Pamela Largue spoke to Jason Tundermann, Vice-President of Business Development at LevelTen Energy, to learn about trends in the corporate renewable PPAs marketplace.
PEi: Tell me more about LevelTen Energy
Tundermann: LevelTen Energy is a web-enabled online marketplace with the core products being power purchase agreements with renewable energy assets under various stages of development.
Developers upload power purchase agreement (PPA) offers according to standard terms and conditions, as well as information about their project. All of the information is formatted in a standard way, which enables us to make an apples-to apples comparison. This is the supply side of the market place. On the whole, we’ve created this platform to help corporate buyers purchase more quickly, more efficiently and more safely.
The demand side or the buyer side of the marketplace allows us to work with corporate buyers and channel partners of all sizes and provide them access to the marketplace. They can review and compare all of those developer offers. Ultimately, we deliver wholesale market expertise, analytics, data and projections of how those PPA offers might perform in the future. That data is used to compare the offers in terms of risk and value.
Would you say there has been an increase in buyer interest?
Definitely, across all geographies. That is one of the reasons I am now based in Paris to oversee the expansion of our marketplace
from North America to Europe.
What trends are you seeing in terms of large corporates?
Historically, there have been a few very large corporations that have signed PPAs with new projects. Those large corporates are still in the market and they are becoming increasingly sophisticated in terms of innovating new contract structures. We work with them to provide the analytics to manage their risk.
One great example of a larger corporate taking advantage of the platform is Starbucks.
Starbucks has a history and a range of renewable energy transactions. They have benefited from our deep dive into wholesale markets and contracting structures, ensuring they got the most from their renewable journey.
When we started working with Starbucks, they hadn’t yet included virtual power purchase agreements or off-site PPAs in their toolkit. Not only could we help them take that next step, we could also advise them away from investing only in a single PPA, which essentially puts all your eggs in one basket.
For example, if a buyer is looking for 100 MW of supply – traditionally that company or its advisor would find a 100 MW wind farm to meet the requirement. However, it’s less of a risk if we take the time to understand the company’s load, peaks and geographies etc, and invest in three projects that add up to 100 MW, creating a portfolio that better matches their load and lowers their risk through diversification.
This is one innovation that we learned by building an online marketplace with the data driven and web enabled tools. We could automatically calculate an optimized mix of wind and solar assets across the country, matching their load profile in terms of geography and time of day.
While also diversifying their procurement across several projects, you’re also no longer dealing with binary project risk, or the risk of a single asset developer, which may experience financial hardships for example. Furthermore, by diversifying across electricity hubs you’re not exposed to the price of one single location. You’re diversified across multiple locations.
It’s basically a mutual fund approach to renewable energy and it’s achieved through software and algorithms.
This must generate a great deal of data.
You have a great deal of data generated from the demand side, as well as from the supply side, which is changing constantly.
Offer price, curves and forward price projections mean you need a platform to roll that all together and make near term decisions. This is a great model for a large customer like Starbucks. They had a three-project portfolio, which has grown as their load and renewable energy targets have grown.
Another trend we see is new smaller buyers coming to the table and smaller companies starting to join the RE 100, or establishing renewable energy goals. Historically, they were locked out of the market because PPA advisors weren’t usually interested in supporting small volumes. However, with an algorithm and web enabled marketplace, we can serve those smaller buyers very efficiently, even coupling them with larger buyers like Starbucks.
There is clearly an interest in this kind of model in the US. What about Europe?
There is a huge interest and my job here [in Paris] is to explore and understand the marketplace and adapt our commercial approach accordingly. Traditionally, many of the larger buyers are US based, the ones you read about in the North American PPA announcements.
The vast majority of those have a presence in Europe, draw power from Europe and have a carbon impact. Also, corporations with large data centres have had a history of procurement in Europe, and there is a whole range of SMEs, or small medium enterprises, based in Europe who are just beginning their journey.
It’s interesting. While there has been much less corporate renewable energy procurement like direct PPAs in the European market compared to the US, for example, there has been more total renewable energy brought onto the grid in Europe. But the bulk of that has been under state sponsored subsidy programs.
Now while that has done a great job bringing renewable energy onto the grid, it’s actually served as an impediment to corporate PPAs because it’s the government promising a very high rate for electricity and as a developer, you would rather sell to the government than to a corporate who doesn’t really want to pay above the electricity market rate.
In fact, one of the factors that has really made this the right time for the European PPA transition is that many of the subsidy programs have expired or will expire soon.
That means, as a developer selling to the state for the last 10 years, the program you are used to will not be around for much longer. This is where corporate PPAs will likely fill the void in a similar fashion to the 2016 transition in the US.
Another key trend is that this push for renewables is becoming more popular, especially as countries around the world push decarbonisation targets.
The RE 100 list is close to 250 companies – companies that have made very specific announcements about targeting 100% renewable energy… and that list is growing very quickly.
So even though Europe is our first step beyond North America, I am sure we can expect further geographic expansion in the future.
What other macro trends have you noticed in the energy space?
Firstly, the decline of fossil fuel as baseload and coal in particular. It’s becoming uneconomic and is getting priced out of the grid, especially as more zero marginal cost renewables arrive.
The second trend is the use of gas and natural gas capacity, which can conserve baseload and serve a modulating function.
Also, many people have their eyes on storage and battery storage in particular. Hydrogen storage could become another alternative for grid management in the future.
What type of organizations are you working with at the moment?
They span the spectrum from small to large and from any sector. We work with clients in the retail, financial and fast-moving consumer goods sectors and a lot with data centres. Of course, our heavy industry clients use a large amount of electricity, so they see the value of a locked, long-term power price.
Ultimately, in spite of current trends, our job at LevelTen Energy is to work with corporates to meet their large-scale energy goals and minimise the risk involved in their projects. We look forward to supporting a greater number and variety of corporates in the future.