Recent Developments in the Renewable Energy Procurement Sector

Renewable energy procurement is a way to keep track of the amount of electricity generated by renewable energy sources.

FREMONT, CA: Renewable energy procurements reached a record high last year, with new capacity in the United States exceeding 10 gigawatts. The year was bolstered by the previous quarter, which saw the signing of contracts covering over three-quarters of the year's capacity. This momentum is expected to continue into 2021, with transactions announced in the first quarter exceeding the entire annual capacity of the previous four years.

The State of the Market results demonstrate how the renewable energy market is maturing, increasing, and strengthening.

A broader range of businesses are entering into procurement agreements: Big tech has been a trailblazer since the inception of corporate sustainable energy contracts. The sector outperforms the competition, inking more deals, negotiating more significant transactions, and pioneering new contract formats. Amazon, for example, announced a 3.4 GW deal in Q4 2020—nearly twice the size of Google's previous largest procurement transaction in 2019.

More and more types of businesses are joining the fray. Nearly half of the enterprises that signed renewable energy deals last year were newbies. According to Renewable Energy Buyers Alliance (REBA), there have been 120 buyers since 2008. Notably, heavy industry firms—steel and heavy machines—commit to renewable energy. According to REBA, eight new industrial customers emerged last year, and the sector's overall capacity procurement more than quadrupled from the previous year, expanding from 511 MW in 2019 to 1,344 MW in 2020. Significantly, large emitters are acquiring renewable energy. Industrial emissions account for almost a third of world emissions, and it is past time for these sectors to decarbonize. Industrial pioneers—such as steelmakers Evraz North America and Nucor Corporation—are critical in advancing a market for cleaner products.

Businesses are putting a premium on-grid decarbonization, not merely on renewable energy development: Numerous corporate energy purchasers seek to accomplish more than increasing their renewable energy deployment. They want to ensure that it contributes to the decarbonization of the electrical system.

This is a paradigm shift—from project outputs to project results. While many businesses may have first purchased solar or wind energy to meet internal 100 percent renewable energy objectives, net-zero promises drive clean energy consumers to consider the bigger picture of emissions.

Buyers are pursuing various techniques to maximize decarbonization, including relocating new deployments. For example, a solar power purchase agreement in a market with a dirtier energy mix will significantly impact emissions reduction than one in a reasonably clean service region. Efforts to decarbonize have fueled the growth of energy storage-related procurement transactions. Additionally, that trend is being fueled by lower energy storage prices. Battery prices have decreased by 88 percent since 2010, making storage a more viable option for long-term energy contracts. Incorporating storage into renewable energy projects is obvious: it enables deeper decarbonization, increases resilience, and stabilizes the resources, allowing an installation to continue producing energy even when the intermittent wind and solar assets are not producing. As the cost of energy storage continues to fall and businesses seek to maximize the value of their clean energy procurement strategy, these types of deals are sure to become more prevalent