Corporate clean energy sourcing must form part of green Covid-19 recovery, dozens of businesses tell policymakers
Mars, Nestle, and IKEA owner Ingka Group are among a coalition of more than 50 major businesses calling on EU leaders to build the business sourcing of renewables into the bloc's Covid-19 stimulus package, hailed globally as "green".
In an open letter sent to the European Commission and to the heads of government for each EU member state today (11 June), the corporates make a string of recommendations on how policy can support business to develop and expand the renewable energy sector in line with the bloc’s 2050 net-zero ambitions.
Recommendations include prioritising funding for electricity infrastructure, to ensure that networks are ready for both digitisation and for the transition to a low-carbon grid, which will, by nature of the variable outputs of renewable arrays, require a sharp increase in storage capacity.
Policy support for corporate reneable Power Purchase Agreements (PPAs) is also urged, in light of the fact that the market for PPAs is currently far more mature in the USA and Central America at present than in Europe. Bloomberg NEF’s latest analysis of clean energy PPAs concluded that a 40% global year-on-year increase in corporate clean energy procurement in 2019 was led by action in the US.
Finance is also a key sticking point for the signatories, who are calling for public credit guarantees or other risk-sharing measures for at-risk renewable energy projects – a move they argue would stimulate additional investment and minimise the risk of stranded assets or capital. This call comes amid predictions that Europe’s wind and solar markets could shrink by between one-fifth and one-third this year, due to the economic contraction brought about by the fallout of the Covid-19 pandemic. €100bn of funding from the EU would be needed to prevent this outcome, the letter states.
The letter has been timed to arrive one week before European leaders are due to meet to discuss the €750bn economic recovery plan unveiled by the Commission at the end of May. The European Commission has created an alliance of businesses working to ensure that the plan delivers benefits for people and planet as well as the economy and has repeatedly vowed that the package will be in complete alignment with its Green Deal, but many are now growing impatient for further details.
RE-Source Platform – a European alliance of stakeholders from across the supply and demand sides of the renewable energy market – has co-ordinated the letter. The Platform’s non-business members include The Climate Group, CDP and WBCSD, while its corporate backers hail from a range of sectors. Heavily represented among the signatories are the food and beverage sector (AB Inbev, Mars, Nestle, Diageo, Heineken), digital and communications technologies (BT, Virgin Media, Konica Minolta), retail (H&M Group, IKEA, VF Corporation), finance (Visa, ING, Zurich, Refinitiv, BBVA, Barclays) and energy (Iberdrola, Orsted, RWE and Lightsource BP). Many of these businesses have either set 100% renewable energy goals or are already sourcing 100% renewable energy.
“Corporate renewable sourcing is a perfect fit for Europe’s post-Covid green recovery, providing businesses with significant amounts of reliable and low-cost solar and renewable energy and unlocking private financing for new projects,” SolarPower Europe’s interim chief executive Aurelie Beauvais said.
“While recent years have seen a substantial uptake in Europe, there is potential for far more. Now, it is essential to simplify corporate sourcing by removing regulatory, financial and administrative barriers.”
The letter follows on from RE-Source Platform’s latest research and advice paper on PPAs, which concluded that European corporates sourced 8GW of renewables in this fashion in 2019, up from 5.5GW in 2018.
The pandemic picture
The impacts of the Covid-19 pandemic have led to a downturn in energy demand in most major markets, with manufacturing lines, transport systems, offices and other large consumers coming offline amid lockdown restrictions. According to the IEA, global energy demand was down 2.5% year-on-year in the first quarter of 2020, with electricity demand currently down around 10% on a global basis.
As such, governments, regulators and businesses are collaboratively taking measures to reduce generation. In the UK, for example, all coal power plants were brought offline by 9 April, while some nuclear and wind generators have received payment in exchange for slashing output.
While demand and generation is expected to rebound fairly quickly as lockdowns are lifted, as has been the case in markets such as China, the pandemic’s impact on energy investment is likely to be felt for longer. The IEA had, pre-pandemic, expected total global energy investment to grow by 2% this year. Now, a 20% fall is forecast.
New analysis from BNEF this week reveals that 184GW of clean power generation capacity was installed globally in 2019, up from 164GW in 2018. The uptick is attributed to falling technology costs and strengthening green legislation, particularly in the realm of net-zero targets.
Published in collaboration with the UN Environment Programme and the Frankfurt School-UNEP Collaborating Centre, BNEF the analysis comes amid a backdrop of warnings that falling oil prices could be compounded by reduced investment by private and public bodies to create a slump in renewable investments.
In order to prevent this trend and align recovery actions with both climate targets and reshaped budgets, the analysis concludes, clean energy should be prioritised in the recovery packages of national governments, public bodies and private firms alike. It states that current commitments to invest in clean energy through to 2030 total just $1trn, compared to the $2.7trn invested in the 2010s.