In 2024, US corporate clean energy buying experienced a significant surge, continuing the upward trend in renewable energy investments.
This year saw a record $71 billion invested in clean energy and transportation in the third quarter alone, marking a 12% increase from the previous year.
Corporations have been increasingly committing to renewable energy sources, with nearly 40 gigawatts (GW) of onsite and off-site solar capacity installed through the first quarter of 2024.
Additionally, corporate clean energy procurement deals in North America, primarily in the US, grew by 58% year-over-year, totaling 3.6 GW.
The strategic importance of sustainability drives this growth alongside the declining costs of renewable energy technologies and the surge of supportive government policies. Despite these advancements, challenges such as siting and permitting obstacles remain, but policy interventions could help address these issues and further accelerate the clean energy transition.
Overall, the continued increase in corporate clean energy buying underscores the pivotal role of the private sector in driving the US towards a sustainable, net-zero carbon future.
What Are Corporate Procurement Markets?
Before we dive into how corporate procurement markets are stepping up, let’s clarify a few important concepts.
Corporate procurement markets refer to the strategic process by which businesses acquire goods, services, and raw materials necessary for their operations. This involves identifying needs, sourcing suppliers, negotiating contracts, and managing supplier relationships to ensure cost-effective and timely procurement. Effective corporate procurement is crucial for optimizing supply chain management, controlling costs, and maintaining the quality of products or services.
Corporate Power Purchase Agreements (PPAs), in turn, are long-term contracts between a corporation and a renewable energy generator. These agreements allow companies to purchase electricity directly from the generator at a predetermined price, providing price stability and supporting the development of renewable energy projects. PPAs can be structured in various ways, including physical PPAs, where the corporation takes physical delivery of the energy, and synthetic PPAs, which involve financial settlements based on energy prices.
Corporate Procurement Markets Are Stepping Up
The United States remains the largest market for Corporate Power Purchase Agreements (PPAs). In 2023, the US accounted for 37% of global corporate PPA deals, which dominated the 45% share in the wider Americas region. Despite a slight decrease from 20.6 GW in 2022 to 17.3 GW in 2023, the US market continues to lead due to its robust renewable energy infrastructure and favorable regulatory environment.
Key drivers for the growth of corporate PPAs in the US include:
– Technological Advancements: The integration of advanced technologies in renewable energy projects enhances efficiency and reduces costs.
– Corporate Sustainability Goals: Many US companies are committed to achieving net-zero emissions, driving demand for renewable energy through PPAs.
– Regulatory Support: Policies and incentives at both federal and state levels encourage the adoption of renewable energy.
Global Perspective on Corporate PPAs
Europe
Europe experienced significant growth in corporate PPA volumes, increasing by 74% to 15.4 GW in 2023. Key markets include Spain, Germany, the UK, and the Netherlands. The region’s strong regulatory environment and commitment to sustainability drive this growth.
Asia-Pacific
The Asia-Pacific region continues to expand, with countries like Australia playing a prominent role. The region’s focus is on securing critical materials and maintaining supply chain flexibility.
Latin America
Latin America is an emerging market for corporate PPAs, with increasing investments in renewable energy projects. Brazil, in particular, has been a significant player, with companies like Atlas Renewable Energy signing substantial PPAs for solar projects. The region’s abundant natural resources and favorable conditions for solar and wind energy make it an attractive market for corporate PPAs.
Africa
Procurement in Africa is often driven by infrastructure development projects, with a focus on building robust supply chains to support economic growth. The region faces challenges such as political instability and logistical issues, which can impact procurement strategies.
A Scope For Markets To Grow
The potential for growth in corporate procurement markets, particularly in the realm of renewable energy, is substantial. As businesses worldwide increasingly prioritize sustainability, several factors are poised to drive further expansion:
1. Technological Innovations: Advances in renewable energy technologies, such as more efficient solar panels, wind turbines, and energy storage solutions, are making clean energy more accessible and cost-effective. Innovations in smart grid technology and energy management systems also enhance the integration of renewable energy into corporate operations.
2. Policy and Regulatory Support: Governments around the world are implementing policies and incentives to encourage renewable energy adoption. These include tax credits, subsidies, and renewable energy mandates. Enhanced regulatory frameworks can reduce barriers to entry and streamline the process for corporate PPAs, further stimulating market growth.
3. Corporate Sustainability Goals: As more companies commit to ambitious sustainability targets, the demand for renewable energy through corporate PPAs is expected to rise. Businesses are increasingly recognizing the importance of reducing their carbon footprints to meet stakeholder expectations and regulatory requirements.
4. Economic Benefits: The declining costs of renewable energy technologies make them an attractive option for corporations looking to reduce operational expenses. Long-term PPAs provide price stability and can protect companies from volatile fossil fuel prices, offering significant financial advantages.
5. Collaborative Initiatives: Partnerships between corporations, governments, and renewable energy developers can amplify the impact of clean energy investments. Collaborative efforts can lead to the development of large-scale renewable energy projects, shared infrastructure, and innovative financing models.
6. Consumer Demand: Increasing consumer awareness and demand for sustainable products and services are driving companies to adopt renewable energy. Businesses that demonstrate a commitment to sustainability can enhance their brand reputation and attract environmentally conscious customers.
On this note, several companies are leading the way in clean energy commitments.
Amazon has been the largest corporate clean energy buyer for four consecutive years, announcing 8.8 GW of power purchase agreements (PPAs) across 16 countries in 2023.
IKEA (Ingka Group) aims to become climate positive by 2030, investing an additional €4 billion to support the transition towards renewable energy.
NextEra Energy is shaping the future with smart investments in clean energy, holding a firm belief in sustainability and aiming for net-zero emissions.
Ørsted, a Danish company, is committed to creating a world that runs entirely on green energy, working across various renewable sectors.
Goldman Sachs has also pledged to go 100% renewable, joining other major companies in the RE100 initiative.
These companies exemplify the growing trend of corporate commitment to sustainability and the adoption of renewable energy solutions.
Key Takeaways
US corporations are increasingly investing in clean energy to drive towards net-zero carbon emissions, recognizing both the economic and environmental imperatives.
These investments are not only crucial for mitigating climate change but also offer substantial economic benefits, including job creation and enhanced global competitiveness. The transition to renewable energy sources such as solar and wind is essential for reducing greenhouse gas emissions and conserving natural resources.
The scope for growth in corporate procurement markets, especially in renewable energy, is vast. By leveraging technological advancements, supportive policies, and collaborative initiatives, businesses can not only achieve their sustainability goals but also gain economic benefits.
As more regions embrace renewable energy, the global market for corporate PPAs is set to expand, driving the transition to a sustainable, net-zero carbon future.
At Anávo, we are committed to working with industries across all energy sectors by helping place the best talent to enable this global transition.