Private companies and public institutions bought 8.9GW of clean energy through new long-term Power Purchase Agreements (PPAs) during the first half of 2020, according to new figures published by BloombergNEF, but COVID-19 still hangs like the Sword of Damocles above the year, with a big second half required to meet 2019’s record levels.
Bloomberg New Energy Finance (BNEF) published its 2H 2020 Corporate Energy Market Outlook: The pandemic edition on Tuesday, diving in on global corporate PPAs signed through July. A total of 8.9GW of new PPAs were signed during the period, 300MW more than was signed during the first half of 2019.
However, BNEF hazards that “a big second half will be required in order for the market to hit record volumes by year-end” and match what was seen in 2019. According to BNEF’s figures from late-January, a total of 19.5GW worth of corporate PPAs were signed in 2019, up from 13.6GW in 2018 and more than triple the activity seen in 2017.
Importantly, over half of 2019’s corporate PPAs were signed in the second half of the year, as BNEF reported in the middle of 2019 that 8.6GW worth of corporate PPAs were signed during the first half of 2019.
The second half of any year is normally a stronger period for both renewable energy development and deployment as well as investment and corporate PPA signings, and 2020 will no doubt need to replicate this if it is to come anywhere close to achieving the record highs of 2019.
However, BNEF unsurprisingly points to the global COVID-19 pandemic as “the biggest adversary that could stall growth” in 2020. Further, “More than in previous years, deals will have to be globally spread for a new record to be established in 2020,” BNEF points out, as the United States, the world’s largest corporate PPA market, has seen activity drop sharply this year.
Specifically, of the 8.9GW worth of corporate PPAs signed so far this year, the United States accounted for only 4.3GW. Texas, normally a major contributor to the country’s corporate PPAs – signing 5.5GW worth in 2019 – saw only 940MW worth of deals signed through the first seven months of 2020.
BNEF points to the impact of the global COVID-19 pandemic as a key contributing factor in the dip in US corporate PPAs. For example, the pandemic has caused power demand in ERCOT – the Electric Reliability Council of Texas, the states’ grid operator – to drop by as much as 9% on some days, which has in turn depressed power prices and weakened returns on existing PPAs. This has, subsequently, hurt “the outlook for future deals.”
Where the United States has slumped, however, other regions have picked up the slack, with Latin America positioning itself for a record year thanks to companies in Argentina, Brazil, and Chile choosing to purchase clean energy through their country’s wholesale market. Brazil alone recorded a total of 860MW worth of corporate PPA deals “through bespoke contracts in its free market.”
BNEF highlights that Brazil’s “surge in activity was enough to offset the dismantling of Mexico’s clean energy market by the country’s current administration, in the name of bolstering grid reliability.”
Europe saw corporate PPAs reach 1.4GW during the first seven months of 2020 across nine different markets, while the Nordics only saw 400MW, unusual for a region which normally dominates the region’s clean energy PPAs.
“Australia is back on the radar,” BNEF said, with corporate clean energy PPA activity already up 50% over 2019 as a whole. Multinational companies such as Amazon and Aldi Foods have announced big clean energy PPAs in 2020, “attracted to the flexibility of Australia’s corporate procurement market, which mirrors the US in many ways.”
Meanwhile, market liberalisation in Taiwan has more then made up for what BNEF describes as “an underwhelming renewable portfolio standard (RPS) announcement in Mainland China.” State utility Taiwan Power was granted a clean power license back in April, which then paved the way for a 920MW offshore wind deal signed by Taiwan Semiconductor Manufacturing Company, part of the company’s 1.2GW worth of PPAs signed through July.
The future of strong corporate PPA activity remains high, as well, thanks to the tremendous increase in demand against the actual supply being signed. BNEF points to the shortfall in RE100 clean electricity demand, which is now projected to reach 224TWh in 2030 – up from its previous estimate of 210TWh.
A total of 21 new companies have joined the RE100 initiative so far this year, bringing its total number of signatories up to 242 and electricity demand up to 247TWh. In fact, according to BNEF, the RE100 “campaign is growing faster than developers can supply it, with 18TWh of incremental electricity demand added this year, far exceeding (when put in capacity terms) the 1.1GW of clean energy purchased by incumbent members over the same period.”
This paves the way for strong long-term health for the corporate procurement sector, as corporate ambition rises to meet the moment.
