The Clean Energy Buyers Association released a study Sept. 30 that offers hard evidence that its large corporate customer members have materially contributed to the growth of renewables by guaranteeing projects stable revenue streams.
REsurety, which conducted the study for CEBA, analyzed 251 renewable projects in ERCOT, MISO and PJM, which are home to 70% of corporate procurements forecast for the near future. It found that those with power purchase agreements from large buyers are much more financially stable.
“We commissioned this study because we wanted to definitively confirm what we’ve all known … that voluntary corporate offtake matters: corporate commitments to buy clean energy, [and] get clean energy projects financed and built in the United States,” Misti Groves, CEBA senior vice president of U.S. strategy, said in an interview.
Corporate customers contracted for 100 GW of clean energy between 2014 and 2024, which represent about 40% of the total brought online over that decade. Such deals give renewable projects a steady revenue stream that helps them to get financed, the study says.
“Without extensive voluntary commitments by our members and companies, the U.S. may actually struggle to meet energy demand, which is growing,” Groves said.
The paper was retrospective, so it focused on purchases of wind and solar, but the same financial benefits can help other technologies such as battery storage, geothermal and nuclear power, she added.
REsurety simulated economic performance of the 251 projects by calculating operating income and debt obligations using historic generation, price and operating cost data from 2015 to 2024 and then identifying sustained periods of financial stress, the study says.
“In contrast to fossil fuel generators, wind and solar projects have low operating costs but relatively high capital expenditures that are financed through a combination of sponsor equity, tax equity and back leverage debt,” the study notes. “Once a project becomes operational, it must repay these upfront costs through term loans and dividends to investors. During periods of low wholesale power prices, projects may not earn enough merchant revenue to meet their debt service obligations or their investors’ rates of return, which, absent additional revenue sources, could lead to financial distress and potential default.”
Offtake agreements with corporate customers cut the likelihood of projects entering periods of financial distress by offering steady income. That means debt interest rates and required debt service coverage ratios are lower for projects with offtake agreements.
Power prices can vary significantly, with the paper pointing to three years this decade: Prices were low in 2020 because of the COVID-19 pandemic, jumped up in 2022 because of expensive natural gas and then were low again in 2024 as cheap gas returned. Over the last two years alone, average prices in PJM ranged from $30 to over $70/MWh.
“For a 100-MW project with a 40% capacity factor, this translates to a swing in annual merchant revenue from $10.5 million to over $24 million,” the study reported.
All markets saw benefits from some kind of offtake with renewable energy credit (REC) deals lowering risk somewhat, but virtual PPAs slashing it, the study found. In ERCOT, 38% of merchant projects faced simulated financial distress, which fell to 18% with REC deals and 9% with VPPAs. In MISO the equivalent numbers were 74% for merchant projects, down to 57% with REC deals and just 4% with VPPAs, while PJM saw 71% of merchants with some distress, which fell to 60% with REC deals and 1% with VPPAs.
Corporate offtake is not a subsidy, REsurety Senior Vice President Adam Reeve said. Tax credits have provided a subsidy to renewables, but offtake deals are at market prices.
“The benefit of the corporate purchase is transferring risk away from the project that enables them to secure debt financing and then get built,” Reeve said in an interview. “Debt financing is the cornerstone of infrastructure investment around the world. We’re doing a lot of infrastructure investment in the U.S. We need that right now.”
Regardless of the presence of tax credits for energy projects, that risk transfer is a benefit that will help get power plants built, he said.
“Without continued corporate risk transfer … for these long-term, stable revenues, we won’t see the growth of low-carbon power in the U.S. that I think we would otherwise,” Reeve said.
The study focused on three wholesale power markets, but it argued that the same would hold true for other markets.
“It’s no accident that that voluntary contracts for clean energy happen in deregulated wholesale markets rather than regulated markets,” Groves said. With its transparent wholesale prices, the construct helps corporations enter into VPPAs and other offtake deals, she added.
“In this next year, as renewable energy projects aim to meet deadlines for tax credits, the support and cooperation of corporate buyers will give developers the confidence to advance spending to secure tax credits to reduce the cost of renewable energy,” Joan Hutchinson, Marathon Capital’s managing director of offtake advisory, said in a statement.
