for-commercial-industrial

For Commercial & Industrial

Increasing numbers of commercial and industrial (C&I) businesses are looking to renewable energy as a way to mitigate the threat of rising energy costs and to reach corporate goals related to sustainability and emissions reduction. Wind and solar energy are uniquely capable of providing a hedge against future costs of power due to the absence of fuel costs. Wind energy is the least cost new generation technology available in the market, and as an on-peak resource, solar is at or approaching wholesale power costs in many parts of the country. There are three options C&I businesses can consider, depending on their location, financials, and energy usage:

  1. Invest directly in ownership of a wind or solar energy project (either at company sites or from a grid-connected source),
  2. Purchase the physical output from a wind or solar energy project, or
  3. Enter into a financial contract that delivers renewable energy credits and provides a hedge against rising power costs.

Our wind and solar energy experts will be happy to discuss these various options with you to answer any questions and determine what might be the best solution for your needs.

Energy Hedge Contracts 

There are a variety of energy hedges which enable C&I customers to take advantage of clean, low-priced renewable energy development.  Renewable energy is uniquely capable of providing a financial hedge against rising natural gas costs and electric power rates. This is because wind and solar projects have no fuel costs. The basic concept of a renewable energy hedge is that the customer pays a fixed price for the renewable power. The power is then sold into the wholesale market. As wholesale prices rise with rising natural gas and other costs (EPA/regulatory influences etc.) then the customer reaps the financial benefit of the rising costs, which provides a hedge against any commensurate rise of their energy costs. A Contract for Differences (CFD) Power Purchase Agreement (PPA) is one such energy hedge which allows commercial and industrial end-user customers to reap the economic and environmental benefits associated with renewable development without the need to directly purchase, own, or take delivery of wholesale energy. In a CFD, all renewable energy credits (RECs) are transferred to, and owned by, the C&I customer. A CFD energy hedge also affords C&I customers significant revenue upside potential whenever a Project’s wholesale nodal market price exceeds its fixed renewable energy PPA price.  The visual below captures the basic concept and value-proposition of a CFD renewable energy hedge:

 

energyhedgesgraphic_25NOV14