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Starbucks enters into first-ever ‘virtual’ storage PPA

December 17, 2020

by Ethan Howland
APPA News
December 17, 2020

Starbucks Corp. is entering into solar and solar-plus-storage virtual power purchase agreements to support its corporate sustainability goals.

One of the contracts is tied to a 1,200-megawatt solar project that is combined with energy storage that can deliver 2,165 megawatt-hours before needing to be recharged, according to LevelTen Energy, which runs a marketplace for renewable energy.

Under the deal with Terra-Gen, Starbucks is contracting for 24 MW of solar and 5.5 MW of battery storage from the Edwards and Sanborn project in Kern County, California. The project is expected to be fully online before 2023, according to Terra-Gen, a renewable energy developer owned by Equity Capital Partners, a private equity firm.

Other offtakers from the Edwards and Sanborn project include San Jose Clean Energy, which is buying 162 MW from Terra-Gen.

Starbucks is the first corporation to execute a virtual PPA for utility-scale storage, according to LevelTen, which helped arrange the transaction.

A virtual PPA is a financial deal under which the buyer pays a set price but doesn’t directly buy electricity from the project. Power from the project is sold into the wholesale market. If the wholesale price is higher than the price in the virtual PPA, the offtaker receives the difference. If the price is lower, the offtaker pays the facility owner to make up the difference.

“This new contract not only provides corporate buyers the economic benefits of storage, but also delivers developers a guaranteed revenue stream, enabling a more practical method for storage project financing,” LevelTen said Dec. 9 when Starbucks announced its deals.

Until now, contracting with utility-scale storage project developers was impractical for most corporations, according to LevelTen.

Stored renewable energy can be sold during the highest-priced hours of the day, often displacing coal- or natural gas-fired generation, the Seattle-based company said.

Also when organizations add storage to their wind and solar power purchase agreements, it can add value and smooth pricing variability by extending the hours of the day the energy is sold, LevelTen said.

“By providing a more practical way to contract with storage developers, this type of financial agreement opens the door to billions of dollars of investment in large-scale energy storage projects, in much the same way virtual power purchase agreements … ushered in a wave of wind and solar project development in the U.S. and beyond,” LevelTen said.

Starbucks also entered into a virtual PPA with an undisclosed solar farm in Virginia. The contract will offset half of its company run roasting and beverage production sites’ electricity use in the United States by 2022.

The coffee company said it is investing about $97 million in up to 23 new community solar projects in New York, which will supply solar energy to more than 24,000 homes, small businesses, nonprofits, churches, universities and Starbucks stores.

Starbucks aims to cut in half by 2030 the greenhouse gas emissions from its direct operations and supply chains.

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