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As Biden left office, the U.S. renewable energy industry looked strong. On the one hand, the Net Zero Consortium for Buyers (NZCB) Virtual Power Purchase Agreement (VPPA) Opportunity Index modeled financial outcomes became slightly less favorable across the U.S. market for wind and solar. But on the other hand, the NZCB RFP- and reverse auction-based procurements continued to show modeled financial outcomes far superior to market averages. The NZCB closed several transactions showing cost-positive modeled backcast and expected forecast financials, with more conservative, less likely modeled financial outcomes on par or better than far less impactful alternatives.

Unleashing American Energy: Monitoring Impact

Just a few weeks into Trump’s nascent second-term administration, he has already cast many recent wins in doubt. Trump's sweeping executive orders include blocking new wind farm construction, halting electric vehicle tax credits, and stopping the dispersal of Congressionally approved funds allocated by the Bipartisan Infrastructure Law and Inflation Reduction Act to support solar panel and wind turbine manufacturing.

With active U.S. renewable energy procurements in ERCOT, SPP, MISO, and North Carolina, SR Inc will monitor these developments in real time, including the status of numerous legal challenges the industry has already filed. We remain committed to helping Member-Clients meet their enterprises’ growing demand for renewable energy. Regardless of how the executive orders hold in court, we are confident that buyers will continue to leverage the high-level of competition in NZCB procurements to negotiate buyer-favorable pricing and terms with finalist developers and continue to find creative ways to address market and political uncertainty during the contracting process as the VPPA market remains strong in 2025.

Q4 NZCB Transaction Activity

In Q4 2024, SR Inc guided and represented over a dozen Member-Clients in aggregated VPPAs through the NZCB.

During that time, the NZCB:

• Announced individual utility-scale solar transactions by Member-Client Synopsys and the City of Cambridge, MA
• Closed another aggregated solar procurement, to be announced publicly soon
• Well surpassed our goal of causing a gigawatt of new renewable energy capacity before 2025

With our initial 1 GW goal achieved, the NZCB now focuses on our new bold target: 10 GW of VPPA advanced market commitments (AMCs) for new renewable energy through 2030.

Why Transact with the NZCB?

Many SR Inc Member-Clients with geographically dispersed electric loads are keenly interested in the impact and scalability of VPPAs. GHG accounting rules make this appeal particularly strong in the U.S. / Canada and Europe’s AIB countries, where companies can apply the energy attribute certificates (EACs) to any sites within the respective boundaries.

Despite their appeal, conventional VPPAs are typically out of reach for all but the largest, most geographically concentrated energy users. When most SR Inc Member-Clients aggregate their load across the U.S. / Canada or European AIB countries, they still lack sufficient scale to command the transaction structure, ESG impact terms, and pricing needed to make VPPAs favorable to buyers.

VPPA 2.0: Democratizing Utility-Scale Clean Energy Procurement

Fortunately, SR Inc’s NZCB offers a different approach. With VPPA 2.0, Member-Clients can create economies of scale, experience, and intellect by aggregating their demand. This auditable corporate procurement process, distinguished by its Reverse Auctions, has become core to many SR Inc Member-Client decarbonization strategies. Together, SR Inc Member-Clients have made the NZCB the leading platform for corporate buyer-aggregated utility-scale renewable energy procurement, expanding access to clean energy’s environmental and financial benefits beyond its former high-load, high-concentration niche.

VPPA Pricing Patterns

Overall conditions in the U.S. VPPA market eased for corporate buyers in 2024 compared to much of 2022 and 2023, but the new Trump administration brings much uncertainty to the industry in 2025. SR Inc’s aggregated procurements have returned to securing mature projects with full hub settlement, zero price floors, firm pricing, and shorter terms despite continuing developer risks.

