Axpo Backs RPD Energy: Largest Swiss Renewable Power Group Partners With Pioneering U.S. Green Energy Firm

Some readers may remember my 2019 Medium article about RPD Energy’s innovative models for bringing renewable electricity to big U.S. companies and their chosen affinity groups, such as employees, customers and vendors.

This month, RPD’s pioneering approach to marketing green energy got a big vote of confidence from Axpo, Switzerland’s largest renewable electricity provider, with group revenues of over $5 billion (CHF 4,846 million in FY 2018/2019).

As described in this announcement, the U.S. affiliate of Axpo has acquired a minority stake in RPD Energy. Axpo also will make its wholesale energy trading services available to enhance RPD’s ability to meet the growing demand for green power.

Given the sharp business downturn that has been triggered by current efforts to combat the coronavirus, Axpo’s new strategic partnership with RPD Energy is welcome news. To me, it suggests:

One of Europe’s major energy groups has concluded that corporate America’s desire for lower carbon energy will not be cast aside in the age of Covid19.

There are several reasons for thinking that Axpo has it right. But before going into the details, let me take a moment to revisit RPD Energy’s unique approach to marketing renewables.

Also an important disclosure: Under my direction, the American Clean Skies Foundation provided the original seed-funding for RPD Energy and the Foundation continues to hold a minority stake in the company. I also serve as an RPD Director. This post, however, solely reflects my personal views and should not be attributed to RPD or Axpo.

What Does RPD Energy Do ?

As described in my 2019 post, over the last few years, RPD Energy has made it much easier and more affordable for corporate electricity buyers to go green by pioneering the sale of physical renewable energy “by- the-slice”.

RPD’s business is based on directly sourcing fractional amounts of electricity as it is generated (plus Renewable Energy Certificates (RECs)) from local utility-scale wind and hydro facilities.

This approach lets companies buy just as much energy as they need for a term they choose (e.g. often 2 to 5 years). Most companies simply don’t want, and typically, cannot afford, to contract for the full output of a large new wind farm until it is paid off.

RPD Energy has also made it equally easy (and economical) for companies to offer the same green energy to their extended business families (employees, vendors and customers) by creating a new kinds of green energy affinity programs. These programs leverage the buying power and brand of the corporate sponsor to source discounted “slices” of energy (and RECs) from the same renewable generator to serve affinity customers that also wish to go green.

RPD-backed affinity programs for green energy have been trialed by the software giant, Intuit, as well as the leading U.S. outdoor retailer, REI- Co-Op.

In addition, Iron Mountain, LG Electronics and Intuit have used RPD to craft right-sized renewable energy contracts for key data centers, head-offices and warehouse facilities from California to Texas to New Jersey.

But Will Renewable Power Sell in a Pandemic ?

The short answer is, most definitely — in fact, perhaps more than ever. This is why I am optimistic.

First, as we are all learning daily, as with access to food, water and medical services, providing electricity is an absolutely essential business. Indeed, as we grapple with the coronavirus on all fronts, electricity may be the essential service of the time.

Electricity is crucial for maintaining other critical services — healthcare, public water systems, fuel distribution, cell phone networks, etc, It is equally important for maintaining any sense of normalcy under current “stay at home” orders. Should our screens go dark or the Internet power down, woe be unto all of us.

Which brings me to a second point: although the overall demand for electricity usage has declined, the fall-off this year is expected to be modest — about 5% overall according to the Energy Department — compared to harder hit economic sectors, such as higher education, air travel and hospitality.

In part, this decline reflects a shift in demand from industrial and commercial customers (which have been largely shuttered) to home-bound residential users which are powering up millions and millions of cook tops, dryers, laptops, phones and other home appliances at unprecedented rates .

Yet, significantly, as demand has weakened, the mix of energy delivered to the grid has become less carbon intensive. When less electricity is required, the highest priced (now, typically coal-fired) generators are pushed out of the market. That’s because electric grids typically call first on generators that have the lowest marginal cost — such as renewable sources, whose marginal cost may be zero. (In fact, recent government estimates indicate electricity generated from renewable sources, including hydro, will exceed that from coal in 2020 — a historic first !). As result, air pollution from power plants has fallen nationwide.

[A brief aside about this year’s dramatic reduction in harmful pollution: Recent estimates from the International Energy Agency suggest that the annual worldwide emission of heat trapping gases in 2020 may be as much as 8% below 2019 levels — bringing emissions back to roughly 2010 levels.

But, as the Times reported: “ Despite the record drop in emissions, scientists cautioned that the world faces an enormous task in getting global warming under control. The United Nations has said that global emissions would have to fall nearly 8 percent every single year between now and 2030 if countries hoped to keep global warming well below 2 degrees Celsius (3.6 degrees Fahrenheit), which world leaders have deemed necessary for avoiding catastrophic social, economic and environmental damage from climate change.”]

