In a scenario of global energy crisis, supply chain bottlenecks and high interest rates, private businesses e public institutions signed contracts to secure 36,7 GW of renewable energy power to power its operations in 2022, a increase of 18% compared to 2021.
The report 1H 2023 Corporate Energy Market Outlook, BNEF (BloombergNEF), highlighted 167 companies — among them, Amazon, Ford and McDonald's — which announced PPAs (energy purchase and sale contracts) in 36 world markets. In total, they signed PPAs for 148 GW since 2008 — more than France's total power generation capacity.
“The purchase of clean energy by companies has been an unwavering constant, even as other aspects of ESG investing have come under scrutiny,” said Kyle Harrison, head of sustainability research at BloombergNEF.
“Companies can access clean energy on a large scale in most large countries. The economics make sense, and amid turmoil in energy markets, PPAs have become useful risk mitigation tools for CFOs.”
PPAs increased 18% in the Americas
According to the research, activities were accelerated in two of the three main regions. Contracts signed (measured in GW) in the Americas totaled a record 24,1 GW, an increase of 18% compared to the previous year, with growth in the United States and Latin America.
In the US, companies have adopted the virtual PPA model under which a clean energy project is sold directly on the wholesale market to get the spot price, rather than literally delivering its electrons straight to the customer.
“These contracts are relatively easy for buyers to sign and provide coverage against electricity price increases. Mining companies seeking clean energy to power their operations in remote areas of Chile and Brazil have boosted PPA activity in Latin America,” the study reported.
“The worsening of the region’s economy could make this an isolated case. Led by mining companies such as Codelco (978 MW), Teck Resources (580 MW) and Usiminas (381 MW), a record 3,3 GW of PPAs were signed by corporations – mainly in Chile (1,7 GW) and Brazil ( 1,5 GW)”, they give an example.
“These companies were enabled by policies such as opening Brazil's free market to all high voltage customers, allowing them to sign bilateral PPAs,” BNEF added.
Furthermore, they emphasize that commercial and industrial solar power in Brazil also reached a new record of 2,5 GW in 2022, made possible by an extension of the country's net metering policy.
“However, weak currencies and high inflation across the region are expected to continue through 2023 and could fuel corporate hesitancy, causing corporate procurement of clean energy across all mechanisms to decline,” they explained.
In the consultancy's view, the economic recession across the region in 2022 could almost certainly harm business demand. Growth in Chile specifically can be attributed to a healthy new addition of solar and wind projects in recent years.
Asia-Pacific, Europe, Middle East and Africa
In the Asia-Pacific region, corporate PPA activity more than doubled to 4,6 GW, led by India and Australia. Now, the PPA model is widely available in the region's major markets of Japan, China and South Korea — which was not the case until a year ago.
BNEF expects activity across the APAC region to continue to grow significantly as more and more companies set 100% renewable energy targets.
In 2022, in the Europe, Middle East and Africa (EMEA) region, activity fell to 8,1 GW, down 7% from the previous year, mainly due to the region's energy crisis.
Some developers have called for richer PPAs to reflect rising overall energy prices in Europe. Others have dispensed with PPAs altogether and sold directly into wholesale markets.
However, they stated that PPA activity in the EMEA region could recover in 2023 due to the drop in natural gas prices and the reforms in the electricity market proposed by the European Commission.
Amazon leads ranking among companies
Among companies that signed clean energy deals, Amazon ranked first with 10,9 GW of PPAs signed in 2022, followed by Meta (2,6 GW), Google (1,6 GW) and Microsoft (1,3 GW), illustrating the continued dominance of large technology companies in the market.
In total, Amazon has announced 24,8 GW of power purchase agreements to date, giving it the seventh-largest clean electricity portfolio in the world, including utilities.
“Technology companies in particular will need to continue to purchase renewable energy to meet their rapidly growing electricity demand,” they pointed out.
According to BloombergNEF, companies that signed contracts to receive clean energy in 2022 have partnered with at least 135 different electric power project developers.
AES Corporation topped the list of sellers in 2022 with 2,8 GW of new PPAs signed this year, followed by Engie (1,6 GW) and Acciona (1,1 GW). All of these companies offered customized contracts to meet customers' energy capacity demand profiles.
The list of companies committed to powering their operations with clean energy continues to grow. In 2022, for example, 56 new companies joined the global RE100 initiative, promising to achieve 100% clean energy consumption at a future date.
In short, the 397 RE100 members have purchased an estimated total of 249 TWh of clean energy to date, but will need an additional 290 TWh by 2030 to meet their goals, according to BNEF projections.
For companies like Google and Microsoft, which have committed to meeting their electricity needs with carbon-free energy, demand will be even greater.
“We are seeing an evolution in corporate energy purchases, with companies moving toward hourly carbon-free energy targets and others signing clean energy contracts for reliability reasons,” Harrison said.
“Developers who can provide uninterrupted firming and balancing services have access to a wealth of corporate clean energy demand and are poised to become the biggest winners in this market,” he concluded.
