Corporate Power Purchase Agreements and Renewable Energy Growth

Do corporate power purchase agreements (PPAs) influence renewable energy investment (and therefore green power generation)? Most people would state (blindly) that they do. But, there has never been an empirical study showing if they do or don’t and if so, how. Well, we have completed the first such study to provide some insights. The answer uncovered is nuanced because there is variation across PPAs and across wholesale electricity and renewable energy markets.

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We will soon be following this study up with a paper on the policy implications of these results, so stay tuned to the GHGMI newsletter for updates.

Abstract

Power purchase agreements (PPAs) are contracts that have become popular among private firms attempting to meet voluntarily adopted climate goals. Using data from the U.S. EIA and Energy Acuity, we construct a dataset on the electricity generation portfolios for U.S. counties over 1990-2021 and estimate two-way fixed effects regressions to explore the effects of spatially and temporally varying PPAs on the deployment of renewables. We find that, in contrast to the voluntary renewable energy certificate market, PPAs have influenced aggregate renewable generation capacity, although the effects are heterogeneous. PPAs signed by non-utility entities (e.g., corporations) generally have a smaller effect than those signed by utilities, but the effects vary by the type of renewable energy project (solar or wind) and spatially based on renewable resource potential, with non-utility PPAs appearing more flexibly used. For GHG accounting purposes, non-utility PPAs are therefore better treated as interventions outside of emissions inventories.

Recommended citation

Backstrom, Jesse D. and Gillenwater, Michael and Inman, Charlie and Brander, Mathew, Corporate Power Purchase Agreements and Renewable Energy Growth (September 26, 2023). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4591413 or https://dx.doi.org/10.2139/ssrn.4591413

This research study was originally published on SSRN.com and is shared here with their consent.