reducing workforce obesity 5% in 5 years.”

Another theme prompted by current events was the importance of considering social issues and unconscious bias in workplace design to create spaces that promote equity and safety for a diverse workforce (e.g. promoting accessible workspaces that consider varying experiences among employees of different races, genders, etc. while still protecting against heightened security challenges.) Another popular topic of conversation centered around leveraging IoT to create a user-centric design that fosters a workplace that remains consistent and seamlessly integrated across a global portfolio. In general, the conversation brought to light the tension between a need to prove financial justification for investments in SHW while maintaining an openness to more qualitative, but still powerful, benefits of such investments.

SR Inc looks forward to convening with Member-Clients early in the New Year to propose a 2018 Research Charter, which is based on the Summit discussions described above and the extensive feedback we’ve received from Members regarding their needs and preferences for rolling out and implementing an effective SHW strategy in 2018. In the meantime, from the SR Inc team to yours, we wish you a happy holiday season and best wishes for the New Year.

Select Relevant SBER Executive Guidance & Tools:

kwall_linkedin_pic-1 (2)As a Senior Manager of Research & Consulting at SR Inc, Kelsey Wallace supports research, development and implementation of enterprise sustainability strategies for companies that recognize the business imperative of more sustainable operations in the face of climate change and an increasingly resource-constrained world. Prior to joining Sustainability Roundtable, Inc., Kelsey worked for an environmental/engineering consulting firm where she supported clients including  the U.S. Environmental Protection Agency and the U.S. Green Buildings Council to promote sustainable buildings, clean energy, and safe drinking water. Kelsey also devoted a year to national service with the AmeriCorps National Civilian Community Corps, where she worked on team-based conservation and community development projects throughout the Southwest United States. Kelsey has her B.A. in Environmental Studies from Connecticut College.

1_Crawley-Peter-117x127Peter Crawley, Director of Research & Consulting at SR Inc , has led at the intersection of strategic consulting, real estate and sustainability for more than 15 years, serving as the principal advisor to top real estate owners and scores of  operating companies.  Peter has helped the executive teams at these enterprises develop and implement highly profitable Sustainability Strategies.  Prior to joining SR Inc, Peter served as the Director of Sustainability Services at the environmental engineering firm EBI Consulting. Peter is LEED accredited and has deep experience working on energy efficiency issues, product life cycle improvements, and greenhouse gas measurement, reduction, and reporting. He has worked on numerous LEED certification and high-performance building projects, and designed and implemented company-wide behavioral change programs to advance sustainability goals and enhance employee engagement. Peter received his BA from Amherst College, his MS in Real Estate from Columbia University and his MA in Sustainability & Environmental Management from Harvard University.

Sustainability Roundtable Collaborates with Leading Industry Experts to Build Business Case for Sustainably Healthy Workplaces Portfolio-wide

October 4th, 2017

Over the past 3 quarters of 2017, SR Inc has built upon previous years of research and collaboration with Member-Clients to develop a highly practicable stepwise process to develop and implement a portfolio-wide sustainable, healthy workplace strategy. At a 3rd quarter Symposium SR Inc hosted at its headquarters in Cambridge, MA, Director of Research & Consulting Peter Crawley provided an overview of this process and accompanying toolkit – an “Implementation Playbook for Sustainably Healthy Workplaces Portfolio-wide” – which draws from industry-leading research and expertise.

The process closely aligns with SR Inc’s higher-level guidance for developing and implementing a strategy for more sustainable operations, but emphasizes the value of integrating health and wellness considerations. The Playbook is comprised of 5 stages, each with accompanying implementation guidance and tools, targeted at Real Estate, Sustainability and Human Resource personnel seeking to build a business case for greater sustainability and health in the workplace. The 5 steps of the system include relevant tools, some of which are listed below:

  • Step 1: Who? – Governance
    • Guidance for developing Governance protocols & Cross Departmental teams (CRE, HR, IT, etc.)
  • Step 2: What? – Strategy
    • Guidance for developing Balanced Scorecard outlining Objectives & Goals
  • Step 3: Why? – Business Case
    • Guidance for conducting Cost/Benefit Analysis – Capturing health & wellness impacts
  • Step 4: How? – Metrics and Methods
    • Sustainably Healthy Workplace (SHW) Features benchmarking tool – Gap Analysis
    • Guidance for Quantifying SHW Impacts on Employee Performance
    • Employee Satisfaction/Engagement Survey Guidance
  • Step 5: When? – Performance Tracking & Reporting
    • SHW Performance Dashboard tool
    • Reporting Guidance & Template

The Governance guidance features case studies from companies like SAP, highlighting the governance structure they use to implement SHW strategy.

The Governance tool (Step 1) provides best practice guidance for developing a governance structure to support a SHW strategy that engages multiple departments beyond CRE – most notably, Human Resources – to foster joint decision-making and collaboration and align with a greater number of internal stakeholders, attract greater support from the C-Suite, and allow for program costs and benefits to be distributed across both CRE and HR budgets. It also provides case study examples of the organizational structures and policies that companies have established to govern their SHW strategies.

Once a governance structure has been established, a SHW Committee will need to develop goals and objectives for its program. The Strategy Scorecard and accompanying guidance (Step 2) aligns initiatives and key performance indicators specific to sustainability and health in the workplace with 4 key business perspectives: Financial Performance, Internal Customer (i.e. Employee) Satisfaction, Sustainable Business Processes, and Sustainable Capacity & Risk Management. By identifying how specific SHW initiatives progress one or more of these business perspectives, adapted from a more traditional Balanced Scorecard, a Strategy Scorecard helps the SHW Committee to develop portfolio-wide, employee-centered sustainability initiatives that align with multiple stakeholders and an enterprise-wide strategy – helping them to gain traction with upper management and ultimately be better resourced.

The Methodology tool guides implementing executives through the process of conducting a Cost-Benefit financial analysis based on a portfolio-wide employee-centric approach.

The third step guides a SHW Committee through a cost-benefit analysis of potential SHW initiatives that introduces health-related costs into the equation. This “reframed” cost-benefit analysis encourages heads of Real Estate to account for the reductions in workforce health-related costs (e.g. absenteeism, turnover, health insurance costs, productivity, presenteeism, etc.) in addition to benefits traditionally associated with building investments, such as energy savings and space reductions.

Step 4 identifies metrics and best practice methodologies that companies use to measure the relative health of buildings within their portfolio. Drawing from industry-leading research and expertise, SR Inc has developed a simple, usable benchmark tool for CRE directors to efficiently identify and prioritize opportunities for improved health in the workplace. Tools comprising this stage of the Playbook also help users to employ best practice methodologies for quantifying impacts of healthy workplace investments on employee performance metrics, such as absenteeism, employee satisfaction, health costs, productivity, revenue and turnover. This includes a discussion of best practices and limitations to working with data sourced from HR. Additionally, SR Inc provides guidance and referrals to industry leading Employee Satisfaction and Engagement surveys, to gather powerful qualitative evidence for needed investments in SHW.

SR Inc works with Member-Clients to develop Summary Reports to present performance metrics and results of companies’ SHW programs.

The 5th and final step of this Playbook provides guidance and tools for tracking and reporting data related to SHW investments. SR Inc has developed a Performance Dashboard that companies can use to track employee performance data related to health and wellness. A template of a summary Results Report complements this tool and presents data in a clear and flexible format.

Delos’s Industry Insights slide presentation summarizes 14 studies revealing the latest insights into workplace wellness programs, health-related employee performance metrics, employee health costs, and more.

SR Inc is pleased to collaborate with Delos, developer of the WELL Building Standard, to develop this 5-step Playbook based on the latest research and industry trends, while presenting them in a highly-focused format for efficient and effective use by CRE professionals. At SR Inc’s 3rd quarter Symposium, Dr. Whitney Austin Gray, Delos’s Executive Director of Research and Innovation, discussed key industry research publications that communicate the value of health and well-being in the built environment. This special edition presentation of Delos’s “Industry Insights 2017,” which Member-Clients can download by emailing delos.insights@delos.com, summarizes 14 studies revealing the latest insights into workplace wellness programs, health-related employee performance metrics, employee health costs, and more from sources such as the American Heart Association, Fidelity Investments, and Gallup. SR Inc and Delos enthusiastically invite Member-Clients to provide feedback on these tools and pilot them within their organization so that we can maximize their effectiveness and help to drive forward progress in the movement for more sustainable, healthy workplaces across companies and industries.

Select Relevant SBER Executive Guidance & Tools:

kwall_linkedin_pic-1 (2)As a Senior Manager of Research & Consulting at SR Inc, Kelsey Wallace supports research, development and implementation of enterprise sustainability strategies for companies that recognize the business imperative of more sustainable operations in the face of climate change and an increasingly resource-constrained world. Prior to joining Sustainability Roundtable, Inc., Kelsey worked for an environmental/engineering consulting firm where she supported clients including  the U.S. Environmental Protection Agency and the U.S. Green Buildings Council to promote sustainable buildings, clean energy, and safe drinking water. Kelsey also devoted a year to national service with the AmeriCorps National Civilian Community Corps, where she worked on team-based conservation and community development projects throughout the Southwest United States. Kelsey has her B.A. in Environmental Studies from Connecticut College.

1_Crawley-Peter-117x127Peter Crawley, Director of Research & Consulting at SR Inc , has led at the intersection of strategic consulting, real estate and sustainability for more than 15 years, serving as the principal advisor to top real estate owners and scores of  operating companies.  Peter has helped the executive teams at these enterprises develop and implement highly profitable Sustainability Strategies.  Prior to joining SR Inc, Peter served as the Director of Sustainability Services at the environmental engineering firm EBI Consulting. Peter is LEED accredited and has deep experience working on energy efficiency issues, product life cycle improvements, and greenhouse gas measurement, reduction, and reporting. He has worked on numerous LEED certification and high-performance building projects, and designed and implemented company-wide behavioral change programs to advance sustainability goals and enhance employee engagement. Peter received his BA from Amherst College, his MS in Real Estate from Columbia University and his MA in Sustainability & Environmental Management from Harvard University.

Drawdown’s Influence on Intuit’s Corporate Sustainability Strategy

September 21st, 2017

Sustainability Roundtable, Inc (SR Inc) is pleased to partner with sustainability thought leader Paul Hawken – influential author and founder of Project Drawdown – on the important and innovative work his organization is doing to move the planet towards climate drawdown – the point at which greenhouse gas concentrations in the atmosphere begin to decline on a year-to-year basis. Multiple SR Inc Member-clients have begun to collaborate with Paul Hawken to help leverage Drawdown’s definitive and rigorous modeling of 100 solutions to help advance climate drawdown globally. Of those Member-clients, Sean Kinghorn, Senior Sustainability Program Manager at Intuit leads this effort by integrating several Drawdown solutions into Intuit’s corporate sustainability strategy.

