Organic Valley, a 2,000-farm cooperative based in Wisconsin, sits at the intersection of two rising trends in the solar space: corporate customers innovating more ways to purchase renewables and an increase in solar power across the Midwest.
In August and September, Organic Valley and Canadian developer BluEarth Renewables brought online three solar projects totaling 12.67 megawatts, helping the cooperative reach a 100 percent renewables goal it set in 2017. But in a unique configuration for corporate projects, those installations are part of a larger 32-megawatt portfolio of projects in Wisconsin, Iowa and Minnesota that will also serve more than 20,000 customers in the Midwest.
Organic Valley, BluEarth and the initial developer partner, OneEnergy, worked with 13 Midwestern municipal utilities as well as several other corporate partners on a total of 10 solar projects that provide electricity or renewable energy credits to the various partners.
In the past, large-scale corporate renewables deals have largely favored power-purchase agreements with one offtaker. Recently, companies have been engaging with renewables in more unique ways: Facebook invested tax equity in a Texas solar project, Google engineered a reverse auction to sign more PPAs, and companies including Gap and Bloomberg joined up on a small-scale aggregation deal.
Organic Valley, which already has renewables investments, was also looking for a new prototype.
“We needed a new model to be able to get to 100 percent renewables,” said Stanley Minnick, the company’s energy services and technology manager. “[We] needed to find partners that were able to innovate and go beyond…what [had] proven itself as a replicable model.”
The result could become yet another template for corporates acquiring renewables, a stable of buyers that now make up a significant portion of overall utility-scale solar demand. This year analysts at Wood Mackenzie Power & Renewables expect corporate solar deals to account for nearly 14 percent of overall utility-scale installations, surging to about 29 percent in 2020.
The details
Initially, Organic Valley was interested in going the way of other large corporate purchasers to meet its goals: working with a utility partner to create a green tariff or renewable energy rider, which allows a large purchaser to get power from renewables through a utility while not burdening other ratepayers with the costs.
That endeavor, however, would have required approval from the Wisconsin Public Service Commission, a challenge that turned out to be a non-starter.
“When we started working on this in 2017, and frankly still today, the prospects of getting something approved, and the time and energy and resources it would take to go in front of that body, really forced our hand a little bit to come up with this model,” said Minnick.
Instead, Organic Valley turned to the group of municipal utilities it purchases power from and pitched a plan that had the food company buying renewable energy credits (RECs) from solar projects and municipal utilities offtaking the electricity through fixed-price power-purchase agreements.
To ensure the projects would pencil out economically, developer OneEnergy decided to build more capacity and bring other REC partners onboard. The developer worked with Organic Valley to loop in NativeEnergy, multipurpose-soap company Dr. Bronner's, and the city of Madison, Wisconsin. That allowed for bulk purchasing, construction and financing, said Eric Udelhofen, OneEnergy’s development director. OneEnergy sold the portfolio to BluEarth prior to construction.
“The margins were so thin on these projects,” said Minnick. “Had we lost any one of the 10 physical projects, there’s a really good chance that none of them would have gotten built. So that’s where those partnerships with those other groups became super important.”
The commitment to 25-year REC agreements from partners also provided more financial certainty to projects, said Udelhofen.
“Companies have a lot of leverage when they’re trying to pull these deals together,” said Udelhofen. “They can use that more than they realize for the benefit of renewables development on their behalf.”
Because the RECs are going to partners rather than remaining associated with the individual projects, the power sold to the municipal utilities is technically “brown power.” Still, the configuration of the project did bring more solar energy to a state where the market is just budding and a 10 percent by 2015 renewable portfolio standard remains on the books. Wisconsin has installed less than 100 megawatts of solar capacity, though a recent announcement from utility Alliant Energy is expected to significantly boost that total.
That power is also going to utilities at a price comparable to what they were paying before, one reason for the importance of the economies of scale that Udelhofen mentioned.
“It became clear pretty quickly that we were going to need to deliver a price of power that was pretty low to compete with their existing wholesale contract for those municipal utilities,” said Udelhofen.
Organic Valley had its own slate of requirements as well. To incorporate pollinator habitats and grazing lands, the group worked with Minnesota-based clean energy advocacy organization Fresh Energy. Organic Valley also partners with a project at the National Renewable Energy Laboratory to study agriculturally friendly adaptations at solar installations.
The projects also needed to be sited locally, provide additional solar to the grid and incorporate some benefit to their communities.
“I love wind farms in Texas but that’s not where I wanted to get our power,” said Minnick. “We wanted to be able to say that we led to more solar [being deployed] — it was absolutely essential. We also wanted to do it in our own backyard.”
Interest rises in corporate solar
OneEnergy and Organic Valley developed the portfolio of projects at a time when corporate customers are increasingly driving demand and solar has become competitive across the U.S.
According to Wood Mackenzie Power & Renewables, utility-scale solar (larger than the Organic Valley projects) and wind both now beat new-build combined-cycle gas plants on a levelized cost of energy basis in Wisconsin. Cost declines make renewables technologies largely viable even in states with lackluster renewables policies.
“As the market has evolved and prices have come down, I think some of these market players that aren’t subject to renewable portfolio standard [requirements] are looking more at solar as a way to meet some other needs, whether it’s offsetting transmission costs, or meeting some of their capacity requirements, or just delivering energy in a way that’s close to competitive with wholesale,” said Udelhofen.
The decline in prices is also upping the appeal of solar with corporate customers, which account for over two-thirds of electricity demand in the U.S.
Minnick spoke to Greentech Media soon after fast-food company McDonald's announced it had signed power-purchase agreements for 380 megawatts of wind and solar in Texas. Though Organic Valley doesn’t agree with McDonald’s philosophy on food, Minnick applauded the contracts as another indication of serious corporate demand for solar.
“What company isn’t taking a hard look at investing in solar in some form or fashion?” said Minnick, who hopes that Organic Valley’s efforts may serve as a model for corporate peers.
At the same time, Minnick is looking to more ambitious plans. Organic Valley’s 100 percent renewables achievement includes only its corporate-owned facilities. About 250 of its 2,000 partner farms currently have solar installed, and Organic Valley has plans to triple that number in the next three years, a task Minnick said would be aided by an extension of the federal Investment Tax Credit.
Ultimately, those efforts will encompass only emissions from Organic Valley’s purchases of energy. Tackling the emissions directly associated with the company’s business and value chain will be an effort that requires a “career’s [worth of] work,” said Minnick.
