Growing Corporate Presence in Power Markets Will Boost Clean Energy

(Bloomberg) --

Companies have been buying renewable energy to power their operations for decades. At first, this was done at very small and highly distributed scale, such as attaching solar power to remote monitoring systems for pipelines. In the early 2000s, companies began to build their own rooftop solar assets to power buildings, or contract with a third party to meet the same demand onsite.

Starting around 2010, companies began to do something different: they signed power purchase agreements with large, offsite renewable energy assets connected to the wholesale power grid. These assets were identical to anything built by a utility or independent power producer and they put power into the grid in the same way — companies purchased the output as it flowed into the grid. That market began, as all do, in a small way, with just 100 megawatts or so in 2010. It has since grown.

In 2021, corporate procurement of clean energy topped 30 gigawatts. That's about 10% of the amount of renewable power generation capacity added last year; it's also about the same as total global installations of clean power in 2008.

It is fair to describe the corporate renewable procurement phenomenon as primarily an Americas endeavor. Seventeen gigawatts of capacity announced last year came from the U.S., accounting for 55% of the total, with another 3.3 gigawatts from other countries in North and South America. Europe signed contracts for 12 gigawatts, while Asia signed only for two gigawatts, significantly less than in 2020.

Such procurement also is very much a U.S. technology company activity. Amazon.com Inc., Microsoft Corp., and Meta Platforms Inc. were the three largest signers of contracts last year, with most of that capacity coming from solar. Amazon signed contracts for more than six gigawatts last year, increasing the total capacity it has under contract to almost 14 gigawatts. At that scale, Amazon counts as one of the world's biggest players in renewable power. Its portfolio is slightly larger than that of Electricite de France SA, which has the 13th-largest portfolio of renewable power generation assets globally.

Google, which was previously the leader in total corporate renewable energy procurement, fell significantly in this year's list of biggest buyers. It procured just over 600MW in 2021 through bilateral power purchase agreements, but for a good reason. The company has implemented a different energy strategy to meet its demand for zero-emissions power. Google is now aiming to run only on carbon-free energy at every hour of every day by 2030. That is a much more technically challenging proposition than simply buying as much clean power as your global demand – it means matching supply and demand everywhere, at all times, from many different sources.

The main driver behind all of this activity is fairly straightforward. While companies can enjoy cost savings from fixed-price renewable power, their corporate renewable energy targets are a more powerful incentive. Last year, 67 companies became new signatories to RE100, a global initiative of companies committed to 100% renewable energy, pledging to offset all their electricity demand. There are now 355 RE100 member companies, in 25 countries. Collectively, they consume 363 terawatt-hours of power a year, slightly less total demand than Illinois, North Carolina, and Virginia combined and more than the United Kingdom.

With more companies pledging to source renewable power, and with increasing demand for power from energy-intensive industries such as technology and petrochemicals, the corporate presence in global power markets will only increase. BloombergNEF estimates an additional 246 terawatt-hours by 2030 — about equal to California's current power consumption — from today's existing RE100 members. That equates to nearly 100 gigawatts of new wind and solar power contracts.

There's plenty of room to grow.

Nathaniel Bullard is BloombergNEF's Chief Content Officer