Sean Kinghorn – pictured with Paul Hawken – received SBER’s 2015 Outstanding Corporate Leader Award

Jim Boyle, SR Inc’s CEO & Chairman interviewed Sean Kinghorn in the spring of 2017 on Paul Hawken’s personal influence on Sean as well as the multiple Drawdown solutions being incorporated at Intuit as Sean leads their internal and external sustainability efforts for global operations. Sean’s leadership serves as a compelling case for how corporate executives can leverage Drawdown’s solutions to advance this movement and to benefit their organization as all solutions modeled are already in place, well understood, analyzed based on peer-reviewed science, and expanding around the world.

 

How did you first become aware of Drawdown and what intrigued you about it?

I first learned about Drawdown through SR Inc, specifically when Paul Hawken spoke at Intuit’s HQ during SR Inc’s 2015 Q4 Executive Symposium. What intrigued me was the concept of solutions Paul and his team established. Paul has been a hero of mine dating back to college. Back then, everyone was talking about global warming but no one had ever ran the numbers to come up with a list of solutions at scale. Drawdown does just that, which is what made a lot of sense to me, especially as solutions Intuit can institute.

How have you followed Paul over the years?

After college at UC San Diego in the mid 90’s, I read The Ecology of Commerce and Natural Capitalism, which was part of the spark that pushed me into this type of work. While studying environmental studies, there were no talk about the industry, business or the economy. We only studied topics like deforestation in the Amazon, so Paul’s work attracted my attention.  I followed Paul since college but connected and collaborated with him through SR Inc.

As you moved into corporate sustainability, what resonated with you?

After reading the Project Drawdown book several times, I was very motivated. People bury their heads in the sand when they learn the doom and gloom scenarios but understanding the negative impacts – especially if you don’t do anything – are important. Paul came forward with innovative and scalable solutions to actually reverse global warming. 80 out of the 100 solutions proposed are already out there, so it’s really about how you integrate Drawdown into an action plan for every company, community and individual.

Before you learned about Drawdown, did you think it was possible to reverse global warming?

No, I didn’t. A relevant question Paul always asks is, “Do we really want to live in a world that’s two degrees warmer?” Before Drawdown, no one was talking about trying to reverse global warming since no one really did the math. All you ever heard is that it’s nearly impossible for all countries to come together but Drawdown finally calculates the possibilities. I found it really interesting that so many solutions involve land use which opens up a whole new area of opportunities for companies and communities who didn’t feel like they could be part of the solution.

What specific solutions did you learn from Drawdown that you thought were applicable to Intuit’s strategy and how are you integrating them?

Intuit’s new mission statement – Powering Prosperity Around the World – is the foundation for how I approach sustainability. How can our sustainability program have the biggest positive environmental, social and economic impact globally? Project Drawdown has had several impacts on our corporate sustainability strategy. We have shifted in how we look at carbon offset projects. Three increased investments in Intuit’s shift that were influenced by Drawdown are:

  1. Investments in REDD+ conservation projects around the world.
  2. Expanding our global investments this year in clean cookstove projects.
  3. Investments in refrigerate management in developing nations, which is Drawdown’s #1 solution.

Additionally, we recently launched a Sustainability Employee Engagement Platform provided by WeSpire. Intuit’s WeSpire campaigns are focused on the cumulative impact of actions based on employees’ personal life choices, several of them modeled from Drawdown’s solutions. Examples include inspiring employees to ride bikes or electric bikes, eating less meat, and exploring vegetarian options. For each campaign topic, employees have the opportunity to click to learn more information on Drawdown’s ranking and calculation.

We’re also working on several proposals that explore Intuit’s customer sustainability solutions, including renewable energy which is tied to Drawdown.

How else has Drawdown influenced your work at Intuit?

Intuit is creating partnerships with organizations to magnify Drawdown. At the 2017 Sustainable Brands Summit in Detroit, we presented our REDD+ project & Lyft partnership which is directly tied to Drawdown. The partnership outlines that for every Intuit employee who uses Lyft for business, Lyft donates 1% to the REDD+ project. To calculate the accuracy of the carbon footprint savings for the rides, I connected with Matt Ellis, Founder & CEO of Measurabl, to utilize Measurabl’s technology to pull together critical data including the vehicle make, model, distance traveled and number of passengers. We then measured that against the REDD+ project and concluded the project equated to about 85 metric tons of net positive impact. It’s an interesting way to create partnerships and have it tied back to Drawdown.

Are you talking to senior management about Drawdown?

I bought 20+ copies and distributed Drawdown to our sustainability committee and different leaders within the company including our CEO. Since Paul is such an eloquent speaker, I’m planning for Paul to speak at our Mountain View campus in the fall with senior leaders, green team members and all employees who are interested. This event will further support Drawdown’s impact at Intuit.

For more information on Project Drawdown visit Drawdown’s official website.

Please contact Brittany Doherty with questions re Sustainability Roundtable, Inc’s partnership.

 

Jim Boyle is CEO & Chairman of Sustainability Roundtable, Inc. For more than eight years, Jim has led full-time teams of diverse experts assisting world-leading corporations, real estate owners, and federal agencies in their move to greater sustainability. He has led in developing SR Inc’s confidential, industry specific, annual management assessment and recommendation process for more sustainable operations and real estate that is compatible with major public standards globally. Further, he has directed the development of hundreds of pieces of SR Inc original Executive Guidance & Tools and led in the creation of SR Inc’s Renewable Energy Procurement Services (REPS) practice, which represents top corporate off-takers across the U.S. and internationally.  Before founding SR Inc, Mr. Boyle advised fast growth technology firms, private equity firms, and institutional investors as an adviser on real estate strategy and implementation, and before that, as a large law firm attorney assisting corporate and investment clients on complex real estate and environmental compliance-related issues. Jim is a graduate of Middlebury College and Boston College Law School, who early in his career served as a federal law clerk and as an aide to John F. Kerry in the U. S. Senate.

Brittany Doherty, Program Director joined SR Inc at the start of 2015. Brittany has two years of experience managing and writing Sustainability Reports for the Town of Dartmouth in accordance with the comprehensive, credible, and widely used standard, the Global Report Initiative (GRI). Brittany graduated with a B.S in Organizational Behavior Management & Sustainability from the University of Massachusetts-Dartmouth, while actively developing a variety of sustainability initiatives for the university. Brittany served as the President of Net Impact at her university for three years, was a member of the Fair Labor Association Student Committee for two years, and also launched a pilot-teaching-program to integrate Sustainability into the global network of Junior Achievement. While Brittany was attending graduate school, earning a certificate in Environmental Policy, she worked as an Analyst for the Town of Dartmouth, assisting in the advancement of the Town’s economic, environmental and social policies. Outside of her work at SR Inc, Brittany has volunteered on the Sustainable Belmont Committee and assisted in the Town’s GHG Inventory project, as part of the Climate Action Plan. She also served as a valuable member of the Belmont Solar Campaign (BSC).

 

Powering Portfolio-wide Real Estate & Operations with Renewable Energy

July 20th, 2017

Unsubsidized wind and solar have been hurdling down their respective cost curves and have become financially-competitive with conventional energy sources. As an example, Tucson Electric’s signing of a solar & storage PPA for less than 4.5¢/kWh in May represents the new US integrated solar & storage price benchmark. This is the latest example of aggressive price reductions over the past 2-3 years that have promoted an equally aggressive growth of renewable energy capacity, consistently outperforming traditional energy forecasts. Concurrently, more and more companies are committing to various sustainability, GHG emission, and renewable energy targets, with 101 RE100 companies (and counting) committed to 100% renewable energy globally.

Many SR Inc Sustainable Business & Enterprise Roundtable (SBER) Member-clients are leading globally on corporate procurement of renewable energy. On June 15th, Bay-area SR Inc Member-clients gathered at Salesforce’s HQ in San Francisco to discuss the latest best practices in corporate procurement of renewable energy and how they might take advantage of innovative procurement mechanisms to reach their sustainability goals portfolio-wide.

The Opportunity

SR Inc closely tracks trends and developments in the fast-paced renewable energy market and has been advising its Member-clients on these movements and their significance for more than nine years. Some of the more important include the following:

1. Utility scale wind and solar has achieved cost-parity with coal and NG: Utility scale wind and solar costs have declined rapidly in the last year, particularly through the integration of storage. As of December 2016, solar and wind prices were the same or cheaper than coal in more than 30 countries without subsidies, and solar continues a cost decline of 20% compounded annual rate (WEF, 2016).

2. Corporate commitments to 100% renewable energy are rising fast: The number of companies committing to 100% renewable energy globally (101 just within the RE100 with more than 3 dozen others not within the RE100) has risen nearly 50% since last year’s Q2 Symposium. As their total energy demand far exceeds their portion currently sourced from renewables, the potential for renewable energy growth remains very strong.

Figure 1: Important considerations to developing 100% Renewable Energy Goals. Sourced from Salesforce presentation (Sher, M., 2017).

Figure 1: Important considerations to developing 100% Renewable Energy Goals. Sourced from Salesforce presentation (Sher, M., 2017).

3. Corporate off-site RE procurement has typically required large commitments: While the number of off-site corporate off-taker PPAs have been declining, the average size of each deal has been increasing faster, resulting in an increasing rate of procured renewable energy.

4. Many leaders are transitioning to the procurement of bundled RECs: While the purchase of unbundled RECs (expense only) is an important gateway for corporations to start experimenting with renewable energy claims, a growing number of leaders are setting more aggressive targets that prioritize bundled RECs along with their associated power. WRI’s Corporate Renewable Energy Buyer’s Principles make this priority clear: “We are increasingly interested in access to bundled energy and REC products.   Unbundled RECs do not deliver the same value and impact as directly procured renewable energy from a specific project or facility.” (WRI, 2016)

Figure 2: In December 2015, the Federal Solar ITC (Investment Tax Credit) & Wind PTC (Production Tax Credit) were extended to begin phasing out in 2020 and 2017, respectively. (BRC, 2017)

Figure 2: In December 2015, the Federal Solar ITC (Investment Tax Credit) & Wind PTC (Production Tax Credit) were extended to begin phasing out in 2020 and 2017, respectively. (BRC, 2017)

5. Member-clients want small-scale tranches of grid-proximate renewable energy projects: Most companies cannot make the large-scale commitments that have generally dominated off-site PPA deals for procuring bundled RECs while achieving additionality.

The culmination of these trends amounts to the need for a flexible procurement mechanism capable of harnessing the growing interest in renewable energy by smaller corporate buyers, economies of scale, and bundled RECs simultaneously. A re-evaluation of the VPPA is unveiled a potential solution.

The Virtual Advantage

Virtual Power Purchase Agreements (VPPA) have gained traction over the last four to five years due to their ability to provide corporate off-takers with a variety of attractive financial, operational, and sustainability-oriented characteristics. In a VPPA, an off-taker and supplier agree on a contract price (or “strike price”), which will effectively serve as the price that the off-taker will pay for energy over the contract term. The supplier sells its electricity to the grid at the locational marginal price (LMP). If the LMP is greater than the strike price, the supplier will pay the off-taker the difference between the contract price and LMP for the associated amount of energy bought. Similarly, if the LMP is less than the contract price, the off-taker will pay the supplier the difference. Thus, the supplier is always effectively paid, and the off-taker always effectively pays the contract price for the energy regardless of fluctuations in the wholesale market. Variations on this basic mechanism can be tailored to suit best the off-taker appetite for risk and upside cash flow as well as the core financing needs of the developer to build and operate the renewable energy system. Regardless, the off-taker is transferred the bundled RECs with crystal-clear additionality claims.

