While fossil fuels tanked as the pandemic took hold, renewables have made record contributions to grids. Mark Hillsdon and Terry Slavin look at the role of corporate power purchasing in helping economies build back better
As Covid-19 forced countries around the world into lockdown, grounding airlines and closing factories, global energy consumption plummeted. Demand dropped by 3.8% in the first quarter, according to the International Energy Agency (IEA), which predicted that the figure would be 6% by the end of the year – equal to the entire energy needs of India, the world’s third-largest consumer.
The oil price slid so precipitously that at one stage in April producers were paying traders $40 a barrel to take it off their hands. Global demand for coal also dropped by 8%, with the UK recently running coal-free for 67 days, the longest period since the industrial revolution.
Fossil fuels’ loss was renewables’ gain, however, with green energy making record contributions to electricity generation in Belgium, Germany and the United States, where it overtook coal for the first time. Although Covid-19 is expected to slow the renewable market’s growth for the first time in 20 years, the world is still set to add 167GW of capacity this year, more than the total power capacity of North America and Europe combined, the IEA reported in a market update in May.
Governments have the opportunity to invest in renewables a key part of stimulus packages designed to reinvigorate their economies
However, the IEA also warned that even before Covid-19 renewables were facing challenges of financing, policy uncertainty and grid integration in several markets, which it said could undermine their ability to meet ambitious net-zero energy and climate goals.
“Covid-19 is now intensifying those concerns. However, governments have the opportunity to reverse this trend by making investment in renewables a key part of stimulus packages designed to reinvigorate their economies,” the IEA said.
At a virtual press conference, Fatih Birol, the IEA’s chief economist, underlined the importance of regulation in sustaining the market for renewables this year. He said that growth in the US – one of the few bright spots – is driven by renewable portfolio standards in about 30 states, which mandate electricity supply companies to produce a specified fraction of their electricity from renewable energy sources.
In 2018, 37% of increased solar capacity and 19% of wind was installed to meet renewable portfolio standards (RPS), according to the US economist Jeffery Sachs. During a panel discussion at Reuters Events’ recent Virtual Responsible Business Summit, Sachs argued that all states should have an RPS, consistent with a national standard committing the US to decarbonise by mid-century.
“I’m a fan of regulation,” Sachs said. “It’s the best way forward, it creates the [zero-carbon] roadmap and it stimulates innovation.”
Another significant driver of the expansion of renewables, in the US and globally, has been purchases of renewable energy by corporates.
It's a win-win for the government because it means the private sector is helping to invest and rebuild after Covid and restore energy infrastructure
According to BloombergNEF, more than 100 corporations in 23 countries signed contracts for some 19.5GW of clean energy in 2019, greater than 10% of all renewable energy capacity added globally last year, and triple the activity in 2017.
Last month, at an event by the Council for Sustainable Business, COP26 president Alok Sharma urged companies to do their part towards a successful event in Glasgow next year by signing up to
RE100, a global initiative run by the international non-profit the Climate Group, whose 240 members commit to sourcing 100% renewable power, most of them by a 2030 deadline.
Renewable energy made record contributions to electricity generation during lockdowns. (Credit: Pascal Rossignol/Reuters)
Together, RE100 members now represent a scale of electricity demand that is greater than that of Poland and the Czech Republic combined, according to The Climate Group.
In an interview with The Ethical Corporation, RE100 head Sam Kimmins said that despite the fact many companies have been hit hard by the pandemic, “we're seeing really strong resilience in terms of their renewable energy commitments”, with RE100 members set to invest $98bn in renewable energy infrastructure over the next decade to meet their goals.
“They'll be investing that money because it makes economic sense ... it's a win-win for the government because it means that the private sector is helping them to invest and rebuild after Covid and restore their energy infrastructure.”
Although Europe leads the world on the clean energy transition, it lags North America in the amount of renewables sourced by corporations
Surprisingly, although Europe leads the world on the clean energy transition in many respects, it lags North America in the amount of renewables sourced by corporations. According to BloombergNEF, companies used power purchase agreements (PPAs) to buy six times as much renewable power in the Americas as in Europe last year.
The growing demand for renewables from RE100 companies was recently cited in Japan’s Covid-19 Economic Stimulus Package, in which €885m was set aside to support corporate PPAs for onsite renewables.
In June, more than 50 companies, including Mars, Nestlé and AB InBev, Enel and Ørsted, called for corporate renewables to be built into the EU’s €750bn economic stimulus package, arguing that Europe could see a significant portion of the €90bn in renewables investment planned by RE100 members over the next 10 years.
