The global corporate sourcing market has never been as active and diverse as it is today. The renewable energy procurement movement was started by trailblazing organisations that were committed to reducing their environmental footprint, and at the same time, saw an opportunity in this to reduce their electricity bill. In the meantime, green power sourcing has become a crucial part of the energy and sustainability strategy of many leading corporates – and as costs for renewables continue to decrease, the appetite for cost-competitive solar and wind power is now growing quickly. In 2018, a breathtaking 13.4 GW of corporate PPA deals were signed worldwide (see Trends Fig. 6), more than double the volume in 2017. So, what has changed in just one year to witness this incredible growth?
US continues to lead in corporate green power sourcing
The United States, the world’s leading renewable energy PPA market, has seen a very strong rise in corporate sourcing of green power and the main reason is a combination of different factors. The first element was a surge in aggregation models that allowed a wave of smaller players to sign their first agreements. Secondly, a series of big deals from a few corporates were signed with utilities, benefiting from emerging Green Tariffs, which are optional programs in regulated US electricity markets offered by utilities and approved by state public utility commissions that allow larger commercial and industrial customers to buy bundled renewable electricity volumes from specific projects through special utility tariff rates. Growth in Brazil or Mexico also supported rapid development of corporate renewable PPAs in the Americas. On a smaller scale, Europe also observed many deals for record PPA volumes that more than doubled year-on-year to 2.3 GW in 2018. This was, in particular, thanks to the right framework conditions in Nordic countries, though mostly related to wind, and growing interest of corporates in signing deals in completely new PPA markets, such as Poland. When it comes to solar figures, more than 10 GW of rooftop solar has been installed in the past five years.
Large-scale off-site PPAs were the driver in the Asia-Pacific (APAC) region growing to 2 GW from 1.3 GW the year before. Australia and India are world leading solar markets with enormous potential that are starting to take off in corporate renewable power sourcing. Two other solar giants in that region, China and Japan, are also seeing the first corporate PPA developments, which are expected to speed up rapidly soon, as both countries currently transition away from a traditional feed-in tariff support scheme.
So far, corporates have chosen primarily wind over solar for renewable PPAs. First, it has been easy to access large, renewable power volumes from big wind farms; smaller, commercial solar has rather been directly installed on-site. With the advent of large-scale solar in Europe and corporate renewable power sourcing emerging in traditional utility-scale solar markets, such as China and India, low-cost solar is going to play a much bigger role in corporate sourcing.
Though at a very early stage, corporate sourcing of renewable energy shows the increasingly strategic role that wind and solar play in the business operation of corporations around the world. This will make it impossible for governments to neglect this vast potential much longer and force them, sooner rather than later, to implement policies that support corporate sourcing in the electricity sector and promote additional investments in renewable energy. In fact, corporate demand is already higher than the availability of appropriate projects today. According to Bloomberg NEF, today’s RE100 companies, a group of leading global corporates that has committed to go 100% renewable, require an additional 190 TWh from renewable energy production by 2030 (see Trends Fig. 7).
Many barriers to overcome
Several organisations around the world are working to strengthen the business case and communicate the competitive advantages of corporate renewable energy sourcing (i.e. the RE-Source Platform in Europe, REBA in the US or the REI in Japan). A key event for interested parties in this field is the RE-Source Conference, which will take place in Amsterdam from the 2nd to the 3rd of October 2019. Nevertheless, regulatory constraints and legal restrictions are still in place in many markets, hindering the development of corporate renewable energy sourcing. Some of these obstacles are:
- Restrictions on third party ownership of on-site installations
- Major administrative and financial burdens
- Interconnection fees for cross-border projects
- Restrictions to multi-buyer or multi-seller schemes
- Compatibility of support schemes with corporate PPAs
These barriers, that differ from country to country, can hold back large IT companies, pharmaceuticals, food and beverage giants, and energy intensive corporates from sourcing renewable energy, but more importantly, make things particularly challenging for small and medium-sized businesses (SMEs), which also offer huge potential to be unlocked. SMEs need more flexibility and straightforward administrative and legal procedures to engage in corporate sourcing and measures that will open the door to all types of industrial and commercial consumers striving to go 100% renewables.
For further trends in solar, download the Global Market Outlook for Solar Power 2019-2023
RE-Source 2019, Europe’s leading corporate energy procurement event, will take place from 2-3 October in Amsterdam. More information