Government policymakers in the U.S. have dropped the ball on the climate crisis, but corporations have been stepping in to fill the gap. In the latest development, the research organization BloombergNEF (BNEF) reports that U.S. companies were the driving force behind a dramatic year-over-year increase in long-term power purchase agreements (PPAs) for clean energy globally.
If there are any remaining doubts about the ability of the private sector to push the global needle on a clean energy transition, the new BNEF report should lay that to rest.
One key factor is the emerging popularity of power purchase agreements, especially in the area of “virtual” power purchase agreements that take place outside of regulated, utility-based markets.
Until now, many companies have relied on purchasing carbon offsets and renewable energy credits to develop a more sustainable profile. In contrast, power purchase agreements have a more immediate and direct impact on the shovels-in-the-ground pace of clean energy development.
The BNEF report, titled “1H 2020 Corporate Energy Market Outlook,” brings the growing role of virtual power purchase agreements into sharp focus.
According to the report, more than 80 percent of power purchase agreements in the U.S. were signed under the virtual model.
Globally, the BNEF report totals 19.5 gigawatts in long-term, clean energy power purchase agreements for 2019, spread among more than 100 corporations in 23 countries.
Alone, this relatively small group of companies accounted for fully 10 percent of all renewable energy capacity added globally. The total of 19.5 gigawatts also represents a sharp 44 percent increase over 2018, when BNEF recorded 13.6 gigawatts in corporate PPAs.
The rapid upswing in interest is especially dramatic compared to 2017, when renewable energy contracts were in the single digits at approximately 6 gigawatts.
Corporate clean energy portfolios have already reached utility-scale proportions in some instances, and the 2019 activity trend puts them on track to reach nation-scale levels as well.
Since 2008, corporate clean energy purchases have totaled 50 gigawatts, a figure that surpasses the power generation fleets of Vietnam, Poland and similar markets.
The report also affirms that U.S. corporations can take meaningful action on the climate crisis, despite a lack of support from the White House.
According to BNEF, U.S. companies accounted for a full 13.6 gigawatts of clean energy purchases in 2019, surpassing the entire global total of the previous year.
In fact, the report underscores the key role that individual CEOs can play in the clean energy revolution by steering their companies to take aggressive action and seek opportunities for innovation.
In that regard, the report indicates that the 2019 growth rate may be just a taste of how rapidly the global clean energy transition could occur in the coming years.
Of the 2019 total, Google alone was responsible for a full 2.7 gigawatts in clean energy contracts, making it the single largest purchaser in the world. Google obtained more than two-thirds of its 2019 purchases last September in just one event, an innovative “reverse auction” process conducted live and in public.
If other companies adopt a similar model, the scale of clean power contracts in 2020 could skyrocket again.
Another recent innovation is the renewable energy aggregation model. Introduced last year for the first time by a group comprised of Bloomberg, Cox Enterprises, Gap Inc., Salesforce and Workday, the aggregation model enabled these smaller-scale energy purchasers to pool their consumption for a virtual power purchase agreement.
Growing diversity among major clean power buyers could also emerge as a driving force.
The tech sector has long dominated clean power purchasing and that still held true in 2019, with Facebook, Amazon and Microsoft all following Google among the top four. However, solar power purchase contracts also attracted Occidental Petroleum, Chevron and Energy Transfer Partners in 2019.
Somewhat ironically, BNEF credits ExxonMobil with running ahead of the curve for clean energy purchases by fossil fuel stakeholders. In 2018, the company signed two power purchase agreements for a total of 575 megawatts.
Aside from direct bottom-line considerations, the BNEF report also credits shareholder pressure with nudging corporations to ramp up their sustainability commitments.
Shareholder pressure is a significant factor because it is based on advocacy for transparency. In that regard, shareholder pressure helps drive the interest in adopting science-based emissions targets that deploy data-driven information rather than relying on feel-good projects.
Meeting science-based targets necessarily requires action on clean energy, and the number of companies under that umbrella more than doubled in 2019 to reach a total of almost 400, BNEF found.
Shareholder pressure could also be one of the forces behind a sharp increase in the level of interest in the RE100 organization. In 2019, RE100 attracted 63 more companies to a pledge of 100 percent renewable energy for electricity, bringing the total number of companies to 221.
As a further demonstration of the impact of power purchase agreements, BNEF also calculates that the RE100 companies could be instrumental in launching another 105 gigawatts of new solar and wind development globally by 2030, if they meet their RE100 obligations through power purchase agreements.
The usual caveat applies: There is no substitute for aggressive government action in the context of a global environmental crisis. Nevertheless, as more companies take action, the decarbonization trend will keep moving forward, and the pressure on policymakers is bound to increase.
Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes.
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