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August 3, 2021

The Net Zero Consortium for Buyers VPPA Opportunity Index: 2021 Q2

Every quarter since 2019, SR Inc’s Net Zero Consortium for Buyers (NZCB) has been pleased to offer the NZCB VPPA Opportunity Index that enables a comparison of potential wind and solar VPPA performance across US hubs using common analytics.  The Index reflects both prior (backcast) performance and forward pricing.  The Opportunity Index has been based on proprietary SR Inc analytics and key data sources including those provided by SR Inc partners LevelTen Energy and REsurety.

Key findings from our Q2 analysis include:

1. Wind VPPA prices across the country are up 11% on average from the previous 12 months, while solar VPPA prices are up 6%.
2. Due to increased VPPA prices, average cashflow per 10MW across hubs was down $59K for wind in Q2 versus Q1 and down $13K for solar.
3. Average realized wind prices in Q2 2021 are up 59% across hubs from Q2 2020 (during Covid) and solar prices are up 69%.
4. Due to the increasing cost of unbundled RECs to $4 on average during Q2, wind VPPAs would have been less expensive in 33% of the hubs versus buying unbundled RECs, and solar VPPAs would have been less expensive in 71% of the hubs.
5. The average hub annual cashflow for a 10MW wind VPPA would have been $94K more expensive than buying the equivalent number of unbundled RECs, and the average hub annual cashflow for a 10MW solar VPPA would have been $115K less expensive than buying the equivalent unbundled RECs.
6. ERCOT (Texas) continues to present the most prevalent opportunities for near breakeven or cash positive opportunities for wind and solar deals. The average ERCOT annual cashflow for a 10MW wind VPPA was $(58)K and the average ERCOT annual cashflow for a 10MW solar VPPA was $286K.
7. Solar also presented near breakeven or cash positive opportunities in multiple MISO hubs.

The NZCB VPPA Opportunity Index is a relatively simplistic rendering of complex markets, but NZCB participants find it helpful in beginning to gain an understanding of VPPA market dynamics and financial implications for implementing their renewable energy strategies through aggregated VPPAs.  In pursuing any specific VPPA opportunities, NZCB participants typically require very detailed and custom analytics performed with senior expert assistance before transacting.

Methodology:

• To calculate average annual cashflows, SR Inc multiplies 1) the difference of technology-shaped realized market prices (2015-2020) and forecasted technology-shaped electricity futures market prices (2022-2035) and top quartile VPPA prices in each hub (from LevelTen Energy’s PPA Price Index) 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 26K 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. However, SR Inc uses 10MW because it is typically the minimum individual corporate offtake required within 100+ MW aggregated procurements that REPS manages for NZCB participants.

Data Sources

• LevelTen Energy PPA Price Index top quartile VPPA pricing data for Q2 2021 (all proposed projects of 8+ years)
• REsurety REmap actual average, technology-shaped realized market prices for 2015-2020 (excluding the anomaly of February 2021, where wind earned $654/MWh and solar earned $1,260/MWh in ERCOT) and technology-shaped future market price forecasts for 2022-2035 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.

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David Osborn is an accomplished corporate sustainability advisor serving dozens of SR Inc’s Fortune 500 and mid-sized client companies as they drive significant operational efficiencies and better align with talent, customers, investors, and regulators through corporate sustainability strategy. From his career in business consulting and executive leadership, David brings to SR Inc over 20 years of experience in building professional services and technology-driven businesses serving a broad range of client industries. David is a graduate of Dartmouth College and Northwestern’s Kellogg Graduate School of Management.  After receiving his MBA, David cut his teeth at Bain & Company in their Boston office and then progressed up to Managing Partner at Booz, Allen & Hamilton (BAH) where he was ultimately elected by his Partners to head their Australasian business.  David next returned to the US to head BAH’s Retail Financial Services practice in North America and then transitioned to serve as Managing Partner / EVP at two innovative business service companies at BAH. David then joined SR Inc as Chief Operating Officer in 2010.

As Director of Research & Consulting at SR Inc, Jeff Meltzer provides outsourced program assistance to clients on a one-to-one basis, helping CSR, operations, and sustainability executives set goals, drive progress, and report the results of their sustainability programs.  Jeff holds a Master of Environmental Management from Duke University’s Nicholas School of the Environment and a B.A. in Environmental Policy from Colby College.  Before SR Inc, he had relevant work experience with the Procurement and Property Services team at Citizens Bank as an EDF Climate Corps Fellow, with the EHS and Sustainability team at L’Oréal, and with the EPA Green Power Partnership as an Environmental Analyst at Eastern Research Group.  He also advised Biogen in helping develop a Scope 3 supplier engagement strategy to achieve its ambitious Science-Based Target.  Jeff is also an active participant in sustainability groups, is an accredited LEED Green Associate, is trained in the GRI Standards and GHG Protocol, was the Co-President of the Duke’s Net Impact club, and most recently was a member of the leadership team of Net Impact Boston.