Figure 3: A schematic of the VPPA structure (NRG, 2017)

Figure 3: A schematic of the VPPA structure (NRG, 2017)

  • Positive NPV: While Contract-for-Differences (CFD) are not new to the finance world, structuring VPPAs in this way has allowed for the developer to secure financing while simultaneously allowing the off-taker to hedge both electricity price increase and, with tailored “collar”-type mechanisms, volatility. A well-designed hedge allows corporations to come out ahead financially, as opposed to continuing to be vulnerable to inexorable market price increases over time and separately expending money on unbundled RECs. Furthermore, off-takers can participate with no upfront capital expenditure.
  • Additionality: PPAs, with their associated bundled RECs, provide a clear additionality advantage over the simple purchase of unbundled RECs on the national market. See our previous Not All RECs Are Created Equal post for more on this delineation.
  • Flexibility: Since the transaction directly between the supplier and off-taker is purely financial, VPPAs allow corporations the flexibility to target the energy use of multiple load locations and operational profiles without the explicit treatment of power delivery. Furthermore, VPPA’s enable companies to take advantage of renewable energy projects with more attractive natural resources (e.g. wind and sun) and financials regardless of proximity to their actual energy demand location(s).
  • Risk-spreading: Unlike physical PPAs, VPPAs allow for the aggregated procurement of renewable energy on behalf of multiple corporate off-takers, not only spreading-risk, but also opening the opportunity for system size economies of scale to multiple off-takers who don’t have enough energy demand to justify a large project on their own. While the versatility of VPPAs make it a useful tool, it is important to make sure it is the right tool for the job for your company and required management response.

Management Response

Develop a portfolio-wide renewable energy strategy integrated with your corporate sustainability strategy, ASAP. SR Inc Member-clients view renewable energy as a major opportunity that should be integrated into their greater corporate sustainability strategies as soon as possible given the time-sensitivity of very low interest rates, declining federal tax credits, and fierce supplier competition. They recognize that by waiting, they risk missing-out on a buyer-favorable market. This integrated renewable energy strategy should encompass your company’s entire operational portfolio, including leased space. SBER Member-clients experience in the procurement of renewable energy have found that certain management best practices have enabled them to move to leadership in renewables including:

  1. Identify opportunity sites and know your renewable energy options. By identifying sites across  your US portfolio where (a) changing regulations are favorable, (b) you are paying over $0.07/kWh, and (c) your site is amenable to solar, on-site projects can produce year-one savings in certain US markets. Alternatively, consider community solar or utility-offered green products if they are available. For sites that are leased or otherwise incompatible with on-site options, off-site procurement from the same utility district as your site electricity demand can provide both high-quality bundled RECs and the associated price-competitive energy. Procurement from off-site renewable energy that is not grid-proximate can still provide high-quality RECs along with a robust financial hedge against electricity price risk via VPPAs.
  2. Keep an eye on energy storage. Recent advances in energy storage technology, rapidly decreasing costs, and shifting grid tariff structures make it impossible to neglect the consideration of storage integration into either on-site or off-site projects, as well as your overall renewable energy strategy.
  3. Examine opportunities for aggregated procurement of off-site renewable energy. While companies strategically pursue a full array of energy solutions – including energy efficiency, on-site and off-site renewable energy, as well as unbundled RECs – off-site renewable energy is evolving to provide attractive business cases on multiple fronts. Member-clients are increasingly interested in aggregated procurement of renewable energy to improve economic terms, reduce transaction costs and further de-risk procurement.
  4. Fortify your renewable energy procurement process. As the market has matured – producing dozens of deeply experienced, well-financed, well-referenced corporate suppliers and scores of interacting technological and transactional options – responsible corporate procurement of renewable energy solutions requires a well-managed, comprehensive, and auditable procurement process.
  5. Team up with an experienced strategic advisor to help navigate the complex landscape of renewable energy procurement actors and offerings. Experienced corporate off-takers develop blended internal/external teams with deep experience in both renewable and conventional energy. Outside advisors may be compensated by the corporate off-taker and/or any winning suppliers via a transparent, optimally RFP-disclosed, market-based fee.
  6. Engage your CFO. Develop a team and plan backed by current market-tested data to engage your CFO six to nine months before procurement to demonstrate why your renewable energy strategy and implementation provide a superior, risk-adjusted opportunity for your company.

A Force to be Reckoned With

Salesforce is an SR Inc Charter Member who has been leading the way in their commitment and implementation of sustainability and renewable energy ambitions. Their FY17 Stakeholder Impact Report outlines their aggressive sustainability targets in the face of the company’s own explosive growth. Targeting both Scope 1 and 2 emissions, Salesforce has set its sights on moving from 23% emissions mitigated via renewable energy in FY16 and 17 to 100% in FY18. They will follow a three-step, iterative process as a key methodology (2017):

  1. Avoid emissions by siting facilities on clean electricity grids.
  2. Reduce emissions through resource efficiency.
  3. Mitigate remaining emissions through renewable energy or high-quality carbon credits.

This process illustrates just how embedded Salesforce’s sustainability strategy is in its operations and its priority of upstream mitigation efforts. Furthermore, its 100% renewable energy commitment, joining the RE100 back in 2015, means that they are not relying on carbon credits to do the heavy lifting. In their endeavor to procure enough renewable energy to account for 100% of their global operations – up from 265,000MWh in FY16 to 371,000MWh in FY17 – VPPA’s have been an essential mechanism, with Salesforce signing two in 2015.

Max Sher, Sustainability Program Manager at Salesforce

Max Scher, Sustainability Program Manager at Salesforce

At the helm is 27 year-old Sustainability Program Manager, Max Scher, earning GreenBiz’s 30 Under 30 designation in 2017. Having developed Salesforces’ renewable energy and carbon roadmap, Max leads the company in its journey to Net-Zero Greenhouse Gas Emissions, as he works with and for Senior Director of Sustainability, Patrick Flynn.

At the highest level, companies should be thinking about how their product, service, business model, and operations can become sustainable, not only environmentally and socially, but financially as well. Today, all companies should take a portfolio-wide approach, examining their entire configuration of current and future energy needs and how those can be addressed by the full range of solutions in order to design a holistic strategy. As a valuable component of these strategies, Member-clients and SR Inc are developing robust and scalable approaches for aggregated off-site renewable energy procurement. SR Inc is leading a competitive RFI / RFP process to offer this approach, along with its variety of inherent benefits, to a wide-range of Member-clients.

Select Relevant SBER Executive Guidance & Tools:

 

ErikLandryErik Landry joins Sustainability Roundtable Inc as an MIT Sloan Sustainability Fellow. Pursuing a Master’s degree at MIT’s Technology and Policy Program of the Institute for Data, Systems, and Society, as well as a Sustainability Certificate from MIT’s Sloan School of Management, Erik approaches sustainability from a systems perspective. His current research within MIT Sloan’s System Dynamics Research Group pertains to capability building and resource allocation dynamics in complex social and technical systems. Before beginning his graduate studies, he spent two years at the U.S. Department of Energy’s Solar Energy Technologies Office – where he analyzed alternative market pathways for concentrating solar power as well as grid integration solutions for highly distributed photovoltaics – and one year at Argonne National Laboratory – where he studied the material chemistry of organic photovoltaics. Erik holds a B.S. in Chemistry from the University of Chicago

David Osborn is an accomplished corporate sustainability advisor serving dozens of SR Inc’s Fortune 500 and mid-sized client companies as they drive significant operational efficiencies and better align with talent, customers, investors, and regulators through corporate sustainability strategy. From his career in business consulting and executive leadership, David brings to SR Inc over 25 years of experience in building professional services and technology-driven businesses serving a broad range of client industries. David graduated from Dartmouth College where his studies concentrated in Economics and Geology. He received numerous academic honors highlighted by a citation in mathematics from the then college President John G. Kemeny. After IT systems experiences at Arthur Anderson (now Accenture) and Wang Labs, David graduated from Northwestern’s Kellogg Graduate School of Management with honors, a member of the Beta Gamma Sigma Honor Society and in the top 3% of his class.

After receiving his MBA, David cut his teeth at Bain & Company in their Boston office and then progressed up to Managing Partner at Booz, Allen & Hamilton (BAH) where he was ultimately elected by his Partners to head their Australasian business. After helping to grow that business from a very early stage to a staff of more than 100, David returned to the US to head BAH’s Retail Financial Services practice in North America. After a few years back in the US market, David transitioned out of his highly successful consulting career and served as Managing Partner / EVP at two innovative business service companies: the first a 150 employee, VC-backed innovative technology services provider in Boston, and the second a high-end, 200+ employee proprietary marketing services provider located in Princeton and New York. In both companies, David led over 200% growth within 2-3 years while substantially building the companies’ delivery teams and capabilities.

Making the Case for a Portfolio-wide Sustainably Healthy Workplace Program

July 5th, 2017

A growing body of evidence points to the clear link between sustainable, healthy workplaces and more satisfied, more productive employees. Therefore, it’s no coincidence that many successful and fast growing companies (including Sustainability Roundtable Inc. (SR Inc) Member-Clients Akamai, Salesforce and others) are developing comprehensive Sustainably Healthy Workplace (SHW) strategies for implementation portfolio-wide.

Bay Area Member-Clients recently joined SR Inc at Salesforce’s LEED Platinum HQ in downtown San Francisco to further explore the research behind this link and to discuss the benefits and barriers to pursuing a more Sustainably Healthy Workplace strategy portfolio-wide.

As SR Inc works towards the development of a decision-support and business case tool for portfolio-wide SHW strategies – in line with SBER’s 2017 Research Charter – the 2nd quarter of 2017 served as a “Discovery Phase” to determine the major perceived benefits and barriers to implementing such strategies. Some of the key themes that arose as barriers during interviews with dozens of Member-Clients were unsurprising such as:

  1. the potentially high dollar and staff time costs of developing and implementing such a strategy;

    ibicalculator

    Integrated Benefits Institute estimates the significant workforce health costs for a company with 2,000 employees. Key: General Health (GH); Short-term Disability (STD); Family & Medical Leave Act (FMLA); Long-term Disability (LTD); Workers’ Compensation (WC); Source: Integrated Benefits Institute. “The Total Costs of Workforce Health: Prepared for Sample Report.”

  2. the complexities associated with measuring the direct impact of work environments on employee performance; and
  3. the lack of available implementation guidance.

However, these interviews also revealed some less obvious barriers, such as:

  1. the challenge of quantifying the costs of SHW programs on a per full-time employee (FTE) basis (in addition to per square foot (SF) basis);
  2. perceiving existing HR Health & Wellness programs as a substitute for healthy workplace programs, (noting that only 15% of employees participate in their current health management program); and
  3. assessing and implementing healthy workplace programs via a single-asset versus portfolio-wide approach.

