The low prices for renewables in the Texas market have attracted substantial levels of corporate investment. 5.5 gigawatts of corporate renewable energy purchases were finalized in Texas in 2019, according to Bloomberg New Energy Finance.
The corporate deals often take the form of so-called virtual PPAs. Instead of physically using the energy, an investor purchases a virtual PPA from a renewable energy developer and receives credits, which can be used to boost the company’s renewable energy footprint. Once the developer has completed the renewables project with the help of virtual PPA financing, they can supply the energy to the electricity grid.
Virtual PPAs have become popular among large tech companies, such as Facebook and Google. In August, Google finalized an agreement with Candela Renewables for 140 megawatts of solar power as part of a virtual PPA.
The Google deal is indicative of a shift towards virtual PPAs for solar power in Texas over the past two years. While virtual PPAs for wind power have traditionally dominated the market and can be purchased for a cheaper price, Bloomberg NEF reported around 80 percent of the 5.5 gigawatts of corporate investments in renewables during 2019 went to solar projects.
Solar offers an attractive investment opportunity because it can take advantage of the spikes in power prices that occur during periods of peak demand on summer afternoons. When energy prices rise above the agreed level noted in a virtual PPA, the investor makes a profit on the difference. This has helped give solar an edge over wind power, which typically achieves its highest levels of power generation at night, when energy demand is lower.
Kyle Harrison, a sustainability analyst at Bloomberg NEF, argues that increased investment in more profitable solar virtual PPAs “represents a growing sophistication among buyers.”
Although the threatened loss of federal tax credits appears to be pushing prices for renewables up slightly, Harrison is confident about the sector’s future. In late 2019, he argued that even if federal tax credits come to an end, the corporate renewables market will be “strong enough to survive without subsidies.”
Harrison added, “A lot of tech companies, for example, even if they’ve already reached their goals, their electricity demand continues to grow as they continue to build factories and data centers.”
Jordan Smith is a freelance journalist and translator covering issues related to energy, the environment, and politics. His work has appeared on the independent news site Opposing Views and at the Canadian Labour Institute.