Australia being left behind as global corporate renewable PPA market surges ahead


The global corporate market for renewable energy power purchase agreements continues to surge, with analyst firm BloombergNEF observing that the volumes of PPAs signed in 2019 was up more than 40 per cent compared to the previous record year in 2018.

But despite the rosy outlook globally, the Australian PPA market has slowed dramatically, as the large-scale renewables market is hampered by growing grid connection frustrations.

Global corporate PPA’s signed in 2019 exceeded more than 19.5GW of new renewable capacity additions, representing between $20 billion and $30 billion in new project investment.

The BNEF analysis estimates that around 10 per cent of all renewable energy capacity additions globally have been driven directly by demand for corporate PPAs.

”Sustainability commitments will ensure that clean energy procurement from corporations continues to thrive. The ball is in the court of utilities, policymakers and investors. They will need to meet these buyers in the middle, especially in nascent markets for corporate procurement,” BloombergNEF lead author and sustainability analyst Kyle Harrison said.

According to BloombergNEF’s analysis, North America has emerged as the dominant market in the corporate PPA space, amassing 15.7GW of new project commitments un the 2019 year.

New corporate PPA’s signed in the Asia Pacific region fell from a combined 2.1GW in 2018, to just 1.2GW in 2019.

Australia advisory firm Energetics had flagged that 2019 would be a relatively subdued year for Australian corporate power purchase agreements. The company’s own corporate PPA tracker showed 2019 contracts lagging behind the pace set in 2018, and was tracking significantly behind 2018 contracts, which totalled more than 1,800MW.

The fall in Australian corporate PPA activity reflects a wider downturn in large-scale project commitments in Australia, which saw the level of investment fall by 60 per cent in 2019, as grid connection difficulties and ongoing political ructions continue to dent investor confidence.

One bright spot observed by BloombergNEF was the installation of onsite solar systems at Australian commercial and industrial premises, which almost doubled in 2019, compared to the previous year, reaching almost 1GW in onsite solar generation capacity.

Global corporate PPA volumes. Source: BloombergNEF

BNEF examined the commitments under the RE100 initiative, a global push for major companies to commit to purchasing all of their electricity consumption from renewable sources, will require an additional 105GW of new solar and wind projects to be built by 2030.

BloombergNEF analyst Jonas Rooze said that the amount of renewable energy now being purchased by the corporate sector globally is comparable to the purchasing power of medium-sized countries.

BNEF found that the rapid growth in companies making corporate sustainability pledges, such as under the RE100 initiative, or by pledging to operate in a way consistent with the Paris climate change agreement goals, was the core factor driving growth in corporate PPAs.

“Corporations have purchased over 50GW of clean energy since 2008. That is bigger than the power generation fleets of markets like Vietnam and Poland. These buyers are reshaping power markets and the business models of energy companies around the world,” Rooze added.

A growing number of Australian companies have made commitments under the RE100 initiative, including each of the big four banks (ANZ, NAB, Westpac and the Commonwealth Bank), along with Bank Australia and Macquarie Bank. Property giants Dexus and Mirvac have also pledged to go 100% renewable, as has tech company Atlassian.

Global commitments under the RE100 initiative, made by a collection of 221 companies, total around 233TWh of annual electricity purchases, which is comparable to Australia’s total electricity consumption.

The analysis shows that corporate renewable energy commitments are likely to drive new investments in renewable energy projects to meet the growth in demand.

Projected renewables shortfall for RE100 companies Source: BloombergNEF

Technology companies have led the charge into corporate power purchase agreements, with tech giants including Facebook, Amazon, Microsoft and Google ranking as the leading contractors of renewable electricity as the companies shift their manufacturing, warehousing and data centre consumption onto wind and solar.

Between the four tech giants, a combined 5.5GW worth of corporate PPA contracts were been signed with new wind and solar projects in 2019.

“The clean energy portfolios of some of the largest corporate buyers rival those of the world’s biggest utilities. These companies are facing mounting pressure from investors to decarbonize – clean energy contracts serve as a way to diversify energy spend and reduce susceptibility to the tangible risks associated with climate change,” Harrison added.

Earlier in the month, Microsoft became one of the first major companies to commit to going carbon negative by 2030 and will undertake to remove an equivalent amount of greenhouse gas emissions from the atmosphere as to account for all of the company’s emissions since its founding in 1975.

Companies have faced growing calls from investors to find ways to address their contributions to global greenhouse gas emissions and to limit their contributions to global warming.

The investor push includes the world’s largest investment manager, Blackrock, which announced earlier in the month that it divest itself from thermal coal, and ramp up its engagement with the companies it is invested in, to ensure they are taking appropriate action on climate change.

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