U.S. VPPA pricing remained high in Q4 2024 for financial, technical, and other unpredictable reasons:

What direction are prices going? SR Inc sees early signs that easing solar supply chain pressures may facilitate VPPA price stability or reductions. However, the new administration means uncertainty abounds. We will closely monitor tariff expansions, Inflation Reduction Act adjustments, and any other unpredictable clean energy policy impacts the new administration may provide. Throughout active and recently closed transactions, the NZCB’s creative solutions more than matched uncertain conditions. We expect the 2025 VPPA market to remain strong.

VPPA Factors to Monitor

PC EACs for Market Credibility

The growing concern about the reputational risks of unbundled EACs has driven increased pricing for purchaser caused EACs for several years now. (For unfamiliar readers, PC EACs are generated by a project caused by its procurement via a long-term transaction that enabled the project to get financed.) Corporates are demonstrating a willingness to pay for more credible EACs that have unequivocally caused new renewable energy capacity to be built.

Following 2022 and 2023’s steep VPPA price increases, 2024’s increases have been much more modest. The modeled cost of buyer-favorable, VPPA-sourced EACs (i.e., what SR Inc Member-Clients call purchaser-caused EACs) rose $3.75 per EAC on average across wind and solar in all U.S. hubs over the last year as the volume of closed VPPA transactions remains high (closed deals averaged 14GW/year in 2021 through Q3 2024). While the average modeled U.S. VPPA cost $16.36 in Q4 2023, it cost $20.12 ($17.00 for solar and $23.24 for wind) in Q4 2024. These increases reflect the market value of U.S. PC EACs. However, SR Inc procurements achieve significantly better results than that average, thanks to the NZCB’s professionally managed U.S. and European competitions, culminating—as mentioned above—in Reverse Auctions shaped to benefit corporate buyers.

AI Energy Surge

Another factor SR Inc’s NZCB monitors closely is historical and projected earned wind and solar prices across hubs. In Q4, our 22-year earned price indicator increased 10% for wind and increased 7% for solar across active VPPA hubs compared to the prior quarter. After decreasing the prior two quarters, this indicator’s increase likely stems largely from increasing gas prices and futures, which influence electricity’s realized prices and forecasts.

Record-high electricity demand growth influences this spike. Recent articles and studies continue to highlight the surge in power usage driven by factors including AI data center proliferation, continued cloud migration, cryptocurrency mining, manufacturing onshoring, electrification including the migration to EVs, and the adoption of emerging technologies like green hydrogen and battery energy storage. This unprecedented demand for renewables and fossil fuels will likely put upward pressure on prices, although recent news about China’s highly efficient DeepSeek AI model has thrown in some doubt.

Recent examples include:

• The Rhodium Group and the New York Times report that U.S. demand for electricity jumped 3% in 2024 (with natural gas usage reaching record highs) after staying flat for the prior two decades.
• GridStrategies predicts U.S. electricity demand to jump 16% by 2029 (up by a factor of 5 from predictions 2 years ago).
• Berkely Lab predicts a tripling of data center energy use in the next three years, representing 12% of the U.S.’s total energy consumption by 2028.
• McKinsey predicts global energy consumption from data centers to grow at 20% per year through 2030.

Electricity price projections expect this demand increase to counter the downward price pressure from low natural gas prices and the addition of more renewable energy and storage (with zero marginal costs) to the grid.

To better quantify U.S. VPPA market dynamics, the NZCB has published the NZCB VPPA Opportunity Index quarterly since 2019 to help advance SR Inc’s mission to accelerate the development and adoption of best practices in more sustainable business. The NZCB VPPA Opportunity Index enables a comparison of potential wind and solar VPPA performance across U.S. hubs using common analytics. It reflects both prior actual (backcast) performance and forward carefully modeled pricing and is based on proprietary SR Inc analytics and key data sources including those provided by SR Inc data providers LevelTen Energy and REsurety. We call reader attention to the fact that the Index is based upon VPPA offers, not executed transactions, made over the prior quarter.

