New York, January 28, 2020 – Corporationsbought a record amount of clean energy through power purchase agreements, orPPAs, in 2019, up more than 40% from the previous year’s record. The majorityof this purchasing occurred in the United States, but also underpinning thestrong uptrend is a surge in corporate sustainability commitments around theworld.
BloombergNEF (BNEF) finds in its 1H 2020Corporate Energy Market Outlook, published today, that some 19.5GW of cleanenergy contracts were signed by more than 100 corporations in 23 differentcountries in 2019. This was up from 13.6GW in 2018, and more than triple theactivity seen in 2017.
Put in context, the 2019 total wasequivalent to more than 10% of all the renewable energy capacity added globallylast year – and the projects involved are likely to cost between $20 billionand $30 billion to develop and build.
Jonas Rooze, lead sustainability analyst atBNEF, said: “Corporations have purchased over 50GW of clean energy since 2008.That is bigger than the power generation fleets of markets like Vietnam andPoland. These buyers are reshaping power markets and the business models ofenergy companies around the world.”
Technology companies once again dominatedclean energy procurement. Google signed contracts to purchase over 2.7GW ofclean energy globally in 2019, more than any other corporation. In September2019, the tech giant announced contracts to purchase 1.9GW of clean energy insix countries – the largest single announcement ever by a corporation. Thecompany used a unique reverse auction process to sign these contracts, withdevelopers taking part in a live, public bidding process. Facebook (1.1GW),Amazon (0.9GW) and Microsoft (0.8GW) were the next largest buyers globally in2019.
Though not as active as the technologysector, a growing number of oil and gas companies are signing clean energydeals. Occidental Petroleum, Chevron and Energy Transfer Partners all signedsolar contracts in 2019, following in the steps of ExxonMobil, who kicked offthe trend by signing two PPAs totalling 575MW at the end of 2018.
Kyle Harrison, a sustainability analyst atBNEF and the lead author of the report, commented: “The clean energy portfoliosof some of the largest corporate buyers rival those of the world’s biggestutilities. These companies are facing mounting pressure from investors todecarbonize – clean energy contracts serve as a way to diversify energy spendand reduce susceptibility to the tangible risks associated with climatechange.”
Figure 1 (above) shows that PPAs in theAmericas region totalled an unprecedented 15.7GW last year. The U.S. made upthe bulk of this, at 13.6GW – more than all of global activity in 2018. Morethan 80% of these contracts signed in the U.S. in 2019, or 11.2GW, were underthe virtual PPA model – synthetic contracts that can only be signed inderegulated markets. The remaining 2.4GW of clean energy purchased bycorporations in the U.S. in 2019 was transacted under green tariffs, which areoffered by utilities in regulated markets.
It was also a record year for corporatePPAs in the Europe, Middle East and Africa (EMEA) and Latin America, wherecompanies purchased 2.6GW and 2GW of clean energy, respectively. Notable inEMEA was the pivot to new European markets outside of the Nordics. Thoughnearly half of the activity still came from Sweden, Norway, Finland andDenmark, companies are now beginning also to sign long-term clean energycontracts in markets like Spain, Poland, France and Italy for the first time.Corporations signed two offshore wind contracts in Germany, indicative offuture trends from buyers in the region. Those who cannot sign PPAs can turn tothe region’s extensive certificates market.
In Latin America, which saw threefoldgrowth in its corporate PPA market, Brazil and Chile have emerged as topmarkets. Brazilian customers with annual demand over 3MW, known as wholesaleconsumers, have negotiated contracts directly with clean energy developers. InChile, large mining companies like BHP Group and Antofagasta, facing similarinvestor pressure to oil and gas companies, are negotiating special cleanenergy supply agreements with retailers. Colombia is the next Latin Americanmarket to watch, following the successful roll-out of its first clean energyauctions.
While 2019 was a down year for corporatePPA activity in Asia Pacific (APAC), there is still plenty of buzz in theregion. In Australia, onsite solar projects delivering power to corporationsnearly doubled to 1GW, and a growing number of retailers offer sleeved programsto deliver clean energy reliably to corporate buyers, similar to green tariffsin the U.S. China’s renewable portfolio standards (RPS) are officially inforce, mandating that large power consumers meet a certain amount of theirdemand with clean energy. Japan’s non-fossil certificate auctions grew 11-fold,boosted by the country’s high level of participation in sustainabilityinitiatives – unrivalled among Asian markets.
Corporate sustainability commitments alsoskyrocketed in 2019, and were a driving force behind the record-breaking yearfor PPAs in 2019. Nearly 400 companies around the world committed to setting ascience-based target in 2019, more than doubling the total number of firms withthese goals. These firms have pledged to reduce their emissions in line withthe Paris Agreement, and clean energy will be an essential part of thisstrategy. Additionally, 63 companies set an ‘RE100’ target, pledging to offset100% of their electricity demand with clean energy. The RE100 totalled 221members through 2019, collectively consuming 233TWh of electricity in 2018,based on their latest filings – slightly less than South Africa’s entire powergeneration fleet.
BNEF estimates these 221 RE100 companieswill need to purchase an additional 210TWh of clean electricity in 2030 to meettheir targets. Should this shortfall be met with offsite PPAs, it wouldcatalyze an estimated 105GW of new solar and wind build globally. Funding thesenew additions would be expected to require an additional $98 billion ofinvestment (including allowance for capital cost reductions during the 2020s).
Harrison said: ”Sustainability commitmentswill ensure that clean energy procurement from corporations continues tothrive. The ball is in the court of utilities, policymakers and investors. Theywill need to meet these buyers in the middle, especially in nascent markets forcorporate procurement.”
BNEF updates its data on corporateprocurement each month and publishes a market outlook on corporate energystrategy bi-annually.
(Source: BloombergNEF )