To overcome such barriers, SR Inc’s Peter Crawley, Director of Research & Consulting, shared some of the core best practices Member-Clients are employing to successfully develop and implement portfolio-wide SHW strategies and – in some cases – related building certifications:

  1. Recognize the ability of portfolio-wide SHW strategies to transition the Corporate Real Estate (CRE)
    cogfxstudy

    The CogFX study identifies significant correlations between sustainable, high-performing buildings and healthier, more satisfied occupants. Source: MacNaughton, P. Satish, U. Guillermo Cedeno Laurent, J. Flanigan, S. Vallarino, J. Coull, B. Spengler, J.D. Allen, J.G. “The impact of working in a green certified building on cognitive function and health.” Building Environment. March 2017 v.114:178-186.

    function from cost management to value creation. Directors of CRE that take an employee-centered, portfolio-wide approach to portfolio management are empowered to deliver an integrated strategy that engages employees; integrates sustainability, wellness, and renewable energy initiatives; is highly visible; and is enduring to enable year over year growth and excellence.

  2. Allocate the costs & benefits of health & wellness workplace programs/certifications across both CRE and HR departments. A portfolio-wide SHW strategy engages multiple departments beyond CRE – most notably HR – fostering joint decision-making collaboration to align with a greater number of internal stakeholders, attract greater attention/support from the C-Suite, and allow for both costs and benefits of initiatives to be distributed across both CRE and HR budgets.
  3. Quantify correlations between Healthy Workplaces & Employee Performance. A range of credible studies exist – from Harvard School of Public Health’s CogFX Study to Integrated Benefits Institute’s suite of tools – that help companies better understand the impact of work environments on employee health and productivity and build the business case for implementing SHW strategies portfolio-wide.
  4. Recognize the Risk Management (Regulatory, Brand, Workforce & Market) Benefits of portfolio-wide SHW programs. Portfolio-wide SHW programs can help enterprises align with a range of both internal and external stakeholders, helping ensure they are in compliance with environmental and health regulations; improving brand reputation among customers and investors; reducing risk of workforce illness, absenteeism, and escalating health costs; and future-proofing their building portfolio for anticipated market demand for healthier buildings.
  5. Use workforce costs/FTE metrics in addition to building costs/SF when analyzing the business case for SHW programs. The traditional approach to a cost-benefit analysis considers hard costs of building, owning, and
    reframecostbenefit

    A portfolio-wide SHW program invites a reframed cost/benefit analysis that integrates employee impacts – such as absenteeism, turnover, health insurance costs, and productivity – for a more comprehensive analysis of the costs and benefits of sustainably, healthy workplaces.

    operating a healthy workplace as well as the (sometimes significant) additional costs of certifying that workspace/building. The ROI is typically calculated based on resulting reductions in energy, space, and water costs. A portfolio-wide SHW program invites a reframed cost/benefit analysis that integrates employee impacts into the mix. Specifically, health-related workforce costs such as absenteeism, turnover, health insurance costs, and employee disengagement are costs with significant impact on the bottom line. Inversely, reduced absenteeism, lower turnover rates, lower health insurance costs, and greater employee engagement/productivity are benefits that can greatly contribute to revenue. For example, a portfolio-wide SHW Program yielding a 5% annual reduction in health-related costs  at a company of 10,000 employees can produce nearly $20 Million in cumulative savings over 5 years versus a “Business as Usual” scenario.

As Q3 of 2017 begins and we move closer to SR Inc’s 6th Summit for Sustainable Operations in Denver on December 8th, SR Inc looks forward to sharing with Member-Clients a decision-support tool to help Real Estate executives develop a portfolio-wide SHW strategy for their enterprise, and to help build the business case for its implementation (including wellness certifications where appropriate). SBER Premier Thought Leader Delos will also bring its multiple years of workplace health expertise to this effort and help ground the business case tool in credible, evidence-based research. In the meantime, SR Inc is available to answer any general or specific questions your team has regarding health and wellness in the workplace.

Select Relevant SBER Executive Guidance & Tools:

kwall_linkedin_pic-1 (2)As a Senior Manager of Research & Consulting at SR Inc, Kelsey Wallace supports research, development and implementation of enterprise sustainability strategies for companies that recognize the business imperative of more sustainable operations in the face of climate change and an increasingly resource-constrained world. Prior to joining Sustainability Roundtable, Inc., Kelsey worked for an environmental/engineering consulting firm where she supported clients including  the U.S. Environmental Protection Agency and the U.S. Green Buildings Council to promote sustainable buildings, clean energy, and safe drinking water. Kelsey also devoted a year to national service with the AmeriCorps National Civilian Community Corps, where she worked on team-based conservation and community development projects throughout the Southwest United States. Kelsey has her B.A. in Environmental Studies from Connecticut College.

1_Crawley-Peter-117x127Peter Crawley, Director of Research & Consulting at SR Inc , has led at the intersection of strategic consulting, real estate and sustainability for more than 15 years, serving as the principal advisor to top real estate owners and scores of  operating companies.  Peter has helped the executive teams at these enterprises develop and implement highly profitable Sustainability Strategies.  Prior to joining SR Inc, Peter served as the Director of Sustainability Services at the environmental engineering firm EBI Consulting. Peter is LEED accredited and has deep experience working on energy efficiency issues, product life cycle improvements, and greenhouse gas measurement, reduction, and reporting. He has worked on numerous LEED certification and high-performance building projects, and designed and implemented company-wide behavioral change programs to advance sustainability goals and enhance employee engagement. Peter received his BA from Amherst College, his MS in Real Estate from Columbia University and his MA in Sustainability & Environmental Management from Harvard University.

Not all RECs are Created Equal

June 7th, 2017

Think all Renewable Energy Certificates (RECs) are equally good for the planet?

Think again.

RE100 reported that in 2015 unbundled Renewable Energy Certificates (RECs) were “by far the most popular approach [for corporations to source renewable electricity], accounting for 85% of the total renewable electricity being obtained in the US.”  There can be no doubt that unbundled RECs have played an irreplaceable role in the promotion of the renewable energy market throughout the United States.  Nevertheless, as a number of corporations begin to achieve their 100% renewable energy goals, some are looking to move beyond unbundled RECs.

Some familiar faces are among those companies leading the charge.  Microsoft has set its goal at directly sourcing 50% of the electricity used at its data centers from wind, solar, and hydro by next year, and 60% early in the next decade, and “then to keep improving from there”.  Google, Autodesk, and Steelcase are taking similar approaches.

Greenpeace seems to support this evolution. In its recent report, “Clicking Clean,” it tracks how different companies in the IT sector are leading (or lagging) their industry counterparts in their commitments towards renewable power and, perhaps even more importantly, how they differ in their implementation of those commitments.  Over-reliance on unbundled RECs takes its place among a set of “shortcuts” that some companies take to achieve their sustainability claims without actually promoting new renewable power or reducing Green House Gas (GHG) emissions.

REC Basics

When you switch on your lightbulb, there is no way of knowing whether the consumed electricity comes from a squeaky clean photovoltaic solar panel or a smog belching coal plant.  Once electricity is generated, it is put onto the electric grid, which can be thought of like a big pool of electricity, whereupon it flows subject to Kirchhoff’s Voltage Laws until it reaches some downstream point of consumption.  Given the inability to physically trace energy from clean sources once it enters the grid, RECs were created as a contractual mechanism to keep track of renewable energy production, not consumption, so that companies can claim rights to clean energy and promote the development of new renewable energy projects that would displace dirtier conventional energy production.  A REC is created at the location and time at which one MWh is produced by a certified renewable energy source.

The value of a REC is primarily determined by three factors:

  • Supply and Demand: As we all fondly remember from Economics 101, a lower supply drives a higher demand, ceteris paribus. (We can agree that RECs are “normal” goods.)  Where supply of RECs saturates the market– as has been seen in Texas due to an abundance of wind generation – demand for RECs is depressed.
  • Regulation: Demand is generally higher in compliance markets than in voluntary markets. When utilities, due to renewable portfolio standards (RPS) or renewable portfolio mandates (RPMs), are on the hook for retiring (claiming) RECs, they tend to be more prized.
  • Technology: Do you think solar or wind is cooler? Companies have their preferences too.  The desire to have RECs produced by a specific technology for branding campaigns or local support can factor into a REC’s value.

For more detailed information on RECs, please see SR Inc Member Advisory on International Renewable Energy Markets.

To Bundle or not to Bundle?

Unbundled RECs are those that have been disassociated from the electricity production originally represented and are sold separately from energy.  Consequently, unbundled RECs are very flexible and have been an attractive way for companies to pursue their sustainability and renewable energy goals regardless of the location of and regulatory environment around their energy load.  Bundled RECs, on the other hand, are ‘bundled’ with the purchase of energy and, consequently, are constrained by certain grid considerations.  While, as mentioned before, the particular electrons generated from the renewable source are immediately lost in the electric grid, bundling works as long as you are purchasing energy from the same regional grid.

Why does it matter?  Both RECs were created with the generation of clean energy.  Isn’t that enough?

It depends on what your goal is.  If your goal is to claim rights to renewable energy at a potentially very cheap cost, unbundled RECs will do that for you.  If your goal is to claim those rights in a way that promotes the renewable energy industry, you might need something more.

Imagine that in order to satisfy your RPM (or perhaps your shareholders), you could either A) purchase a bunch of super cheap unbundled RECs from an oversupplied market in Texas or B) purchase bundled RECs from a new renewable development in your area where there is less existing renewable generation.  Which does more for the promotion of clean energy development?  There is a right answer to this question: B.

In fact, if a company justifies an increase in energy consumption in a grid supplied by conventional generation with the purchase of national RECs, the result would be even greater GHG emissions.  With this realization, an increasing number of companies, especially leaders in the Information Technology sector such as Google and Microsoft, are opting to purchase bundled RECs instead of unbundled RECs.  The value that “grid-proximity” has on the promotion of renewable energy in their respective locations, as well as the brand and relational benefits towards the engaged stakeholders, is a value-add beyond the well-recognized and trusted RECs in the renewable energy market.  For more information on how companies can push the envelope at the nexus of renewable energy and sustainability, please see SR Inc Member Advisory on Renewable Energy Impacts on Sustainability Reporting.

There’s a PPA for That

The Corporate Renewable Energy Buyers’ Principles were created by the World Resources Institute (WRI) to clarify driving principles that help corporations in their efforts to procure renewable energy in an effective manner.  One of the six principles is the call for “access to projects that are new or help drive new projects in order to reduce energy emissions beyond business as usual”.  Enabling the construction of new renewable energy projects, as well as the resulting saving of GHG emissions, beyond what would have occurred in the absence of action is called “additionality”.  The question of what enablement entails, as well as what actually would have happened, is a little bit gray and can be argued to varying degrees.  Fossil-fuel displacement, clean energy traceability, project financing, price point, tax incentives, emissions avoidance, and even project timing, could all potentially fall under the umbrella of additionality.  Purchase Power Agreements (PPAs) have boomed in recent years, and are arguably stronger in terms of additionality than the purchase of unbundled RECs.  The long-term contractual commitment to buy energy from a clean power source is very often the driving factor behind the development of a new renewable energy project in the first place.  The only problem is that PPA’s don’t necessarily come with the certified recognition of clean power production.  Only RECs serve that purpose.  Thus, the purchase of bundled RECs along with the corresponding clean energy through PPAs is good for the clean energy recognition, good for the additional development of renewable energy projects, and good for the planet.  But it doesn’t end there.  Many corporations are not located near a suitable location that provides the favorable economic, regulatory, and renewably resourced environment to make a direct PPA possible.  Virtual PPAs (VPPAs) have enabled corporations the ability to provide additionality to the regional grid, get bundled RECs, and do so at an off-site location that fits their financial requirements.   The only thing that is needed now is a mechanism that can make accessible the benefits of a VPPA to the great majority of corporations that do not need an entire utility-scale renewable energy project all to themselves.  Finally, the aggregated procurement of renewable energy with bundled RECs using a VPPA and contract-for-differences (CFD) transaction structure emerges as an attractive option for a large majority of corporations to gain all of the benefits while minimizing their financial risk.  For more on this structure, please refer to SR Inc Member Advisory on Advanced Renewable Off-site Energy.

