Kaiser Permanente’s recent announcement that it would purchase enough renewable energy to meet half of its electricity consumption in California made big news, from the Bay Area (such as here and here) to the cleantech and sustainable business communities to national outlets (witness here and here).
The health care provider’s deal with project developer NextEra Energy Resources for 110 megawatts of solar and 43 megawatts of wind power capacity is unique in its origins and instructive for other companies seeking to meet their sustainability goals. It also is an excellent example of the progress promoted by the Business Renewables Center, an RMI-convened and member-led platform that accelerates corporate procurement of off-site renewable energy by bringing together corporate buyers, project developers, and service providers (including founding members Kaiser Permanente and NextEra Energy Resources).
Why would a major health care organization care about clean energy? Kaiser Permanente believes climate change is a health issue. Emissions from fossil fuel-powered generators—both directly (air pollution) and indirectly (e.g., global warming that impacts mosquito and disease spread, ozone levels, and heat stress)—are closely tied to human health. And so Kaiser Permanente is leading by example, aggressively pursuing renewable energy to slash its own carbon profile and encouraging others to follow suit.
Kaiser Permanente took a significant step in 2012, when it adopted a sustainable energy policy with the target of reducing its greenhouse gas emissions 30 percent below 2008 levels by 2020. Its initial efforts focused on increasing energy efficiency, onsite generation, and other means of procuring green power, but it soon recognized that these strategies would not be sufficient to meet its goal. “As an organization that is constantly adding members and building hospitals and medical offices, achieving our 30-percent greenhouse gas reduction goal was not possible through energy conservation and distributed generation alone,” explains Chief Energy Officer Ramé Hemstreet. “Reduced energy intensity was being offset by new facilities and equipment, and even Kaiser Permanente has only so many roofs and parking lots that can accommodate solar.”
How did Kaiser Permanente realize its goal to procure off-site renewable energy? It had wisely laid the groundwork by establishing its motivation (the 2012 policy and emissions reduction target) and building internal familiarity through the experience of doing power purchase agreements for on-site generation. Even so, this was a significant transaction that required strong and savvy leadership, substantial expertise, and the right balance of perseverance and patience. Kaiser Permanente’s deal team engaged the right external advisers, identified a list of potential project developers with which to partner, issued the RFQ to that list, ultimately selected NextEra Energy Resources as the best fit, and worked with NextEra to reach a deal that made financial sense for both parties. At the same time, the deal team realized it needed to champion the opportunity with internal stakeholders and adeptly navigated the appropriate internal processes to validate the transaction.
The resulting off-site deal will have a large impact. Kaiser Permanente consumes about 1.6 terawatt-hours of electricity every year across its 38 hospitals, 600 medical offices, and other facilities, mostly in California but also in seven other states and the District of Columbia. The off-site wind and solar projects alone will produce enough electricity to meet about one third of that consumption overall, or more than 40 percent of its consumption in California (additional onsite renewable generation will bring the total to 50 percent in state). In total, Kaiser Permanente’s renewable generation in California will avoid 215,000 metric tons of greenhouse gas emissions, the equivalent of removing more than 45,000 cars from California’s roads.
Those looking to duplicate Kaiser Permanente’s success should begin by focusing on three things:
These lessons are just the beginning. Many companies in Kaiser Permanente’s position have needed to build their internal capability to complete these deals from the ground up. Fortunately, Kaiser Permanente, NextEra Energy Resources, and other BRC members offer unprecedented transparency into the inner workings of deals like this one, so that collectively we can streamline processes, improve success and time to completion rates, and remove or lower barriers. Thanks to the BRC and its members, everyone benefits from shared learning, rather than having to go it alone and start from scratch each time.
Source: RMI. Reproduced with permission.
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