Why Clean Energy corporate sponsors are buying less this year

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(Bloomberg) —

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Big companies have made a one-way bet on renewable energy: more, every year.

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In 2012, businesses procured electricity from 300 megawatts of wind and solar power; last year they purchased over 30 gigawatts, a 100-fold increase. There are now over 125 gigawatts of clean energy under contract with major companies around the world.

But look closely at the data for the first half of 2022, and the one-way bet appears to be off. Business supplies of clean energy have stalled at less than 15 gigawatts, less than half of last year’s total. This means that at the current rate, 2022 could be the first year of decline in more than a decade for new business clean energy purchases.

The relative decline is not evenly distributed. In the Americas, contracts are running just a few hundred megawatts behind the 2021 annualized rate. In the Asia-Pacific region, however, contracts are more than 20% ahead of the pace. Most of the decline stems from paltry contract volumes in Europe, the Middle East and Africa. (Note that almost all contracts in this large region are in Europe proper.)

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A number of factors are hampering the corporate clean energy market in Europe in particular. There is the geopolitical uncertainty of Russia’s war in Ukraine, as well as the impact of the war on electricity prices (which have reached astronomical levels in France and Germany). Soaring prices and economy-wide inflation have made it very difficult to negotiate long-term power purchase terms.

There are a few bright spots: Corporate clean energy markets in Spain and Denmark are both at record pace. But the European market as a whole is constrained.

But the Americas market isn’t all the numbers suggest. Amazon.com Inc. has played a huge role in the global purchase of clean energy for businesses, signing 25 contracts for 5 gigawatts of capacity alone. Without this, volumes in the region would also be well below last year’s trend.

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Between 2020 and 2021, Amazon’s electricity consumption has increased by almost 29%. To date, the company has purchased 19 gigawatts of clean energy. That’s double the second-largest corporate buyer (Microsoft Corp., with 9 gigawatts). The clean energy Amazon now orders would make it the 10th largest wind and solar portfolio in the world.

The comparison isn’t exactly apples to apples, as utilities own their assets, while Amazon just signs power contracts. But it is instructive. While Chinese companies dominate global clean energy portfolios, Amazon uses more clean energy than Warren Buffett’s Berkshire Hathaway Inc., and more than French electricity giant Electricité de France SA (EDF). Amazon’s clean energy is only marginally lower than that of the other two major European owners of renewable assets, Iberdrola SA of Spain and Enel SpA of Italy.

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Amazon’s appetite is a sign of what lies ahead. Business demand for clean energy is growing, regardless of short-term market disruptions. Companies that have signed the RE100 commitment for 100% clean energy will need an additional 275 terawatt hours of clean energy in 2030, which is as much as Spain produces today.

Bonus Chart: California’s High Power

California set an all-time high in electricity demand this week thanks to record-breaking heat in many parts of the state. The last record was in 2006, and since then the state has added several gigawatts of rooftop solar power. Another novelty since the last demand record: batteries.

The following chart shows five years of Labor Day grid-wide battery power. It’s not hard to see the growth, and it’s also not hard to imagine how much more stretched the California power grid would be without distributed solar generation and very large batteries that discharge when the system has them. most needed.

Nat Bullard is a senior contributor to BloombergNEF and Bloomberg Green. He is a venture capital partner at Voyager, a start-up investor in climate technologies.