In March, 24 local governments in Maryland came together on a plan to purchase enough renewable energy to power more than 246,000 homes a year. They did so by issuing a joint Request for Proposal (RFP) through the Baltimore Regional Co-operative Purchasing Committee (BRCPC) to seek a supply of up to 240,000 MWh of renewable energy from 2022. This large-scale transaction was made possible by an energy supplier procurement approach known as energy aggregation, a way for two or more buyers to purchase electricity from one. large-scale production facility.
According to the new report from the Intergovernmental Panel on Climate Change (IPCC), greenhouse gas (GHG) emissions must peak within four years to limit global warming to 1.5 degrees Celsius, and cities have a key role to play in achieving this goal. Aggregation can be a powerful way for cities to quickly ramp up their renewable energy and help decarbonize local economies at the speed and scale needed. Yet most cities did not pursue aggregation due to an inadequate understanding of its new agreement structure and a lack of tools and resources to help streamline the process.
To help cities overcome these obstacles, last year the American Cities Climate Challenge Renewables Accelerator, an initiative co-led by RMI and the World Resources Institute, began organizing a large-scale renewable energy aggregation cohort. . This cohort provided technical assistance to more than 30 organizations, including the BRCP. A second iteration of the cohort is underway with a new group of organizations. In addition, a recently released RMI report, “Procuring Large-Scale Renewables through Aggregation: A Guide for Local Governments”, aims to help more cities understand and pursue aggregation.
As more and more cities take steps to decarbonise the power system, aggregation will be an increasingly important option that can offer buyers several benefits, such as opening doors for small towns, creating positive network effects and the realization of more savings.
Enable small buyers to access large-scale projects
Aggregation can enable participation of small towns that on their own are unable to purchase enough electricity to merit developer attention. This is especially important for small communities with 100% renewable energy targets, as most municipalities cannot supply 100% of their electricity needs with on-site solar generation alone. Therefore, large-scale off-site sourcing will be an essential part of the decarbonization strategy of many small buyers.
The conclusion of a renewable energy purchase agreement was our next step, but our consumption is too low to do it alone.
An example of a small buyer accessing large-scale renewable energy projects is a 25 MW joint solar purchase made by MIT, Boston Medical Center (BMC) and Post Office Square (POS) in 2016. In this overall deal, MIT has pledged to buy 73%. of the power generated by the new array, with BMC buying 26% and POS buying the rest.
“Closing a renewable energy purchase agreement was our next step, but our consumption is too low to do it alone,” said Pamela Messenger, general manager of Friends of POS. “It’s exciting to join forces with two industry leaders, which allows us to mitigate 100% of our electrical footprint. “
Likewise, other smaller local governments have also used aggregation to access, such as five local governments in Maine. They have partnered up for the state’s first multi-city renewable energy project, a 4 MW solar panel, which provides climate benefits equivalent to more than 4,000 acres of forest.
Without pooling electricity demand with other buyers, small towns would not be able to access large-scale projects on their own, making it difficult to effectively reduce their carbon emissions.
Create knowledge sharing opportunities
By uniting, cities can not only aggregate their purchasing power, but also pool their knowledge to streamline procurement processes. The experience shared among participants can generate positive network effects, including increased mentoring, increased credibility, and support for inexperienced buyers.
For example, the city of Nashville partnered with Vanderbilt University last year to purchase power from a 125 MW solar project as part of the Tennessee Valley Authority’s Green Invest program. This public-private partnership allowed the city to leverage the expertise of the University’s Large-Scale Renewable Energy Study Advisory Committee to identify the best risk mitigation strategy.
In addition, a group of buyers can also share lawyers, accountants or external consultants.
According to Susan R. Wente, Acting Chancellor of Vanderbilt University, “We want this partnership to serve as a collaborative model that other organizations in our region and beyond can replicate to bring about long-term, lasting change for the better. protect our common environment. ” In fact, the connections formed within the aggregation group have gained national media attention and send a powerful signal to utilities, policy makers and developers that local governments are serious about decarbonizing the power system rapidly. .
In addition, a group of buyers can also share lawyers, accountants or external consultants. For example, 15 municipalities and public entities in Pennsylvania, which also participated in the Renewables Accelerator’s large-scale renewable energy aggregation cohort, have teamed up to study the viability of investing in a joint solar agreement. The 15 entities published a joint tender for energy consultants in May to share external consultancy services.
Unlock more savings
Throughout the collaborative process, aggregate agreements can generate various cost savings, as they allow cities to achieve greater economies of scale by combining renewable energy demands from multiple buyers.
For example, an analysis from the National Renewable Energy Laboratory estimates that purchasing 100 MW of solar power instead of 5 MW can reduce development costs by 24%. This can lead to cost savings in the form of lower power purchase contract prices for all buyers, regardless of their size.
In another case, Enel X, which is working with BRCPC on a joint purchasing strategy, found that renewable energy projects typically need to exceed 20 MW to be economical. The company has discovered that aggregation is a way for small buyers to participate in large projects.
By working together, our cities are able to deliver clean energy to their communities cost effectively.
In Florida, 12 cities came together to form the Florida Municipal Solar Project. They are developing 372.5 MW of zero-emission energy capacity, enough to power 75,000 homes in Florida. According to Jacob Williams, CEO and Managing Director of the Florida Municipal Power Agency, “By working together, our cities are able to deliver clean energy to their communities in a cost-effective manner. Clint Bullock, Managing Director and CEO of the Orlando Utilities Commission, explained, “We can take advantage of economies of scale to lower the price of solar power to a point where a dozen municipal utilities can afford. to sign and I think that’s something people around the country will take heed of. “
As more and more cities set goals for the transition to renewable energies, the aggregation democratizes access to clean energy by allowing participants, in particular small buyers, to collectively develop energy projects. renewables much larger than those that a single buyer could access individually. Partnerships can create positive network effects through knowledge sharing and inspire other organizations in the region to replicate the collaborative model. By unlocking more savings, aggregate agreements provide cities with a lower-cost mechanism to effectively meet climate goals.
The new IPCC report underlines the urgency of decarbonizing the electricity system and reducing GHGs. To play their role, cities must accelerate the pace and scale of renewable energy purchases. While aggregation is still a relatively underutilized procurement method, this approach is crucial in helping them do just that.
Our report, “Procuring Large-Scale Renewables through Aggregation: A Guide for Local Governments,” helps local governments step by step through the aggregate procurement process and links to other key tools and resources relevant at each stage.
Cities must act now to reduce greenhouse gas emissions. The best way forward is to involve all stakeholders and ensure a more promising economic structure for a wide range of buyers. In the fight against climate change, it is better to band together than to go it alone.