Stepping Back

While the dropping costs of renewable energy technology and the grand entrance of PPAs and bundled RECs onto the scene surely make the renewable energy market an exciting one to enter, companies should step back and explore the space of options.  The primary focus area for improvement should include energy efficiency and demand reduction.  The cheapest and cleanest energy is the energy not used.  On-site renewables provide, in no uncertain terms, the next best level of additionality.  Various PPA structures with bundled RECs come in next, with unbundled RECs providing an essential stepping-stone for companies to engage in renewable energy markets.  Ultimately, companies will need to construct portfolios of the available alternatives that best fit their sustainability goals, energy needs, risk profiles, and financial situations.

References.

ErikLandry

Erik Landry joins Sustainability Roundtable Inc as an MIT Sloan Sustainability Fellow. Pursuing a Master’s degree at MIT’s Technology and Policy Program of the Institute for Data, Systems, and Society, as well as a Sustainability Certificate from MIT’s Sloan School of Management, Erik approaches sustainability from a systems perspective. His current research within MIT Sloan’s System Dynamics Research Group pertains to capability building and resource allocation dynamics in complex social and technical systems. Before beginning his graduate studies, he spent two years at the U.S. Department of Energy’s Solar Energy Technologies Office – where he analyzed alternative market pathways for concentrating solar power as well as grid integration solutions for highly distributed photovoltaics – and one year at Argonne National Laboratory – where he studied the material chemistry of organic photovoltaics. Erik holds a B.S. in Chemistry from the University of Chicago.

Top Ten U.S. Cities Ranked For Climate & Renewable Energy Policies

May 31st, 2017

Sustainable Business & Enterprise Roundtable (SBER) Member-clients are formulating and pursuing aggressive renewable energy goals and almost all have substantial presence in multiple large U.S. cities. Consequently, Member-clients have requested a quick survey of what the most advanced large U.S. cities are doing to meet their climate change goals, especially as they consider potential partnerships with the cities they operate in to advance a shared commitment to accelerating the necessary move to a low carbon economy.

Since this concerns public information, Sustainability Roundtable Inc. wanted to share this ranking of large U.S. cities leading on the low carbon economy on our blog.  This post, therefore, explores ten large U.S. cities leading through their relatively bold commitments to reduce their greenhouse gas (GHG) emissions and advance renewable energy. This movement is, of course, much broader than the listed cities.

For example, twenty-nine U.S. cities and counting have committed to transition their power source to 100% renewable energy. An interactive map created by the Sierra Club reveals that seven of those cities have already hit their renewable energy targets– Aspen, CO, Burlington, VT, Columbia, MD, Greensburg, KS, Kodiak Island, AK, Rockport, MO and Santa Monica, CA. The map also features 22 other cities committed to 100% renewables, including San Diego and San Francisco, CA, along with 39 cities currently working towards 100% renewables, including Chicago, IL, Denver, CO, Oakland, CA, and Philadelphia, PA.

For the convenience of Member-clients and others, we provide the following informal ranking of cities’ efforts in specifically pursuing renewable energy to reduce their GHG emissions, highlighting selected progress.  Five of those listed are part of the Carbon Neutral Cities Alliance (Boston, DC, New York City, Portland and San Francisco).

#10. Philadelphia, PA: Financing solar in Philadelphia has been challenging over the years, but the City has made significant strides in making it easier, faster and cheaper to install – and has been recognized as a SolSmart Gold designee – which helps the city reach its 80% GHG reduction goal by 2050.

Philadelphia’s Office of Sustainability is responsible for driving Greenworks Philadelphia, the City’s comprehensive sustainability plan which was first launched in 2009. Philadelphia’s 2016 Greenworks Plan outlines a goal to reduce GHG emissions 80% by 2050, below a 2006 baseline and the City is currently establishing new local government energy and climate targets. As part of the eight visions of Greenworks, the third vision focuses on clean energy that all Philadelphians can afford.

  • 2016 Population: 1,526,006.
  • Philadelphia had 10 MW of solar PV installed by the end of 2016.
  • The City’s solar and wind installation at Lincoln Financial Field generates three megawatts of energy responsible for 1/3 of the City’s solar capacity.
  • As a SolSmart Gold designee, Philadelphia is receiving national recognition for its work to reduce solar permitting costs, create a Solar Guidebook, and update their expedited permitting process.

P2

Beginning in 2009, the City of Philadelphia purchased 20% of its total annual energy through national wind RECs. In 2014 the City shifted its purchasing strategy from national to state RECs, focusing City dollars on supporting local projects. While local RECs are more expensive, the Energy Office is committed to using Philadelphia’s buying power on the REC market to spur the growth of renewable energy close to home. The increase in renewable generation in Philadelphia has come not through solar alone, but also through projects like the PWD’s biogas cogeneration plant at its Northeast Water Pollution Control Plant.

p5According to Greenworks Philadelphia, the state’s alternative energy portfolio standard and initial investment in solar through the PA Sunshine Program helped create a market for solar renewable energy credits (SRECs). The end of the Sunshine Program and the lack of sufficient expansion of the portfolio standard (and the ability of utilities to meet requirements by purchasing solar energy outside of Pennsylvania) have made financing solar projects in Philadelphia challenging in the past years.

 

#9. Chicago, IL: The City of Chicago has the same GHG reduction goal as Philadelphia but recently announced to power municipal operations with 100% renewable energy by 2025 which is currently being met through a combination of Renewable Energy Credits (RECs), utility-supplied renewable energy, and on-site generation.

The City launched the Chicago Climate Action Plan (CCAP) in 2008 to create a roadmap of five strategies – including clean and renewable energy sources as number two– to reduce GHG emissions and adapt to climate change. The Plan outlines how Chicago will achieve its mid-term goal of 25% reduction by 2020 and its ultimate goal of 80% reduction below 1990 GHG levels by the year 2050. Chicago also has goals to improve citywide energy efficiency by 5%; improve overall energy efficiency in municipal buildings by 10%; and create an additional 20 MW of renewable energy consistent with the Illinois Renewable Portfolio Standard, including installing 10 MW of renewable energy on City properties.

  • 2016 Population: 2,695,598.
  • Chicago had 13 MW of solar PV installed by the end of 2016.
  • The City provides annual reports on progress towards its goals in the Sustainable Chicago Action Agenda.
  • Chicago has reduced its carbon emissions by 7% from 2010 to 2015.
  • In 2010, a solar field consisting of 5,000 solar panels, covering over 2.3 acres, was completed on top of a 30-million-gallon underground reservoir. This roof generates over 1 MW of electricity annually.
  • Mayor Rahm Emanuel and City leadership announced on April 9, 2017, more than 900 city-owned buildings will shift to 100% renewable energy by 2025.
    • City Buildings, Chicago Public Schools, Chicago Housing Authority, Chicago Park District, and City Colleges of Chicago use almost 1.8 billion kWh of energy (8% of the city’s total use).
    • With initial purchases to begin in 2018 and 2019, the commitment will be met through a combination of acquiring RECS, utility-supplied renewable energy via Illinois’ Renewable Portfolio Standard, and on-site generation.
  • Chicago Solar Express makes installing solar easier by cutting fees and streamlining and standardizing permitting and zoning processes
  • A list of renewable energy consultants and working groups that the city has worked with can be found here.

#8. Boston, MA: Pulling ahead of Chicago, the City of Boston exceeded its 25% GHG emissions reduction goal by 2020 seven years early, achieving it through renewable energy programs and installations, paired with energy building ordinances which helped the City achieve a #1 ranking in energy efficiency.

Boston’s initial climate goals were formally adopted in 2007 with Executive Order 3-3890. In 2014, Mayor Walsh released the Greenovate Boston Climate Action Plan Update to reveal the City’s progress towards GHG emissions reduction and outline its strategies. The City announced it had reduced municipal GHG emissions by approximately 27%, meeting its 2020 goal of 25% reduction seven years early and on track to meet its long-term goal of 50% reduction by 2050. The Climate Action Plan outlines 2020 targets that include 15% energy use from co-generation and 10 MW of additional commercial solar. Boston plans to expand on-site renewable energy, district energy, and combined heat and power, along with promoting renewable energy purchasing, including buildings that have linked off-site renewable projects.

  • 2016 Population: 667,294.
  • The City of Boston had 20 MW of total solar PV installed by the end of 2016.
  • The report, Shining Cities: How Smart Local Policies Are Expanding Solar Power in America released April 4, 2017, ranks Boston 21st among major U.S. cities for solar, ahead of Philadelphia, Seattle and Miami for the total amount of installed solar, but behind Newark, NJ, Portland, OR, and DC.
  • According to the third edition of the City Energy Efficiency Scorecard, recently delivered by the American Council for an Energy-Efficient Economy (ACEEE), Boston remains the number one U.S. city for energy efficiency. Boston’s solar programs and building energy reporting ordinances have helped the City achieve this national recognition.
  • Since Boston is one of the windiest cities in the nation, the Boston Redevelopment Authority created new zoning laws for wind turbines.
    • The installation of a 1.5 MW turbine in Charlestown and two 600 KW turbines on Deer Island, generate more than 5 million kWh, saving roughly $600,000 each year.
    • In 2008, the Massachusetts Port Authority installed 20, 12-foot tall wind turbines on the roof of Logan Airport’s offices which utilize stable winds along the waterfront.
  • Boston’s Municipal Greenhouse Gas Inventory Summary reveals the City started buying RECs primarily from Midwestern wind farms in 2005.
  • Solar is also a critical source to meet Boston’s climate action goals. Boston has created many programs to expand solar energy, such as the Renew Boston solar program which helps Boston residents, businesses and institutions save money and energy.
  • The City’s interactive BERDO Mapping Tool calculates metrics for renewable energy for all buildings.

#7. Oakland, CA: Oakland may be the “other” city in the Bay Area but it is a national and global leader in greater sustainability.  Oakland is on track to reduce GHG emissions 36% by 2020 through residential and government solar programs including community choice aggregation as the City plans to add 62 million kWh of new renewable energy used to meet local needs, annually.

