With businesses more eager than ever to make bold clean energy promises, the global market for corporate renewable energy power purchase agreements continues to surge. Last year, corporations contracted an unprecedented volume of renewable energy projects, up more than 40% from the previous year’s record, finds Bloomberg New Energy Finance (BNEF).
Some 19.5 GW of clean energy contracts were signed by more than 100 corporations in 23 different countries in 2019, BNEF finds in its 1H 2020 Corporate Energy Market Outlook. This was up from 13.6 GW in 2018, and more than triple the activity seen in 2017. The analysts estimate the demand for corporate PPAs amounted to between $20 billion and $30 billion in investment and was equivalent to more than 10% of all the renewable energy capacity added last year.
“Corporations have purchased over 50 GW of clean energy since 2008. That is bigger than the power generation fleets of markets like Vietnam and Poland,” said Jonas Rooze, lead sustainability analyst at BNEF. “These buyers are reshaping power markets and the business models of energy companies around the world.”
The Americas region totaled an unprecedented 15.7 GW last year, with the U.S. alone at 13.6 GW – more than all of the global activity in 2018. It was also a record year for corporate PPAs in Europe, Middle East and Africa (EMEA) and Latin America, where companies purchased 2.6 GW and 2 GW of clean energy, respectively. While 2019 saw a decrease in corporate PPA activity in Asia-Pacific (APAC), there was still a lot going on in the region.
In Australia, onsite solar projects delivering power to corporations nearly doubled to 1 GW and the number of retailers offering sleeved programs to deliver clean energy reliably to corporate buyers increased. However, there was a slowdown in the number of finalized agreements after a rush of corporate PPAs the previous year.
Almost 25 agreements were announced in 2018, but there was just five new PPAs in the first half of 2019 – mostly small retail PPAs, according to an earlier report from the Business Renewables Centre of Australia (BRC-A). However, activity has picked up again with five PPAs announced in the third quarter.
Overall, corporate renewable power purchase agreements have become a major force in Australia’s large-scale renewable energy market. A total of 58 corporate PPAs were negotiated for 2.3 GW of capacity since 2017 with over 60% of the investment made with new wind and solar farms, finds the BRC-A report released in November.
Tech and oil
Globally, technology companies have once again dominated clean energy procurement. Google signed contracts to purchase over 2.7 GW of clean energy globally, followed by Facebook (1.1 GW), Amazon (0.9 GW) and Microsoft (0.8 GW).
The contribution of oil and gas companies was also significant. Occidental Petroleum, Chevron and Energy Transfer Partners all signed solar contracts in 2019, following in the steps of ExxonMobil, who kicked off the trend by signing two PPAs totaling 575 MW at the end of 2018, BNEF finds.
“The clean energy portfolios of some of the largest corporate buyers rival those of the world’s biggest utilities,” Kyle Harrison, a sustainability analyst at BNEF and the lead author of the report, commented. “These companies are facing mounting pressure from investors to decarbonize – clean energy contracts serve as a way to diversify energy spend and reduce susceptibility to the tangible risks associated with climate change.”
Hundred gigawatts of new wind and solar on the cards
Corporate sustainability commitments also skyrocketed in 2019 and were a driving force behind the record-breaking year for PPAs. Nearly 400 companies around the world committed to setting a target in line with the Paris Agreement, more than doubling the total number of firms with these goals. Additionally, global commitments under the RE100 initiative surged with 63 new companies pledging to offset 100% of their electricity demand with clean energy.
In its annual report released in December, the Climate Group announced that its RE100 initiative experienced a banner year in 2019, growing by over a third, with 40% of that growth coming from Asia and the South Pacific. One in three RE100 members are now more than 75% renewables powered, and more than 30 have reached their 100% goals, roughly 14% of member companies, according to the report.
Last year, RE100 comprised 221 members, collectively consuming 233 TWh of electricity in 2018. BNEF estimates these companies will need to purchase an additional 210 TWh of clean electricity in 2030 to meet their targets. Should this shortfall be met with offsite PPAs, it would catalyze an estimated 105 GW of new solar and wind build globally and an additional $98 billion of investment, BNEF calculates.
“Sustainability commitments will ensure that clean energy procurement from corporations continues to thrive,” Harrison said. “The ball is in the court of utilities, policymakers and investors. They will need to meet these buyers in the middle, especially in nascent markets for corporate procurement.”
In Australia, Commonwealth Bank of Australia was the first one to join RE100 in November 2018 and was followed by a number of businesses dominated by the banking sector. The list of Australian RE100 signatories currently includes all big Australian banks: ANZ, Bank Australia, Commonwealth Bank of Australia, Macquarie Group, NAB, Westpack, as well as QBE Insurance Group, property developer Mirvac and tech company Atlassian.
