OPINION

Court ruling encourages corporate investment

By Stu Dalheim

Renewable energy adoption is on the rise around the country. Corporate America is no exception. A majority of America’s largest companies have a clean energy goal, and they’re making serious investments to meet those goals.

However, while companies are committed to becoming major players in the energy space, many state laws are outdated and reflect a time when companies and individuals had no choice — it was buy electricity from your utility or live in the dark. As a result, corporate investments are going to states where laws reflect the electric sector in the 21st century.

The Iowa Supreme Court helped bring the state’s laws up to speed with this new reality. Last week, the court ruled Eagle Point Solar could sell electricity to the city of Dubuque through a power purchase agreement. It may seem odd that the court would have to weigh in on the question of whether a company could enter into a contract with another entity and sell it something, but electricity is a unique case.

Many decades ago, state legislators around the country were concerned about the electric sector. Competition among many utilities could mean chaos with numerous companies stringing up wires down the streets, so utilities were allowed a monopoly over their service areas in exchange for oversight of their rates. These laws, however, did not envision a time when individuals and companies could take electricity production into their own hands.

As the cost of renewable energy plummets, more and more people want to do just that, and the Iowa Supreme Court wisely determined that utilities should not stand in the way.

While this ruling is a victory for the renewable energy industry and people who want solar on their roofs, it’s also a victory for companies like Wal-Mart, eBay and Kohl’s. What do these companies have in common? They are part of what has become the new norm in corporate America.

A report, “Power Forward 2.0,” released last month by Calvert Investments and our partners, showed that 60 percent of Fortune 100 companies have a clean energy goal. Their clean energy efforts are saving them over $1 billion and are realizing pollution reductions equivalent to shutting down 15 coal plants. Most of these companies, however, just want to buy renewable energy. They don’t want to be renewable energy companies themselves.

That is where the solar power purchase agreement comes in.

By entering into a power purchase agreement, a company can buy electricity generated by solar panels on their roof or a wind farm miles down the road without having to own the equipment themselves. That makes sense — if you’re a retailer you want a solar company, not your staff, taking the time to think about the panels on your roof.

It also makes sense for the company’s finances. The cost of electricity is volatile. In many places that cost is rising. If your company can lock in a fixed price for renewable energy for 15 or 20 years you’ve provided your business a hedge against those volatile and rising costs.

The ability to enter into power purchase agreements is so important that some companies are passing on states where they can’t use them. One of the findings of our report was that companies seek states with strong renewable energy and climate policies. Listening to some politicians you might imagine the opposite is true, but Iowa in particular knows that the naysayers are wrong.

Last year when Facebook chose Iowa for a new data center, one of the key reasons was the ability to buy wind energy in the state. They passed on also windy, but less wind-friendly, Nebraska.

Unknowingly, Iowa has likely missed out on other corporate investments where the company needed to use a power purchase agreement. Thanks to the Supreme Court, the state doesn’t have to worry that it’s missing opportunities.

Again, bravo to Iowa for making the right call. Economic opportunity awaits.

THE AUTHOR:

STU DALHEIM is a vice president at Calvert Investments, a member of the Ceres’ Investor Network on Climate Risk. Contact: Stu.Dalheim@Calvert.com.