The Sustainable Oakland program is an evolution of the Sustainable Community Development Initiative, established by Oakland’s City Council in 1997, and supports Oakland’s progress in becoming a more sustainable city. The Oakland Energy and Climate Action Plan (ECAP) was adopted by the City Council on December 4, 2012 and outlines a ten-year plan including more than 150 actions that will enable Oakland to achieve a 36% reduction in GHG emissions by 2020 and 83% by 2050, below 2005 levels. The plan consists of a 32% decrease in electricity consumption through renewable generation, conservation and energy efficiency. It also includes a goal to add an annual 62 million kWh of new renewable energy used to meet local needs. Specifically, Action BE‐45 outlined in Oakland’s ECAP states: explore opportunities to install alternative energy technologies (e.g. via solar power purchase agreements) or purchase grid-based renewable energy for City facilities.

  • 2016 population: 390,724.
  • Sustainable Oakland’s website reveals that throughout the city, there were a total of 1,819 residential and non-residential solar systems at the end of 2013, with a total generation capacity of 15 MW.
  • The City installed a 372 kW system atop the Oakland Ice Center. The system generates 31% of the electricity used at the facility.
  • Additionally, a 760 kW system on the Municipal Service Center in the Coliseum Business Park generates 82% of the four buildings’ energy load, covering 85,000 square feet.
  • The City has also installed solar thermal systems on Fire Station 18 and the East Oakland Sports Center.
  • Oakland is a member of the Local Government Sustainable Energy Coalition’s Energy Policy Committee which focuses on energy efficiency, clean energy and community choice aggregation (CCA).
  • Sustainable Oakland’s 15/16 Progress Report presents findings from its 2016 emissions inventory and discovered Oaklanders reduced their GHG emissions 14% since 2005 from all sectors of the community – residential, commercial, and local government.

#6. District of Columbia (DC): DC has been reducing its emissions through one of the largest 20-year off-site wind PPAs of its kind ever entered into by an American city which serves 35% of the government’s total electricity needs.

The District’s first Climate Action Plan, Climate of Opportunity, provides an outline for District agencies to cut emissions. DC is committed to reducing GHG emissions 50% below 2006 levels by 2032 and 80% by 2050. The Department of Energy & Environment (DOEE) has been working on updating the Climate Action Plan to align it with the goals and initiatives of Sustainable DC, moveDC and Clean Energy DC. Sustainable DC’s 2032 targets include reducing energy use by 50% relative to 2012 and increasing renewable energy to represent 50% of all energy used in the District.

  • 2016 Population: 561,702.
  • DC had a total of 25 MW of solar PV installed by the end of 2016.
  • The Sustainable DC 2017 Year Progress Report highlights key projects and initiatives, and summarizes basic progress on the Plan.
  • In December, 2015 Mayor Muriel Bowser entered into one of the largest municipal on-site solar projects in the U.S. to boost the city’s total solar generation capacity by roughly 70% through the deployment of 11.4 MW of solar PV systems on the roofs and parking lots of 34 District-owned facilities. This was through the DC Department of General Services’ (DGS) Power Purchase Agreement (PPA) with DC-based, Nextility Inc.
  • DGS expects additional peak-season cost savings for electricity purchases from off-site energy sources in the summer months, when both demand and solar output is often greatest.
  • On top of the immense solar generation, DGS signed the largest 20-year off-site wind PPA (in PA) of its kind ever entered into by an American city in July 2015, which serves 35% of the government’s total electricity needs from a wind farm.
  • The District’s commitments to sustainable energy were recognized by the U.S. Environmental Protection Agency (EPA) with a Green Power Leadership Award in 2015.

DC6DC extended its Renewable Portfolio Standard (RPS) target from 20% by 2020 to 50% by 2032 which includes a separate solar-specific target of 5% by 2032. In 2015, electricity sales in the District totaled 11.3 billion kWh with an RPS requirement of 12%. Since DC has limited renewable capacity, almost all of the RPS compliance targets were met by generation outside of the District through the purchase of RECs.

DC719 states outside of DC have approved capacity that can count toward DC’s RPS, as they are all part of or adjacent to the PJM region. Because some of these states may have their own renewable portfolio standards, the eligible generating capacity may not necessarily be fully available to meet the District’s RPS requirement. About half of the approved capacity is in Illinois, Indiana, and Pennsylvania. The 22 MW of solar capacity in DC represented only 0.3% of total eligible capacity as of July 2016.

#5. Denver, CO: Currently exploring pathways to get to 100% renewable energy, Denver had 45 MW of solar installed by 2016 and has outlined strategies to double renewable energy produced in government operations by 2020 while partnering with Xcel Energy on solar and wind projects.

Denver’s long-term climate reduction goal highlighted in the City’s 2015 Climate Action Plan is to reduce GHG emissions 80% by 2050 from a 2005 baseline. Denver’s Office of Sustainability has formally adopted separate community-wide goals and government operations goals as part of Denver’s 2020 Sustainability Goals. Community-wide goals include reducing Denver’s CO2 emissions to below 1990 levels and holding total energy usage below 2012 levels while cutting fossil fuels by 50% by 2020. Denver’s government operations goals include reducing city GHG emissions to <345,000 mtCO2e and a 20% energy consumption reduction as city operations double renewable energy produced by 2020. Denver is currently exploring pathways to get to 100% renewable energy.

  • 2016 Population: 682,545.
  • Denver had 45 MW of installed solar by the end of 2016.
  • Denver International Airport has four solar arrays installed generating 10 MW of solar developed by Denver-based Oak Lead Energy Partners under a 20-year PPA.
  • Oak Leaf Energy has completed 68 additional solar projects, including the projects for the Denver Housing Authority and the Denver Public School System.
  • The Denver Housing Authority also agreed to a PPA with Enfinity America Corporation enabling the installation of 2.5 MW of solar on more than 350 Authority affordable housing properties.
  • A strategy in place to meet Denver’s GHG goals is to Partner with Xcel Energy to rapidly attain a lower emissions factor for electricity through system efficiencies, additional renewable energy projects and no-carbon sources.
  • Denver has many programs in place to help its residents and businesses become more efficient in lighting upgrades and solar, such as the Denver Energy Challenge.
  • The Office of Sustainability last updated their government operations progress report in February 2017. The report reveals government operations decreased GHG emissions year-over-year. To meet their 2020 GHG goal, Denver will require significant momentum and implementation of major strategies.

#4. Portland, OR: Portland ranks fourth on our list since the city achieved its goal of purchasing or generating 100% renewable energy for City operations in 2016, which was successfully met through solar, micro-hydro turbines, a cogeneration system and RECs.

Portland was the first city in the U.S. to create a local action plan for cutting carbon in 1993. Portland’s 2015 Climate Change Action Plan concludes the City and County established a goal of reducing local carbon emissions 80% from 1990 levels by 2050, with an interim goal of 40% by 2030. In 2015, Portland City Council adopted the Sustainable City Government 2030 Environmental Performance Objectives, directing City operations to purchase or generate clean power for 100% of electricity needs which was achieved a year later.

  • 2015 population: 632,309.
  • Portland had 27 MW of solar PV installed by the end of 2016.
  • The 2015 Climate Action Plan calls for supplying 50% of all energy used in buildings from renewable resources, with 10% produced within Multnomah County from on-site renewable energy sources or district renewable energy sources such as solar, biogas, in-pipe microhydro and biomass.
  • According to Portland’s 2017 Climate Action Progress Report, the City completed renewable energy purchases to meet its FY15/16 electricity demand with 100% renewable energy. The City generated 7% of its electricity from on-site renewable energy systems including solar, micro-hydro turbines and a co-generation system; local electric utilities provided 15% of their supply from renewable resources; and RECs were purchased to offset the remaining electric utility supply.
  • The City was awarded a competitive grant from Pacific Power’s Blue Sky renewable energy program for the design and installation of a solar array at the North Police Precinct (scheduled to be completed in 2017).
  • Portland has one of the highest participation rates in voluntary green power purchase programs in the country, with participants accounting for more than 7% of all electricity sales.
  • The City and County have participated in several relevant PUC dockets and legislative proceedings related to renewable energy policy. This includes PUC proceedings on community solar, solar incentive program design, voluntary renewable energy tariffs, resource value of solar and renewable portfolio standard (RPS) legislation (Clean Electricity and Coal Transition Act of 2016).
  • The 2017 Progress Report indicates that compared to 1990 levels, total carbon emissions from commercial buildings and the industrial sector have declined 15% and 37%.

#3. San Francisco, CA: San Francisco set an ambitious goal to meet 100% of its electricity demand with renewable power community-wide by 2030 and is on track to achieve that goal through its first-in-the-nation mandate of solar and living roofs on residential and commercial buildings.

The San Francisco Department of Environment released the 2013 San Francisco Climate Action Strategy Update, under Mayor Edwin Lee. San Francisco’s GHG emissions reduction goals are to reduce emissions by 25% below 1990 levels by 2017; 40% by 2025; and 80% by 2050.  The 2017 target came two years ahead of schedule, set in 2008, and puts the city on track toward its ultimate goal of an 80% reduction by 2050. San Francisco is committed to meeting 100% of its electricity demand with renewable power community-wide by 2030.

  • 2016 Population: 870,887.
  • San Francisco had 46 MW of solar PV installed by the end of 2016.
  • The San Francisco Public Utilities Commission is responsible for the installation, maintenance and operation of the City’s 19 municipal solar installations (City Hall, Thurgood Marshall High School, North Beach Library, etc.) as well as its future, small, in-line hydroelectric generating facility. In total, the 19 solar energy facilities generate up to 7.9 MW of energy.
  • In January 2017, San Francisco became the first U.S. city to mandate solar and living roofs on most new construction. Between 15-30% of roof space on most new construction projects must incorporate solar, living roofs, or a combination of both.
  • The City explores 100% renewable power purchasing options, including Community Choice Aggregation through its CleanPowerSF program, administered by the San Francisco Public Utilities Commission.
  • San Francisco’s Solar+Storage for Resiliency project aims to expand the solar market by serving as a national model for integrating solar and energy storage into the City’s Emergency Response Plans.
  • San Francisco’s Renewable Energy Assessment shows a complete list of municipal renewable energy installed.
  • San Francisco’s Business Council on Climate Change BC3 is a network of large companies and government agencies dedicated to working together to reach San Francisco’s climate action goals.

#2. New York, NY: By far the largest city on our list, New York City, installed 74 MW of solar in 2016 and has created strong partnerships citywide to implement the City’s comprehensive plans for large-scale solar integration, grid independence and battery storage.

In 2015, Mayor Bill de Blasio announced a Request for Information (RFI) to identify new renewable energy generation capacity, with a goal of powering 100% of City government operations from renewable sources. Under One New York: The Plan for a Strong and Just City (OneNYC) and One City: Built to Last, Mayor de Blasio has committed to a 10-year roadmap of policies regarding dramatic reductions in GHG emissions, from City government operations and citywide. The City has pledged to reduce overall GHG emissions 80% by 2050 and emissions from City government operations 35% by 2025.