Third, in today’s post-Covid economy, consider one other key demand trend:

Our new “alone together” world is powered by the brand name e-commerce, cloud services and IT companies (e.g. Facebook, Amazon, Google, Microsoft, AT&T, Apple, and Zoom (backed by data-center giant, Equinix) that have been leading corporate America’s switch to green energy.

You can browse this corporate procurement chart from REBA.Org for an overview. (It is also reproduced below.)

Given that the mass availability of Covid 19 vaccines is probably a year or more away, America’s tech and e-commerce sector is only likely to increase its role in our economy. The larger this sector becomes — and the more its participants keep pace with the sustainability practices of Google et al — the larger the demand for renewables may be.

Fourth, utilities and other electricity providers have long practiced social distancing. Most retail supply contracts — commercial and residential — are negotiated on-line or over the phone. Likewise, wholesale energy has long been traded in bespoke online and grid-specific markets that few retail consumers could even name.

The foregoing is as true for green energy as it is for fossil-fuel based generation. That means, so long as regulation permits, competitive firms like RPD Energy will be able to grow their customer base much as before, augmented by video-chats and virtual hang outs to help move things along and close deals. It may not be optimal but it will get the job done.

One big last thought: corporate execs at those sustainability-savvy companies most likely to switch to renewable energy (or augment existing purchases) probably have a science bias. They’re the kind of people who tend to think that whether it’s the coronavirus or climate change, we’re likely to face a very high toll unless people heed the science and act wisely.

That’s the type of mind set that will want to power out of today’s crisis in a low carbon way, so we don’t hasten the next one.

For others, it may simply be a matter of risk-management. Failure properly to assess and promptly to act on known scientific risks — whether health or climate related — can be catastrophic. (Check out this ex-Goldman Sachs banker for more in this vein.) So, while we practice social distancing, let’s buy green.

In short, my take is that, even if the economy recovers from the pandemic much more slowly than we would like, corporate America’s appetite for green energy will remain strong, and innovative suppliers like RPD Energy will be there to help them meet the challenge.

So What’s Next for RPD + AXPO ?

Here are a couple of additional thoughts on why the RPD-Axpo tie up may work especially well in the current market environment.

First, as noted at the outset, RPD has built its business on the back of “buy what you need” green contracts — deals that are right-sized for every customer’s load. There is no need to buy the full output of a new wind or solar facility.

This approach should stand out as liquidity becomes top-of-mind for many companies. When business is uncertain, why add to the risk by funding a whole new off-site wind or solar project when your company can meet its sustainability objectives by sourcing the same zero carbon energy (via RPD) from generators that others are financing.

Second, Axpo’s energy trading experience is likely to help RPD exploit recent declines in electricity prices (due to soft fuel prices as well as falling demand).

For example, when electricity prices trend down, companies with existing contracts for “brown” (fossil-fuel backed) electricity may be able to change out multiyear agreements for new contracts that deliver green power over a similar (or longer) term and still save money.

This is often referred to as a “blend and extend” approach. It’s a bit like refinancing a home mortgage, but with a green lender. Likewise, when you refinance, the best options will probably be offered by companies who know the market and have access to a well-capitalized partner (think RPD+ Axpo).

Finally, it’s important to note that Axpo U.S. is part of a large multi-national group with years of experience in serving corporate energy buyers in Switzerland and the European Union. That experience is likely to bolster Axpo’s efforts to grow green energy products in the U.S. and should also afford its partners a range of business introductions that others lack. Moreover, like big tech, EU companies have often led the way when it comes to buying renewable energy both in their home markets and abroad.

Axpo U.S. should also be able to tap the experience of its European sister companies in shaping RPD’s renewable energy products.

For instance, in Germany and France, Axpo’s Volkswind affiliate has been active in marketing wind and solar facilities for many years. In Spain, Axpo Iberia SA, recently signed a ten-year renewable power contract with the CLH Group, which operates numerous facilities and pipelines for oil storage and transport. And, in the U.K., Axpo’s wholesale energy trading business has begun to backstop innovative new retail suppliers such as Valda Energy and So Energy across England and Wales.

Conclusion

In winding up this post, I’d like to return to the issue of risk because, like many other observers of our current public health crisis, I believe it provides a cross-cutting insight.

As Christiana Figueres, the UN leader who presided over the Paris climate accords, told the Financial Times recently:

“The most consequential question looming over us right now is not whether we can address the Covid-19 crisis and climate change at the same time, but rather whether we can afford not to do so.”

She continues: “We have learnt many lessons from the pandemic, but the top one is that high probability/high impact risks must be acted upon in a timely fashion — and delay is costly.”

In other words, carpe diem. Greenhouse gas emissions must be rapidly reduced or we shall pay a very heavy price indeed.

I am convinced that most large electricity users in the U.S. now understand this full well. That is why I think Axpo read it right in partnering with RPD Energy, and will have every success in helping to deliver the zero carbon electricity contracts that American companies will demand in the years ahead.