BNEF: Covid-19 causing drop in US corporate clean energy purchases

The amount of generation backed by US-based corporates signing power purchase agreements (PPAs) was almost one-third lower in the first half of 2020 than in the first half of 2019, new analysis from Bloomberg NEF has revealed.

According to the research services latest analysis of corporate PPAs in the US, deals totalling 4.3GW were signed between January and July 2020, compared to a 6GW total for the first half of 2019.

Of the 4.3GW of deals, just 940MW were signed in Texas, North America’s biggest corporate renewables market. This is a stark drop from 5.5GW of deals done during 2019.

A record 13.6GW of clean energy deals were struck by US-based businesses in 2019, with the likes of Google, Facebook, Target and Nike all completing sizeable deals – mainly for onshore wind. This figure was up from 13.4GW in 2018.

BNEF is predicting that the total generation capacity of deals struck this year in the US will fall short of both of these figures.

Analysts have attributed the downturn to a lack of short-term and mid-term certainty around financial performance, compounded by the fact that many companies are using less energy at present and rethinking their business models to account for remote working. These factors, in addition to President Trump’s decision to withdraw from the Paris Agreement and roll back environmental standards, have hurt the outlook on long-term renewable power prices.

“It becomes difficult to scope out the magnitude of a clean-energy commitment if a company doesn’t know what their footprint will look like short- and long-term,” BNEF analyst Kyle Harrison said.

Global picture

BNEF also looked at the state of corporate renewable PPAs on a global scale, concluding that 8.9GW of supply agreements were signed in the first seven months of 2020. 

During the same period in 2019, 8.6GW of deals were signed. BNEF attributes the slight increase to an uptick in signings across Latin America, Australia and Taiwan. Deals in mainland Europe, meanwhile, remained steady.

While these are promising signals, BNEF ultimately believes that large companies in other markets will look to those in the US to set an example on clean energy procurement. As such, it is forecasting a potential global drop in the coming months.

“A drop in US activity could be a harbinger for drops in activity elsewhere long-term,” Harrison said.

The International Energy Agency (IEA) has stated that the pandemic has dampened investment prospects for many clean technologies as well as for the fossil fuel sector – often the subject of headlines. Recent research from the Agency found that only six of the 46 technologies it classes as key to the energy transition are receiving adequate levels of funding and policy support and warned that this challenge is likely to get worse post-lockdown.

Sarah George