  • 2016 Population: 8,537,673.
  • Private and public solar installations in the City totaled almost 74 MW in 2016. Public solar capacity has increased to nearly 9 MW and private solar capacity has nearly tripled from 24 MW at the beginning of 2014 to nearly 65 MW, which helped to drop GHG emissions by 19% from 2005 levels.
  • Mayor de Blasio pledged to install 100 MW of new solar on public buildings and 250 MW of new solar on private buildings by 2025 through One City: Built to Last. Concurrently, the plan provided funding for the NYC Solar Partnership to continue to reduce market barriers for solar; attract more solar energy companies to the city and create more jobs; and increase the city’s installed solar capacity.
  • Partners helping to advance the Mayor’s goal of increasing solar are the NYC Solar Partnership which is led by Sustainable CUNY of the City University of New York, the New York City Mayor’s Office of Sustainability, and the New York City Economic Development Corporation.
  • New York City funded CUNY’s NYC Solar Partnership, which develops and implements comprehensive plans for large-scale solar integration, including increased resiliency for communities through targeted solar installations around grid independence and battery storage.
  • Solarize NYC, a citywide program designed to further increase access to solar through community group purchasing campaigns over the next nine years, expects to lower costs by 10 to 20% and increase solar capacity in communities that have historically had limited access to solar.

#1. San Diego, CA: The top ranking city on our list is the largest U.S. city to adopt a 100% renewable electricity goal community-wide by 2035.  San Diego is also the city who leads the country in solar PV installations with a commitment to reducing its GHG carbon footprint in half by 2035. 

In a statement from San Diego Mayo, Kevin L. Faulconer, San Diego is the largest U.S. city to adopt a 100% renewable electricity goal community-wide by 2035. San Diego’s Climate Action Plan has received national and international attention and support demonstrating the benefits of nonpartisan climate leadership. Unanimously approved by a bipartisan City Council, San Diego’s Climate Action Plan aims to reduce the City’s carbon footprint in half by 2035. Additionally, targets include a 15% reduction in GHG emissions by 2020 and 40% by 2030, below a 2010 baseline. The City announced that by 2015, climate pollution had been reduced by 17% below the baseline year of 2010 — surpassing the plan’s targeted 15% reduction goal by 2020. The Climate Action Plan is based on five bold strategies which detail energy & water efficient buildings; clean & renewable energy; bicycle, walking, transit & land use; zero waste; and climate resilience.

  • 2016 Population: 3,095,313.
  • San Diego leads the country in total solar PV installed with 303 MW as of the end of 2016.
  • According to San Diego’s 2016 Annual Climate Action Plan, by the end of 2015, the City operated on 35% renewable energy community-wide.
  • Sixteen municipal facilities fitted with PV will help the City reach its goal to pursue energy independence.
  • On a wider scale, the city is currently exploring community choice aggregation which the city, rather than the local utility company, chooses its electricity supply.
  • City taxpayers save about $1 million each year in energy costs with the City’s two large solar systems; one at Otay and the other at the Alvarado water treatment plant.
  • All newly constructed facilities and major renovation projects regardless of square footage are encouraged to incorporate self-generation using renewable technologies to reduce environmental impacts associated with fossil fuel energy use. Newly constructed City facilities shall generate a minimum of 10%, with a goal of 20% from renewable technologies including photovoltaic, wind and fuel cells.
  • San Diego Mayor, Kevin Faulconer is one of four co-chairs of the Mayors for 100% Clean Energy initiative launched by the Sierra Club to convince fellow U.S. mayors to adopt a goal of moving to 100% renewable energy.

References.

Brittany Doherty, Program Director joined SR Inc at the start of 2015. Brittany has two years of experience managing and writing Sustainability Reports for the Town of Dartmouth in accordance with the comprehensive, credible, and widely used standard, the Global Report Initiative (GRI). Brittany graduated with a B.S in Organizational Behavior Management & Sustainability from the University of Massachusetts-Dartmouth, while actively developing a variety of sustainability initiatives for the university. Brittany served as the President of Net Impact at her university for three years, was a member of the Fair Labor Association Student Committee for two years, and also launched a pilot-teaching-program to integrate Sustainability into the global network of Junior Achievement. While Brittany was attending graduate school, earning a certificate in Environmental Policy, she worked as an Analyst for the Town of Dartmouth, assisting in the advancement of the Town’s economic, environmental and social policies. Outside of her work at SR Inc, Brittany has volunteered on the Sustainable Belmont Committee and assisted in the Town’s GHG Inventory project, as part of the Climate Action Plan. She also served as a valuable member of the Belmont Solar Campaign (BSC).

 

Do You Support The Sustainable Tenants’ Leasing Principles?

April 21st, 2017

This Earth Day your firm has an opportunity to join world-leading firms in declaring support for six simple principles that advance greater sustainability in leased space.  All too often firms claim that because they lease most  – or all – of their space, they cannot lead in the move to more sustainable real estate.  And then landlords claim that the best tenants may not care about more sustainable and healthier space. 

More than half dozen world-leading firms have had enough of this splitting of accountability and have come together to lead.  They are also extending an offer to other corporate tenants to join them in publicly endorsing the linked Sustainable Tenants’ Leasing Principles.  These six simple principles listed below all help corporate tenants advance their own commitment to sustainable business through urging landlords to offer sustainable options and relevant data in a timely manner.   

sixslprinciples

This is an effort that will directly benefit your firm as it increases your firms negotiating power when it seeks more sustainable and healthy real estate and energy – especially in smaller leased space around the world. Some of the world’s fastest growing and most sought after corporate tenants have already committed to the Sustainable Tenants’ Leasing Principles including Akamai, Anthem, Intuit, Lenovo, LinkedIn Oracle, Pegasystems  and Teradyne.  Your firm could join them as original signers of the Sustainable Tenants’ Leasing Principles if your firm can commit to supporting the Sustainable Tenants’ Leasing Principles over the 30 day “Earth Month” beginning April 22nd.

Sustainability Roundtable Inc. (SR Inc) Member-clients requested that the linked Sustainable Tenants’ Leasing Principles be created to build on the success of the Corporate Renewable Energy Buyers’ Principles and the Corporate Colocation & Cloud Buyers’ Principles (which now regularly appear referenced in RFPs issued by top corporate buyers the world over).  Consequently, SR Inc created the Sustainable Tenants’ Leasing Principles with guidance from Patrick Flynn, Senior Director of Sustainability at Salesforce (who helped lead on the creation of the Corporate Colocation & Cloud Buyers’ Principles).  Signing companies, however, need not be SR Inc Members and absolutely no costs or obligations are required.  Indeed, all sustainability conscious commercial tenants are encouraged to sign onto this simple but important statement of shared principles. 

Pro Bono Service:  If your company does join these world leading companies as an original signer of the Sustainable Tenants’ Leasing Principles before May 23rd 2017,  SR Inc will donate to your firm on a pro bono – zero cost – basis, SR Inc’s proprietary, editable, Sustainable Leasing Strategy Playbook developed with leading Member-clients over seven plus years, featuring actionable Executive Guidance & Tools for Site Selection, RFPs (including negotiating leverage matrix), LOIs, Lease Language & Work Letter (for tenant build-out). 

The companies signing the Sustainable Tenants’ Leasing Principles look forward to the prospect of your firm joining them to send a needed and clear signal to a fragment, multi-trillion dollar, landlord market about the fact the best corporate tenants do care about the need to move to sustainably healthy workplaces.  Don’t hesitate to reach out to me or Brittany Doherty, Program Director of SR Inc’s Sustainable Business & Enterprise Roundtable, if you think that your firm may want to lead in this simple, highly efficient and effective manner this Earth Month.

 

 

JBJim Boyle is CEO & Chairman of Sustainability Roundtable, Inc. For nearly eight years, Jim has led full-time teams of diverse experts assisting world-leading corporations, real estate owners, and federal agencies in their move to greater sustainability. He has led in developing SR Inc’s confidential, industry specific, annual management assessment and recommendation process for more sustainable operations and real estate that is compatible with major public standards globally. Further, he has directed the development of hundreds of pieces of SR Inc original Executive Guidance & Tools and led in the creation of SR Inc’s Renewable Energy Procurement Services (REPS) practice, which represents top corporate off-takers across the U.S. and internationally.  Before founding SR Inc, Mr. Boyle advised fast growth technology firms, private equity firms, and institutional investors as an adviser on real estate strategy and implementation, and before that, as a large law firm attorney assisting corporate and investment clients on complex real estate and environmental compliance-related issues. Jim is a graduate of Middlebury College and Boston College Law School, who early in his career served as a federal law clerk and as an aide to John F. Kerry in the U. S. Senate.

Brittany Doherty, Program Director joined SR Inc at the start of 2015. Brittany has two years of experience managing and writing Sustainability Reports for the Town of Dartmouth in accordance with the comprehensive, credible, and widely used standard, the Global Report Initiative (GRI). Brittany graduated with a B.S in Organizational Behavior Management & Sustainability from the University of Massachusetts-Dartmouth, while actively developing a variety of sustainability initiatives for the university. Brittany served as the President of Net Impact at her university for three years, was a member of the Fair Labor Association Student Committee for two years, and also launched a pilot-teaching-program to integrate Sustainability into the global network of Junior Achievement. While Brittany was attending graduate school, earning a certificate in Environmental Policy, she worked as an Analyst for the Town of Dartmouth, assisting in the advancement of the Town’s economic, environmental and social policies. Outside of her work at SR Inc, Brittany has volunteered on the Sustainable Belmont Committee and assisted in the Town’s GHG Inventory project, as part of the Climate Action Plan. She also served as a valuable member for the Belmont Solar Campaign (BSC).

Selling Your CFO on Large Scale Off-site Renewables

April 21st, 2017

At a recent multi-member discussion focused on “Selling your CFO on Large Scale Off-site Renewable Energy,” David Osborn, Sustainability Roundtable Inc. COO & Senior Adviser, shared key learnings from Member-Clients regarding the “Virtual Power Purchase Agreement (VPPA)/Contract for Differences (CFD)” transaction structure that has reshaped many Member-Clients’ Sustainability Programs.  Patrick Sullivan, NRG’s Vice President of Development, provided a detailed description of the VPPA/CFD transaction, and Nicola Peill-Moelter, Member-Client Akamai’s Senior Director of Environmental Sustainability, shared Akamai’s experience developing a large scale VPPA/CFD project to enable Akamai to advance towards 50% renewable energy — even as it quickly scales its network worldwide.

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Many Sustainability Roundtable Inc. (SR Inc) Member-Clients were years ahead of the curve when they made renewable energy a leading element of their companies’ corporate sustainability strategies (as has been regularly reported on this blog – for instance, see A Revolution Towards Renewable Energy Portfolio-wide and a 2017 update). Today, 89 global corporations, including nearly a dozen SR Inc Charter Members, have joined the RE100 and committed to powering 100% of their operations with renewable energy. This trend indicates a much broader change in the global energy market that has caused many of the largest and most sophisticated corporate energy consumers to recognize that renewable energy technologies have become a necessary component of a sound energy strategy. Beyond that, they can provide a financial hedging strategy that produces savings, mitigates energy price risk, and provides environmental benefits.

