Buyer-led aggregation can provide many benefits including (1) bigger impact, (2) better economics and prices, (3) lower risk, and (4) positive network effects and compelling communications.

1. Bigger Impact

Aggregated deals allow buyers to pool energy demand and enable significantly larger renewable energy facilities to be built than any individual buyer could support. Larger utility-scale renewables facilities can provide greater community benefits related to job creation, local revenues and tax base, and community health benefits. Larger collective efforts can also send a powerful signal to utilities, policymakers, and developers that local governments are serious about rapidly decarbonizing the electricity system. In addition, pooling energy demand in this way enables the participation of smaller buyers such as school districts, nonprofits, or small cities, which otherwise might not get attention from developers.

2. Better economics and prices

Aggregated deals can reduce prices for buyers by unlocking greater economies of scale, reducing transaction costs, and providing a lower-cost mechanism for governments to purchase energy or renewable energy certificates (RECs).

3. Lower risk

Aggregation can allow participants to reduce their financial and contractual risks. Large-scale renewable transactions provide predictable pricing over 10–20 years and can reduce buyers’ exposure to increases in energy prices due to market shifts, supply shocks, or added costs from a carbon tax. Aggregation can further reduce buyers’ risks by allowing the consortium to purchase energy from multiple projects spread across several locations and resource types, thereby making the group less exposed to the performance of a particular project. Having multiple buyers review and negotiate the same contract can also help ensure that the contracts are structured properly, and that each participant receives the best terms and conditions possible.

4. Positive network effects and compelling communications

Aggregated procurement groups create a shared experience among participants and can generate positive network effects, including increased mentorship, increased credibility, and support for inexperienced buyers. In several cases, members of aggregated deals have gone on to complete additional procurements together or with additional partners. Additionally, the size and novelty of aggregated deals can garner additional media attention, allowing members to highlight their own efforts and encourage their peers to pursue similar efforts.

Read more about the benefits of aggregation in “Banding Together: How Aggregation Helps Cities Buy Renewables at Scale.”