Companies Defy Pandemic To Sign Up For Most Ever Clean Energy Deals
Corporate PPAs hit new record despite pandemic as new markets and sectors embrace renewable power contracts
Businesses bought a record amount of clean energy in 2020, despite the massive disruption caused by the COVID-19 pandemic, global recession and political upheavals that created uncertainty about energy policies, including the US Presidential election and Brexit.
New figures from BloombergNEF show that more than 130 corporations in sectors ranging from big tech to oil and gas purchased 23.7GW of renewable power, an increase of 18% from 20.1GW in 2019 and 13.6GW in 2018. The market was led by Amazon AMZN , which announced 35 separate clean energy power purchase agreements (PPAs) in 2020, for a combined total capacity of 5.1GW.
PPAs allow companies to buy power direct from renewable energy project developers under long-term contracts that allow buyers to lock in price certainty and reduce their emissions, as well as helping the developer to finance new projects. A growing number of companies want to source renewable energy to help them meet sustainability goals and net zero targets.
“Corporations faced a wave of adversity in 2020 – internal corporate functions were disrupted on the outset of the pandemic, and many companies saw revenues plummet as global economies buckled,” said Kyle Harrison, BNEF senior associate and the lead author of the report. “Question marks before – and after – the U.S. election further complicated long-term decision-making for companies. To not only maintain, but grow, the clean energy procurement market under these conditions is a testament to how high sustainability is on many corporations’ agendas.”
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Once again, the US was the largest market but it was less dominant than in previous years, and capacity additions actually fell year on year for the first time since 2016. Companies announced 11.9GW of corporate PPAs in the US in 2020, down from 14.1GW in 2019. The first half, coinciding with the start of the pandemic, was particularly subdued, with companies announcing just 4.3GW of corporate PPAs in the US in that period, BNEF reports.
Latin America also saw a slowdown, with PPA volumes dropping from 2GW in 2019 to 1.5GW in 2020 as the region was hit hard by the Covid-19 pandemic and the economic downturn. This was in spite of a record 1,047MW of corporate PPAs in Brazil in 2020. Brazil’s strength was offset by a huge drop off in Mexico as the current administration continues to undermine the country’s clean energy sector.
But the weakness of the Americas was offset by surging growth elsewhere. The amount of corporate PPA volumes in Europe, the Middle East and Africa (EMEA) almost tripled, from 2.6GW in 2019 to a record 7.2GW in 2020. This growth was driven by huge demand in Spain, where companies announced contracts to buy a massive 4.2GW of clean energy, up from just 300MW the previous year.
“Solar and wind projects in Spain yield some of the cheapest and most competitive prices in Europe, thanks to strong natural resources and a large pool of experienced developers,” said BNEF. “Companies like Total and Anheuser Busch are orchestrating ‘cross-border virtual PPAs’ in Spain, buying clean energy in the country to offset their load elsewhere in Europe.”
The Asia Pacific region also saw record clean energy volumes in the Asia Pacific (APAC) region, with corporations announcing contracts for 2.9GW of solar and wind. Taiwan emerged as a major corporate clean energy market in 2020, supported by a new policy that requires companies with an annual load above 5MW to buy clean power. The island is home to a number of large manufacturers, many of which are feeling pressure from their customers to decarbonize. As a result, Taiwanese companies signed agreements for 1.25GW of capacity.
This year is set to see South Korea emerge as the next big corporate procurement market in Asia after policymakers revised the country’s Electric Utility Act, creating a PPA mechanism and a green tariff program with Korea Electric Power Corporation. South Korean companies are facing similar pressures from customers that Taiwanese groups are.
“More than ever before, corporations have access to affordable clean energy at a global scale. Companies no longer have an excuse for falling behind on setting and working towards a clean energy target,” said Jonas Rooze, lead sustainability analyst at BNEF.
Amazon’s 5.1GW of deals in 2020 mean it has procured more than 7.5GW of clean energy to date, making it the world’s largest corporate buyer of clean energy, ahead of Google GOOG (6.6GW) and Facebook (5.9GW). French oil major Total (3GW), Taiwanese chipmaker TSMC (1.2GW) and US telecoms group Verizon (1GW) were the next largest corporate buyers of clean energy in 2020 (see Figure 2).
The corporate PPA market is likely to remain strong as a steady flow of new companies make clean energy commitments in years to come. Some 65 new companies joined the RE100 initiative in 2020, pledging to offset 100% of their electricity consumption with clean energy. BNEF forecasts that the 285 RE100 members will collectively need to buy an additional 269TWh of clean electricity in 2030 to meet their RE100 goals. Should this shortfall be met exclusively with offsite PPAs, it would catalyze an estimated 93GW of new, incremental solar and wind build.