Electric Utilities May Have Found Brighter Future in ORE

In the past few years, there has been an explosion of customer-owned and -sited renewable energy generation (called distributed energy resources, or DER), such as residential rooftop solar, larger solar installations (on commercial, governmental and industrial facilities), community solar farms, individually owned microgrids, community microgrids, and solar with battery storage. As a result of so much customer-generated power, the future of electric utilities has seemed bleak, as this customer-generated power has significantly cut into utility revenues.

Seemingly in a completely separate and unrelated trend, more utilities have been building their own renewable energy installations, such as utility-scale solar farms, utility-scale wind farms, and utility-scale battery projects, largely as a way to reduce their dependence on coal, natural gas and nuclear generation, as well as to have reliable and more localized sources of backup power following major storms.

Now, according to a new report published by Navigant Research, it seems as though the two trends may begin to dovetail. With this growing connection, utility-scale renewable energy generation may be a new way for electric utilities to replace the revenue that they are losing to DER, by selling their own excess renewable power to large customers (such as corporations, universities, and municipalities) that are either unable to generate enough of their own DER, or have no desire to even get started doing so.

Released last week, the report, "Corporate Utility-Scale Offsite Renewable Energy Procurement Solutions," noted that an increasing number of corporations, universities and municipalities are committing to targets for greenhouse gas (GHG) emission reductions, part of which may involve the expansion of renewable energy procurement as part of their sustainability programs. That is, beyond just installing their own DER, many of these large customers are making the decision to purchase renewable energy from their electric utilities.

Navigant predicts the global market for this large-customer spend on off-site renewable energy (ORE) will reach $15.6 billion by 2027. Of this, North American corporate customers are expected to represent $3.1 billion of this spend, purchasing approximately 2.7 gigawatts.

"These new renewable energy transaction models will not only help corporate buyers meet their sustainability and energy spend reduction goals but will over time help mitigate project bankability risks for project developers and [independent power producers]," said William Tokash, a senior research analyst at Navigant.

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