Corporations Brush Aside Energy Crisis, Buy Record Clean Power

Companies committed to buy 36.7 gigawatts of clean power through long-term contracts with strong growth in the Americas and Asia-Pacific: BloombergNEF

New York and London, February 9, 2023 – Against the backdrop of a global energy crisis, supply chain bottlenecks and high interest rates, private companies and public institutions signed contracts to secure a record 36.7 gigawatts (GW) of renewable power to power their operations in 2022, up 18% from 2021.

BloombergNEF’s (BNEF) 1H 2023 Corporate Energy Market Outlook highlights 167 different organizations, including Amazon, Ford and McDonald’s, that announced power purchase agreements (PPA’s) in 36 markets worldwide. In total, corporations have signed PPA’s for 148GW of clean power since 2008 – more than the total power-generating capacity of France.

“Corporate clean energy buying 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 at scale in most major countries, the economics make sense, and amid turbulent energy markets, PPA’s have become useful risk-mitigation tools for CFO’s.”

Activity accelerated in two of three major regions. Contracts signed (as measured in gigawatts) rose 18% in the Americas to a record 24.1GW, with upticks in both the U.S. and Latin America. In the U.S., companies embraced the virtual PPA model under which a clean power project sells directly into the wholesale market to capture the spot price, rather than literally delivering its electrons directly to the customer. Such contracts are comparatively easy for buyers to sign and allow them to hedge against power price spikes. Mining companies seeking clean energy to power operations in remote corners of Chile and Brazil drove PPA activity in Latin America.
The Asia Pacific region saw corporate PPA activity more than double to 4.6GW, led by India and Australia. The PPA model is now widely available across the region’s major markets of Japan, China and South Korea – something that wasn’t the case even a year ago. Activity across APAC is expected to continue growing significantly as more companies set 100% renewable energy goals.

Activity slipped 7% in the Europe, Middle East and Africa (EMEA) region to 8.1GW in 2022, mostly due to the region’s energy crisis. Some developers demanded richer PPA’s to reflect higher overall energy prices across Europe. Others skipped PPA’s altogether to sell directly into wholesale markets. However, PPA activity in EMEA could rebound in 2023 due to lower natural gas prices and the European Commission’s proposed power market reforms.

Among specific firms signing clean energy deals, Amazon led with 10.9GW of PPA’s signed in 2022, followed by Meta (2.6GW), Google (1.6GW) and Microsoft (1.3GW), illustrating big tech’s continued dominance in the market. In all, Amazon has announced 24.8GW of PPA’s to date, giving it the seventh largest clean energy portfolio globally, including utilities. Technology companies specifically will need to continue buying clean energy to satisfy their rapidly growing electricity demand.

Organizations that signed contracts to receive clean power in 2022 partnered with at least 135 different power project developers. Virginia-based AES Corporation topped the list of sellers in 2022 with 2.8GW of new PPA’s disclosed as signed in the year. Engie (1.6GW) and Acciona (1.1GW) followed. All offered customized contracts intended to match customers’ energy demand profiles.

The list of organizations pledging to power their operations with clean power continues to grow. In 2022, 56 new companies joined the RE100, promising to achieve 100% clean energy consumption by a future date. In all, the 397 RE100 members have purchased an estimated 249TWh of clean electricity to date, but will need an additional 290TWh in 2030 to meet their goals, according to BNEF projections. For companies like Google and Microsoft, which have pledged to meet their demand for power at all hours of the day with carbon-free energy, demand will be even higher.

“We’re seeing an evolution in the corporate energy buyer, with companies moving to hourly carbon-free energy goals and others signing clean energy contracts for reliability purposes”, said Harrison. “Developers that can provide firming and balancing services have access to a wellspring of corporate clean energy demand and are poised to be the biggest winners in this market.”

BNEF updates its data on corporate procurement each month and publishes a market outlook on corporate energy strategy bi-annually.

Microsoft has disputed the BloombergNEF count, saying that it signed 6.7GW of PPA’s in 2022. However, BNEF’s count for Microsoft above adheres to its longstanding methodology of only including in its figures publicly announced PPA transactions. Microsoft provided BNEF with the larger PPA figure it signed for 2022 but did not identify the transactions with which that total was associated publicly.

Oktavia Catsaros
Bloomberg LP

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