If renewables didn’t have policy support, there wouldn’t be much of a market, so the saying goes. You only need to glance at Paula Mints’ most recent report showing how the spread of the European Feed-in Tariff (FIT) caused a spike in development activity to realize how policies manipulate markets.
I wonder however, if that is changing as more and more corporations get into the space. Major players like Amazon, Google and others are signing PPAs left and right. Our story on corporate PPAs gives more insight into how these mechanisms work.
One reason that corporations are interested in PPAs is because of economics. When Chief Financial Officers (CFOs) run the numbers they realize that locking in electricity rates for the next 10, 15, 20 years makes a lot of sense. Policy is a factor here because it is tax credits or other incentives that help make PPA economics look so attractive.
But a second equally important reason is not driven by policy: public support. A recent Strom Report shows that in major industrialized countries, renewables have approval ratings above 80 percent.
This uptick in corporate PPAs can be attributed to policy and public support. The CFO wants the electricity rate-lock, the sustainability officer wants to reduce the carbon footprint of the organization, and the marketing group wants renewables because they are viewed so favorably by the public. If technology costs keep dropping and public support of renewable energy keeps growing, that means that policy could eventually step out of the picture with no detriment to the growth of renewable energy.
Play the video letter from the editor at this link for more on this topic.