Seeking to slash emissions from its manufacturing operations, Honda has entered into long-term virtual power purchase agreements (VPPAs) for wind and solar power that will cover more than 60% of the electricity the company uses in North America.
The VPPAs will enable Honda to fully offset the remaining carbon-intensive, grid-supplied electricity being used in its Ohio, Indiana and Alabama automobile manufacturing operations.
Starting in fall 2020, Honda will purchase 530,000 MWh/year from 120 MW of wind power generated by the Boiling Springs Wind Farm in Oklahoma, a 150 MW development of E.ON. Then, in fall 2021, Honda will secure an additional 482,000 MWh/year from 200 MW of solar power generated from a Texas solar facility. Additional details of the Texas solar facility will be disclosed in 2020 when it is nearer to completion.
Honda’s combined agreements for the output of 320 MW of renewable generation capacity will result in the purchase of 1.012 million MWh of electricity per year. The company will continue to purchase electricity from the local utility for each manufacturing facility but will receive and retire renewable energy certificates equal to the power produced through the VPPAs.
A VPPA is a way for Honda to purchase renewable energy in locations where it is unable to purchase it from the local electric utility. Honda agrees to purchase electricity from a renewable energy supplier, but the clean energy does not go directly to Honda’s facilities; instead, it is sold into the electricity grid, where the clean power is generated. However, Honda’s “virtual purchase” of renewable energy adds more clean energy into the grid.
In the process of structuring the Boiling Springs Wind Farm VPPA, Honda says it implemented a contract structure with the potential to mitigate financial risks in the VPPA market. This “collar” structure sets upper and lower bounds on Honda’s exposure to energy market price fluctuations in any given quarter, while resulting in strong and stable revenues for the renewable power operators.
“These combined VPPAs will help Honda meet its CO2 reduction goals by adding clean, renewable electricity and by decarbonizing the electricity grid,” says Ryan Harty, manager of connected and environmental business development for American Honda. “We hope the addition of a ‘collar’ to the Boiling Springs project will encourage other companies to consider VPPAs as a method to secure renewable power and reduce climate-altering carbon emissions.”
The wind and solar VPPAs are part of Honda’s ongoing efforts to not only purchase renewable power but also generate renewable power on-site at its North American operations. To date, Honda has installed 7.3 MW of wind and solar power at its facilities across the region.