Energy consumption is an ongoing expense that poses several challenges to corporate, municipal, and federal operations. Energy prices are expected to rise in the coming years, potentially impacting profit margins. Through 2035, electricity prices are expected to rise between 45% and 109% based on six different industry accepted sources. Carbon emissions from energy generation already pose environmental risks, but now, they also come with the risk of unknown future regulation and taxation. Furthermore, while the natural gas boom has helped to lower electricity prices, rates remain volatile. Our clients have come to realize that clean renewable energy can serve as a long-term hedge against rising electricity costs and provide companies more control of their energy expense.
There are several ways to take advantage of hedging qualities of renewable energy products with long-term, fixed pricing.
- Traditional Power Purchase Agreement (PPA). In a traditional power purchase agreement, a customer signs a contract to purchase a specified amount of energy from a renewable energy project for a specified length of time at a specified price. In this case, the customer is purchasing the actual electrons that are being added to the grid by the project. PPAs are generally most attractive to utilities, municipalities, and electric cooperatives.
- Project Ownership. Utilities may also capture the hedge benefits of renewable energy through project ownership. Solimar Power Partners can deliver a turnkey facility with ongoing asset management services during the life of the asset.
Utilities
When purchasing renewable power, a typical utility-scale buyer can lock in an energy rate for 20 years. Renewable energy prices are not affected by fuel price fluctuation, nor are they impacted by water scarcity. Buying renewable power can help protect utilities from exposure to price spikes in fuel prices and carbon regulation. Alternatively, owning a renewable energy project can offer a consistent stream of revenue for decades.
Corporations
Energy is often one of the largest expenditures corporations will make in their operations, whether it be used to support commercial buildings, manufacturing plants, or data centers. Energy use is the single largest expense in commercial office buildings, representing one third of the typical operating budgets and accounting for almost 20 percent of the nations annual greenhouse gas emissions. The energy consumed by U.S. manufacturing amounts to $180 billion annually and is responsible for almost 30% of all U.S. greenhouse gas emissions. For technology companies with data centers, recurring power cost is the most significant operational cost.
