By Andrew Winston
BIG companies have been buying a lot of clean energy lately—3.5 gigawatts of renewable capacity in the US last year alone.
Consumer-facing brands, like Apple, Google, IKEA, Microsoft and Wal-Mart, have been covering their roofs and filling giant fields with solar panels and wind turbines. These companies sign power-purchasing agreements (PPAs), to buy kilowatts, not the panels and turbines. They put up almost no capital and usually lower their energy costs.
Industrial firms have had a harder time. They already pay the lowest rates for power, and signing long-term power agreements for 15 to 20 years can be a hurdle, especially on the accounting side. Is the PPA an asset, a liability or something else?
But Dow Chemical and Owens Corning have both recently arranged to buy power from multiple 100-plus megawatt wind farms. Frank O’Brien-Bernini, Owens Corning’s vice president and chief sustainability officer, outlined his team’s strategy:
• Find out how others do it. Owens Corning held about 40 meetings with companies that had bought renewable energy.
• Get early buy-in. O’Brien-Bernini’s team had framing conversations with the CEO and chief financial officer about the financial and operational challenges.
• Use cross-functional teams. Include people from accounting, energy, legal, procurement and sustainability.
• Find the right locations for the business. Owens Corning started with smaller photovoltaic systems at an insulation plant and an office parking lot in Ohio. The results were impressive. Then the company made bigger moves to reduce their greenhouse-gas and energy footprints by buying power from two new 125-megawatt wind farms in Texas and Oklahoma.
The Texas site alone produces more energy than what Owens Corning uses across its extensive Texas operations. Thus, the company can claim carbon-neutral status for its Texas-made products—a big marketing win.
• Seek accounting advice. PPAs can be tricky because of their longer terms. Owens Corning hired PricewaterhouseCoopers to advise the company on how to treat PPAs on financial statements.
Andrew Winston is the author, most recently, of The Big Pivot.