Key findings from SR Inc’s NZCB Q4 analysis include:

1. Top quartile offered wind VPPA prices across the country were up 8% on average from the previous 12 months, while offered solar VPPA prices were up 6%.
2. Realized electricity prices have continued to correct down to more historically typical levels. Average trailing 12-month (TTM) realized wind electricity prices in Q4 2024 were down 21% (to $20.23) across active hubs from the TTM in Q4 2023 and realized solar electricity prices were down 33% (to $27.41) from Q4 2023.
3. The combination of higher VPPA prices and lower realized prices caused expected cashflows in the TTM for a 10MW wind VPPA to drop from $(984)K in Q4 2023 to $(1.31)M in Q4 2024 (drop of $330K) and expected cashflows for a 10MW solar VPPA to drop from $(414)K in Q4 2023 to $(860)K in Q4 2024 (a drop of $446K).
4. Our longer-term view Opportunity Index shows that average modeled cashflow through Q4 2039 per 10MW VPPA across active hubs dropped $154K in Q4 (to negative $983K) versus Q3 2024 for wind and increased $53K (to negative $367K) for solar.
5. In Q4, wind VPPAs modeled to be less expensive in 17% of all active hubs versus buying far less impactful unbundled EACs (based on the typical average cost today of $5.00 for a 10-year strip of unbundled EACs), and solar VPPAs modeled to be less expensive in 31% of all hubs.
6. The average modeled hub annual cashflow for a 10MW wind VPPA would have been $803K more expensive than buying the equivalent number of less impactful unbundled EAC strip, and the average modeled hub annual cashflow for a 10MW solar VPPA would have been $247K more
7. Price modeling shows that ERCOT solar presented modeled opportunities for better than breakeven cashflow in Q4. The average modeled ERCOT annual cashflow for a 10MW solar VPPA was $38K.
8. For wind, price modeling continued to show that ERCOT South presented the best modeled opportunity in Q4, which was $(148)K per 10MW VPPA.
9. To underscore the importance of NZCB’s procurement process, 2024 Q4 NZCB procurements for PC EACs from to-be-built solar were below the Q4 P25 VPPA prices for the same hubs despite also providing more than a dozen specially sought and secured buyer-favorable risk management terms required by conservative, environmentally motivated corporate procurement teams.

The NZCB VPPA Opportunity Index intentionally simplifies complex markets. Nevertheless, many NZCB participants find the rendering helps them begin to understand the market dynamics and financial implications of VPPA-based renewable energy strategies.

When NZCB participants wish to pursue specific VPPA opportunities, SR Inc offers stakeholder briefings and detailed, customized analytics before transacting. This bespoke financial, legal, and market expertise helps VPPA offtakers to develop a timely procurement strategy; implement the procurement strategy in an auditable way; and structure, contract, and negotiate the transaction in a buyer-favorable manner. SR Inc supports NZCB buyers throughout the corporate procurement process, helping them to navigate rapidly changing markets.

*Methodology

• To calculate average annual cashflows, SR Inc multiplies 1) the difference of technology-shaped realized market prices (2018-2024) & forecasted technology-shaped electricity futures market prices (2025-2039) versus top quartile VPPA prices in each hub by 2) the typical total annual production for 10MW offtakes for wind and solar, respectively.
• SR Inc uses 36K MWh production per year for 10MW of wind and 24K MWh per year for 10MW of solar to provide “apples to apples” comparisons for both technologies across hubs.
• The top quartile VPPA price assumes a scaled offtake of at least 50MW, but SR Inc uses 10MW because it is typically the minimum individual corporate offtake required within 100+ MW aggregated procurements for NZCB participants.

 Data Sources

• The NZCB Opportunity Index is developed from proprietary analytics and multiple data providers, which include:
  • LevelTen Energy PPA Price Index North America top quartile VPPA pricing data for Q4 2024 (all proposed projects of 8+ years)
  • REsurety CleanSight Discover actual average, technology-shaped realized market prices for Q1 2018-Q4 2024 and technology-shaped future market price forecasts for Q1 2025-Q4 2039 (as of January 18, 2025) based on multiple electricity futures markets.

If you have any additional questions, or would like to learn more about the NZCB, contact info@sustainround.com.