More than any other country, the United States has a growing portion of new renewable energy projects being built to meet demand from corporations. Agreements by which corporations contract electricity from renewable power producers are expected to be responsible for 44-72 gigawatts (GW) of wind and solar additions in the country from 2021-2030, according to a new analysis by IHS Markit.
The report, titled Corporate U.S. Renewable Procurement Outlook: Optimism Amid a Pessimistic Year says that these corporate-driven Power Purchasing Agreements (PPAs) would represent about 20% of all utility scale renewable power additions for the period—an average of 4.4 -7.2GW per year.
“We have now reached a tipping point for corporate sector demand for renewables,” said Anna Shpitsberg, director, global power and renewables, IHS Markit.
“Fueled by shareholder and consumer activism, the opportunity to hedge power costs and corporate renewable targets, companies are increasingly making the connection between a specific project and a specific facility’s power demand,” she added.
Corporate sector renewable demand had been very small as recently as 2017. However, corporate procurement more than doubled in 2018 and increased again in 2019, with almost 16 GW announced between the two years. The U.S. technology sector has been at the forefront of the expansion in corporate-driven PPAs.
This growth is expected to contribute nearly 8 GW of wind and solar installations in 2020, a 45% annual increase in installations stemming from corporate procurement. Around 220 companies operating in the U.S. are already procuring renewables or plan to do so; and about 40% of these companies have targets that escalate through the early to mid-2020s.
The U.S. currently represents over 60% of the global market for corporate-driven procurement. The U.S. market position can be attributed to factors such as the number of large U.S.-based corporations, tax incentives, a high concentration of power-intensive data centers and power market structures and accounting standards that are more conducive to corporate procurement.
“This type of corporate-driven renewables procurement is growing beyond its tech-based roots,” Shpitsberg continues. “Sectors such as manufacturing and telecommunications that have high consumption patterns, ambitious renewable targets and low-to-moderate renewable procurement to date are poised to expand in this area.”