The Clean Energy Package, adopted in 2019, revised the Renewable Energy Directive and obligated member states to remove all barriers to corporate renewable PPAs, with measures such as reducing taxation on electricity and raising taxes on high-carbon fuels and products.
Yet only two of 24 member states have set out specific measures to deploy corporate renewable sourcing in their national energy and climate plans.
In its letter to the European Commission, RE-Source, the European platform for corporate renewable energy sourcing, said the Commission should request that member states align their recovery and resilience plans with their climate plans.
Covid-19 has presented unprecedented challenges, but some good can come of it if we seize the opportunity to drive emissions cuts
Questioned about the role of PPAs in Europe’s energy transition by The Ethical Corporation’s editor Terry Slavin during Reuters Events’ Virtual Responsible Business Week, the European Commission’s deputy director-general, Klaus-Dieter Borchardt, said it is “not satisfactory” that only two member states have committed to reduce barriers to PPAs.
But while all countries, bar Ireland, have already submitted their plans, they have until June next year to implement the obligation.
“For us, PPAs are a very, very important tool, which allows us to develop the energy market [in Europe] without public support schemes,” Borchardt said. “We will do our utmost to ensure that this will be implemented. If they don’t do so by the end of June 2021, we will enforce it.”
Helen Clarkson, CEO of The Climate Group, said: “Covid-19 has presented unprecedented challenges, but some good can come of it if we seize the opportunity to drive emissions cuts. With the right policy measures in place, businesses will channel billions of euros of investment [in renewable energy] across the continent – slashing emissions and creating the new jobs that we need.”
Jason Tundermann, vice president of business development at LevelTen Energy, a platform for brokering PPAs, said corporations aren’t waiting for European governments to act; “They’re signing PPAs that result in the construction of brand new wind and solar projects that make the grid cleaner for everyone, and reduce their emissions on a massive scale… With this level of corporate and government investment, the renewable energy industry is poised for massive growth.”
(Credit: Fokke Baarssen/Shutterstock)
‘Big companies should help smaller players purchase renewable energy’
PHILIPS WAS one of the first companies to sign up to RE100 in 2014, and the health technology giant is on track to fulfil its 100% commitment by the end of 2020. The business has invested in its own windfarms in the Netherlands, which serves its Benelux sites, and a site in Texas that powers its US facilities.
“If anything, our commitment to become carbon-neutral has become even more important,” explains head of sustainability Robert Metzke. “There is a very clear connection between climate change and healthcare impact. Covid has very clearly illustrated how inter-connected the world is; you cannot solve one problem in total ignorance of the other challenges.”
But Metzke points out that while it may be easy for the likes of Philips to invest in renewables, smaller businesses could struggle. To overcome this, he suggests forming consortia to pool purchasing power and spread the administrative burden, and developing capability development programmes within the supply chains of multinational companies. This, he says, “could be a really strong driver to help smaller companies make these type of transformations.
”The Ball Corporation, which manufactures aluminium drinks cans for the likes of Coca-Cola, Pepsi and Anheuser Busch, is also part of RE100. Rather than running its own wind and solar farms, the company is meeting its renewable targets through power purchase agreements (PPAs) and in May signed two new deals that will supply over 60% of its European electricity needs. The wind projects at Corral Nuevo in Spain, and Brattmyrliden in Sweden, are scheduled to come online in 2021.
Ron Lewis, Ball’s president of beverage packaging (EMEA), says it is easier for renewable energy developers to attract capital to a project if corporates make a long-term commitment to buy power through a PPA.
But Ball benefits, too, he adds, because a PPA, “gives you get a degree of assurance and a reduction in volatility Longer-term deals mean that you know how much you are going to be paying for electricity… [and] by adding green energy to the grid, you're adding optionality, you’re adding resilience and that's the only path forward I can see.”
Mark Hillsdon is a Manchester-based freelance writer who writes on business and sustainability for The Ethical Corporation, The Guardian, and a range of nature-based titles including CountryFile and BBC Wildlife. Terry Slavin is editor-in-chief of The Ethical Corporation magazine and Reuters Events Sustainable Business
This article is part of our in-depth Energy Transition briefing. See also:
Coronavirus IEA COP26 Council for Sustainable Business The Climate Group energy transition RE100 Clean Energy Package European Green Deal PPAs Philips Ball Corproation