While SR Inc has long been advising Member-Clients on onsite renewable energy procurement, the concept of Virtual Power Purchase Agreements (VPPAs) – and, specifically, the Contract for Differences (CFD) form of VPPAs – has driven the adoption of ambitious renewable energy goals for leading global corporations, especially among energy intensive global IT companies. The advent of off-site VPPA/CFD agreements, which do not require companies to have optimal sites for renewable energy projects, has also transformed a growing number of SR Inc Member-Clients’ sustainability programs, as they create a financially attractive path to achieving ambitious environmental goals these companies would not otherwise pursue.

A large scale, off-site Virtual Power Purchase Agreement (VPPA), structured as a Contract for Difference (CFD), is an innovative financial transaction that has made it possible for top credit corporate buyers to improve their financial risks profile while winning Renewable Energy Certificates (RECs) for providing unequivocally “additional” renewable energy to the grid (click to enlarge).

Companies opt to do VPPAs over traditional PPAs when they want to procure renewable energy but cannot cost-effectively develop renewable energy onsite, or when they do not pay a utility for their electricity (i.e., they pay a landlord or colocation facility).  Many SR Inc Member-Clients’ real estate portfolios are predominately in leased space.  These companies in particular are interested in scaled off-site solutions, and more specifically, in how to help their CFO understand the financial benefits of these transactions in the face of growing energy price volatility.

Consequently, David Osborn, SR Inc COO & Senior Adviser, drew from SR Inc’s experience advising dozens of Member-Clients on onsite and offsite renewable energy solutions, to share Key Learnings regarding how to make the case internally for VPPA/CFDs.

Below is a public summary of the Key Learnings David Osborn reviewed:

  1. Develop a renewable energy strategy for your entire portfolio, including leased space – Off-site deals for energy consumed in leased space are available and you can win a meaningfully better deal in 2017 than in 2016.
  2. Act to integrate renewable energy into your corporate sustainability strategy; waiting will risk a buyer-favorable market – Very low interest rates, 30% federal tax credits and fierce supplier competition are creating value opportunities that are time sensitive.
  3. On owned sites where you pay the electricity bill, onsite PPAs or Community Solar could drive year one savings in several US markets – Examine your U.S. portfolio for sites where: (a) changing regulations are favorable; (b) you are paying $.07/kWh+; (c) your sites enable solar; or (d) community renewable energy is available; or (e) the relevant utility offers a “green tariff” to corporate buyers.
  4. For sites that are leased or otherwise incompatible with renewable energy, consider offsite options – If you are able to procure renewable energy from the same utility district as your demand, it can provide both high-quality bundled RECs and a robust hedge against electricity price risk. If the renewable energy system is not grid-proximate, it can still provide a financial hedge and high quality RECs.
  5. As the market has matured, responsible corporate procurement requires a managed, auditable procurement process – With dozens of deeply experienced, well-financed, and well referenced corporate suppliers and scores of combined transactional, technological and site-based options, responsible corporate procurement of renewable energy solutions requires a comprehensive, auditable process.
  6. Corporate off-takers should engage a strategic adviser to help manage their renewable energy procurement – Experienced corporate off-takers develop a blended team of internal experts with deep experience in renewable and conventional energy combined with outside advisers compensated by the corporate off-taker and/or any winning suppliers for a transparent, market-based fee disclosed in the RFP.
  7. Integrate storage technology into your renewable energy strategy – Storage technology advancements, rapidly decreasing costs, and changing grid tariff structures virtually necessitate including storage capability as part of onsite and offsite renewable energy strategies.
  8. Examine opportunities for aggregated procurement of offsite renewable energy – Member-Clients are increasingly interested in aggregated procurement of renewable energy to improve economic terms, reduce transaction costs and further de-risk procurement.
  9. Engage the CFO – Develop a team, plan and market-tested data to engage the CFO 6 to 9 months before procurement to demonstrate why a renewable energy strategy and implementing transactions provide a superior, risk-adjusted opportunity.

The Virtual Power Purchase Agreement (VPPA) & the Contract For Difference (CFD) Transaction Structure:  A Sustainable Game Changer

Vice President, Renewables Development at NRG Energy

Patrick Sullivan, Vice President, Renewables Development at NRG Energy

Patrick Sullivan, Vice President of Renewables Development at NRG, a SR Inc Premier Thought Leader, provided a detailed explanation of the VPPA/CFD transaction structure that has transformed so many corporate sustainability programs. He noted that corporate customers are increasingly seeking offsite PPAs, given the cost of solar and wind energy has dropped significantly in the past ten years, often to a level competitive with the cheapest form of energy available from the grid. VPPAs produce many of the benefits of a more traditional PPA with no capital expenditure required by the customer.  Importantly, VPPAs enable “additionality” by creating a long-term financial contract to support the development and construction of new renewable generation facilities. Like a traditional PPA, VPPAs produce RECs that the buyer can retire to claim emissions reductions and help achieve corporate sustainability goals. Although a VPPA is financial in nature and bears no direct relationship to the actual electricity consumption of the offtaker, it does serve as a long-term hedge against energy price volatility, acting to offset retail energy price fluctuations and reducing a buyer’s exposure to volatile fuel prices over the long-term.

NRG_CFDs

Sample graphic of a CFD, with NRG as the renewable energy developer, owner and operator.

These types of contracts differ from a physical or traditional PPA, in that in a traditional PPA, the corporate offtaker physically takes title to the electricity from the system and pays the system provider an agreed upon PPA price over the term of the multi-year contract. Rather than being strictly a financial hedge, a traditional PPA is an energy hedge applied to the offtaker’s load or monetized in the market.

Leveraging the VPPA/CFD Transaction Structure to Super Charge Your Sustainability Strategy

Member Executive Nicola Peill-Moelter, Senior Director of Environmental Sustainability at Akamai Technologies, described how the Akamai team built the business case for CFDs internally, and specifically how they presented the opportunity to the company’s CFO. Akamai, a global Content Delivery Network service, has grown rapidly, with a 20x increase in peak traffic since 2009, while carbon increased only two-fold over the same period. Renewable energy is a key to this decoupling of business growth from energy consumption and carbon emissions.

Nicola Peill-Moelter, Senior Director of Environmental Sustainability at Akamai Technologies

Nicola Peill-Moelter, Senior Director of Environmental Sustainability at Akamai Technologies

The challenge for Akamai, like many companies, is that its office and network operations are highly-distributed globally with low power demand in each. Further, most of these facilities are leased, so Akamai pays the landlord (versus the utility) for electricity. This common set of circumstances means that a CFD is the only suitable option for procuring renewable energy in the form of bundled RECs. Furthermore, because CFDs (unlike PPAs) expose the buyer to electricity pricing volatility, the business case must be stronger, and not strictly tied to potential lower electricity costs which may be a weak argument for distributed, outsourced operations.

Akamai recently announced a 2020 goal to reduce greenhouse gas emissions by 40% from 2015 levels, which hinges on a second goal to power 50% of global network operations from renewable energy. Below is Nicola’s own summary of the CFD structure Akamai opted to pursue to achieve this goal:

“Thanks to finance innovation, a long-term CFD with a renewable energy-project developer is a viable procurement mechanism that aligns with our principles. We agree to act as the long-term energy “off-taker” at a fixed price, called the strike price. With this commitment in hand, the developer can secure funding for a project that will generate electricity commensurate with our annual energy usage in that power market. Once the project is up and running, the electricity is sold into the wholesale market, with the difference between the strike and market prices flowing to us as a debit or credit, along with the credits for the renewable energy generated (bundled RECs) which are subsequently retired.”

In order to get buy-in from the C-Suite for these goals, Nicola and team had to build the business case for renewable energy, which boiled down to 4 key questions:

  1. Why are we doing this?
  2. How will we achieve these goals?
  3. How much will it cost?
  4. Are the risks acceptable and manageable?

To ensure the initiative’s success, Nicola identified key players and ensured she had a strong renewable energy strategy team in place. She recommended that such a team consist of a:

  1. Sustainability champion: a strong influencer who instigates and leads the project/strategy with the goal of reducing carbon emissions but who can also build a strong business case
  2. Executive champion: an executive who fully supports the project/strategy – ideally the executive whose division is responsible for a major portion of the company’s energy consumption and carbon emissions
  3. Renewable energy consultant: a subject matter expert who helps develop the strategy and is compensated for the best outcome for your company
Akamai_sellingtheCFO

Key players needed to get internal buy-in for a CFD at Akamai.

Other players who played a key role and ultimately needed to be involved in making a deal possible included Executive Management, the CEO and CFO, a treasurer, and a support team including representatives from legal and accounting and outside legal and accounting consultants with expertise in renewable energy.

The business case for a CFD should go beyond potential electricity cost savings. A core part of the business case may include the strong trend of growing consumer concern about climate change, corporations setting renewable energy goals, and strengthening supplier sustainability requirements. Of course, when pitching to the C-Suite, Nicola stressed the importance of speaking in terms they understand – e.g. “competitive value”, “competitive differentiation”, “product features”, and “market trends” – to tell a story compelling to the audience. She also made the case for the “why” in a way that resonated with top decision makers: customer demand. With 89 companies and counting committed to 100% renewable energy via the RE100, and investors applying similar pressure, companies like Akamai need to display their commitment to provide clean-powered services (products) in order to remain competitive.

Helping Your CFO Understand Why So Many Top Corporations Have Found the VPPA/CFD Transaction Structure Attractive

A compelling business case garners buy-in from the CEO and most of the executive team. But ultimately, they look to the CFO to give her/his blessing before signing off. It’s easy for the CFO to say “No.” The needed support from the CFO comes from a  trusted relationship between the CFO and the sustainability champion; demonstration of a well-thought out procurement strategy; well-vetted financials; and an assessment of and mitigation plan for the risks.

 

Akamai_CFDs

SR Inc has been pleased to advise many Member-Clients leading the historically important embrace of renewable energy technologies world-wide. SR Inc recommends that companies avoid committing to energy-related transactions until they have systematically examined opportunities for renewable energy procurement portfolio-wide. SR Inc looks forward to continuing work with Member-Client companies to define management best practices in integrating advanced energy systems and transactions into portfolio-wide sustainability strategies to help meet individual and aggregated needs for procurement of more sustainable energy.

The slide presentation accompanying the Symposium summarized in this blog are available in SR Inc’s Member-only Digital Library here.  Interested non-member companies are encouraged to reach out to SR Inc to request an invitation to join SR Inc’s shared-cost industry leadership service here.

Select Relevant SBER Executive Guidance & Tools:

kwall_linkedin_pic-1 (2)As a Senior Manager of Research & Consulting at SR Inc, Kelsey Wallace supports research, development and implementation of enterprise sustainability strategies for companies that recognize the business imperative of more sustainable operations in the face of climate change and an increasingly resource-constrained world. Prior to joining Sustainability Roundtable, Inc., Kelsey worked for an environmental/engineering consulting firm where she supported clients including  the U.S. Environmental Protection Agency and the U.S. Green Buildings Council to promote sustainable buildings, clean energy, and safe drinking water. Kelsey also devoted a year to national service with the AmeriCorps National Civilian Community Corps, where she worked on team-based conservation and community development projects throughout the Southwest United States. Kelsey has her B.A. in Environmental Studies from Connecticut College.