Green Giant 3M Signs First-Ever PPA With Invenergy
David Labrador | Rocky Mountain Institute
3M, the global manufacturing and technology giant, announced its first-ever power purchase agreement (PPA) in February for the total production from the Gunsight wind farm in Texas, a hefty 120 MW of power. The power was procured from Invenergy, North America’s largest independent renewable power generation company. Invenergy is a founding sponsor of the Business Renewables Center (BRC), which accelerates corporate procurement of utility-scale renewable energy.
When 3M, with its proud tradition of sustainability, turned its attention to sourcing its electricity from renewable energy, it found that off-site, utility-scale renewable power was the way to go, as so many others have found. Last year, corporations procured a whopping 3.2 GW of off-site wind and solar, nearly triple the prior year’s total, and more than two-thirds of the power was taken by first-time corporate buyers like 3M.
The deal is notable both because 3M is a global leader—it is one of the 30 companies whose stock makes up the Dow Jones Industrial Average—and because 3M is a first-time entrant into the off-site renewable energy market. But it is also important because 3M is a leader in corporate environmental responsibility and has been for over 40 years.
A Legacy of Sustainability
“It started back in the ’70s with pollution prevention,” says Heather Tansey, head of business development with the global sustainability group at 3M. A visionary environmental engineer named Joseph Ling led 3M to focus on its operations to minimize pollution while cutting costs. His Pollution Prevention Pays program, inaugurated in 1975, had a big effect on global industrial practice and continues today. “He was one of the first people to articulate the idea that what’s good for the environment is not something that’s necessarily negative for business,” says Tansey.
His approach was documented in a booklet developed for the United Nations, and this philosophy continues to guide 3M today. “What he brought to 3M,” explains Tansey, “was the idea that when we think about sustainability, we think about being financially sustainable as well as doing the right thing for the environment.”
Evolving Goals Led to Utility-Scale Renewables
3M established its energy-management program in 1973, established its first public environmental goals in 1990, and first took inventory of its greenhouse gas (GHG) emissions in 2002. “Since then, we’ve been able to reduce our absolute GHG emissions by 64 percent; it’s been a big focus for the company,” says Tansey.
With the rising threat of climate change and improvements in clean energy technology, 3M looked harder at energy. “As we were moving forward and setting our next set of goals, we knew we wanted to look outside of our own operations and energy management internally,” says Tansey. 3M’s first step was setting a goal of sourcing 25 percent of its global electricity use from renewable energy by 2025. The next step was figuring out how to reach that goal.
“Although we’ve been working on installing renewable energy infrastructure on our facilities, it was clear that putting solar panels on a few of our roofs wasn’t going to get us close to that, at least not very easily,” says Steven Schultz, 3M’s corporate energy manager.
Like other large corporations, 3M decided that the best way to procure renewable energy at scale was to contract for off-site renewables. “It seemed like a quicker, more effective way to proceed by partnering with somebody who was actually in the business of developing renewable energy assets,” says Schultz. “So a power purchase agreement seemed like a very good way to move forward.” 3M secured the services of Altenex (also a BRC sponsor) to advise it on procuring renewable energy, and their search led them to Invenergy’s Gunsight Wind Energy Center in Texas and 3M’s 120 MW PPA.
Laying the Groundwork
Like other companies, utility-scale renewable energy was new to 3M, and it approached the deal carefully. Schultz credits the deal’s success to, “getting all of our team engaged early on, before we even knew which project we were going to pursue, to bring them up to speed.” Tansey agrees; “Having our internal stakeholders from across the company involved from day one—even when we were talking about the goal—was really critical.”
A renewable energy PPA, although commonplace for utilities, is a relatively new type of transaction for corporate buyers. Building familiarity with corporate renewable PPAs is one of the reasons for the BRC’s existence. In this case, BRC sponsors Invenergy and Altenex had a good partner to work with in 3M. “They approached things with a really open mind and innovative spirit,” says Ted Romaine, director of sales and marketing at Invenergy. “I think they did a great job collectively running the traps to get the internal approvals and necessary buy-in in order to consummate the deal in a timely fashion.”
“We had to make sure that our executives and all the people between the executives and us understood what a PPA was, how it would impact our finances, and some of the nuances related to financial accounting in regard to PPA-type projects,” says Schultz. “By having a really serious appetite within the company for meeting our renewable energy goal, our executives were very open,” he adds.
A New Market for Utility-Scale Renewables
3M is an early entrant in a fast-growing market: corporate renewable purchasing. Utility-scale wind and solar have mostly been driven by government mandated renewable portfolio standards, but that’s changing. “Traditionally,” says Invenergy’s Romaine, “we’ve sold to utilities,” who were just interested in meeting the standards and securing the power for their customers.
With each passing year, more corporations are procuring more renewable power. Ian Kelly, a manager at RMI who works closely with the BRC, says, “First-time buyers have been critical to the growth in these transactions and are a sign that the market is broadening and maturing. 3M and other organizations increasingly are recognizing that utility-scale renewables can be key components of their renewable energy strategies.” Now that corporate buyers are predominating, as they did in wind purchasing for the first time last year, the market is changing. “The corporations are really coming at it from a different angle,” says Romaine. “Of course they need the deals to make financial sense but, whether it’s a specific sustainability goal, a greenhouse gas target, or a renewable energy target like 3M had, that’s what’s driving it for them.”
Forty-three percent of Fortune 500 companies have sustainability goals, even if not all of them have such a long history of setting (and meeting) them as 3M has. And that is driving growth in corporate procurement of off-site renewables, of which 3M’s 120 MW wind PPA is a recent example. “We see a lot of promise in this market. It’s really incredible if you look at where the market has come from over the last few years,” says Schultz. “We think everybody in the market is going to get more accustomed to this new class of buyer.”
Copyright 2016, Rocky Mountain Institute. This content first appeared on RMI Outlet and is published here with permission.