The 3 key differences between what smaller and larger companies want in a renewable energy deal

by May 11, 2018

We do a lot of work in the utility space. In fact, that’s what got us on the pathway of sustainability 20 years ago. So we see both sides of a lot of issues.

When utilities get painted with a “solar killer” brush, we completely see that perspective – some utilities can often look like they’re inflexible and simply won’t give customers what they want. On the other hand, we completely see the utility’s perspective – there’s a lot they’d love to do for customers, but they have to get regulatory approval, which doesn’t always happen (and when it does, it’s slow to come). And, although most people don’t know this, the utility industry is one of the – if not THE – biggest buyers of solar energy.

There are lots of other angles from both sides of the solar story, and we understand them all. So when I started making a point to ask folks at conferences who were talking about their company’s latest wind or solar deal, “Hey, did you reach out to your utility to see if they could do that deal for you?” I wasn’t surprised to get blank stares from some folks (“Wow, we didn’t even think about it”) and eye rolls from others (“Have you ever tried to work with a utility?!”).

The fact is, 66% of business decision-makers tell us they expect to increase their reliance on renewables. But it struck me that, despite all we know about companies’ desire for renewables, we didn’t really understand the decision-making process … and how utilities could potentially be a part of it.

Digging deeper: how are decisions made?

So, with the support of five utilities and in partnership with the Smart Electric Power Alliance, we set out to understand what businesses are looking for when they procure renewables. What we found were some distinct differences between very large companies and small to mid-sized companies.

  1. Large companies typically won’t count a utility’s renewables toward the company’s renewable energy goals; a smaller company typically will. Large companies want to know they’re responsible for adding more renewables onto the grid in order to “take credit” for it and count it in their sustainability story. Makes sense. Smaller companies, though, aren’t necessarily as concerned with public reporting, and many are simply looking to reduce costs – and their impact on the planet. As they look at that impact, 75% are OK with calculating their energy-related environmental impact based on the degree to which the utility’s energy is renewable/carbon-free. The magic number is around 50%. In other words, three-quarters of small to mid-sized businesses say that if they knew their utility’s generation mix was roughly 50% renewable, that would check the box for them, and they wouldn’t see the need to procure their own renewables.
  2. Large companies want lower pricing and more control; mid-sized companies are more flexible. Large companies want:
    • “Grid parity” pricing
    • Additionality
    • Ownership of RECs
    • Protection against energy price volatility
    • Term and consumption commitment flexibility

    Mid-sized companies want:

    • Pricing comparable to current “standard” rate
    • “Mid-range” contract term: 5-10 years
    • If possible, they’d like to choose: % of total generation OR specific kWh purchase criteria
    • Additionality isn’t a deal breaker now for SMBs – though it could become more important as they get more experienced
  3. Large companies procure renewables through a defined process; small to mid-sized companies, not so much. Large companies would be happy to buy renewables from a utility, provided that a utility responds to an RFP the company has created in partnership with an outside consultant AND that the utility’s offer included the best pricing and terms, per above. That’s the sticky wicket for utilities … they’re rarely going to have the ability to negotiate and customize pricing and terms because of their regulatory restrictions. On the SMB side, though, utilities have more opportunity, if they play their cards right. Forty-five percent of smaller businesses would actually call their utility as a starting point for procuring renewables, but what’s the number one way they’d find a renewable partner? Google search. Unfortunately, in all the Google searches we conducted along the lines of “solar for my business,” utilities only came up in paid or organic search one time in one city out of many where we searched. This is a big opportunity for utilities and not a very expensive one.

What utilities need to know   

We also uncovered messaging that works: utilities can indeed leverage their stance as “the guys who know energy” and their scale, “we can negotiate the best prices” if that can be made to be true.

In short, utilities could be doing more renewable deals with their largest customers if they could offer competitive pricing and allow their customers to have more control and flexibility in how they manage their energy purchasing on a day-in and day-out basis.

On the small to mid-sized business front, most would be satisfied just by knowing their utility is actively working toward 50% renewables in the overall generation mix. And most would actually talk to their utilities about renewables (and whether the utility’s mix is enough or they want more) if the utility lets customers know that they’re “in that business.” That means utilities must have and execute on a paid and organic search strategy.

Want to learn more? Reach out to me at [email protected] or Chris Schroeder at SEPA at [email protected]. We’d be happy to chat.

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About the Author

Suzanne Shelton

Where Suzanne sees opportunity, you can bet results will follow. Drawing on her extensive knowledge of both the advertising world and the energy and environment arena, Suzanne provides unparalleled strategic insights to our clients and to audiences around North America. Suzanne is a guest columnist in multiple publications and websites, such as GreenBiz, and she speaks at around 20 conferences a year, including Sustainable Brands, Fortune Brainstorm E and Green Build.

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