Corporate demand for renewable electricity in Europe is growing rapidly from an already sizable base. RE100 companies committed to 100% renewable electricity now have a combined demand greater than that of the United Kingdom or Italy. And data shows corporate power purchase agreement (PPA) announcements have increased eightfold from just 0.5 GW in 2014 to a record 4 GW in 2020, and 2021 is on track to be even higher.
It’s clear the demand is there – that’s the good news, as corporate purchases can drive major investment in renewable energy projects, helping Europe to meet its 2030 and 2050 climate and energy targets. The EU also recognizes this contribution, with the Renewable Energy Directive calling on member states to remove barriers to enable companies to sign PPAs.
But are EU member states doing enough to support the corporate market? According to RE-Source’s data, the regulatory situation varies from country to country. While there is more work to do, we see a small but growing list of countries enacting policy measures to facilitate the uptake of corporate PPAs.
These include demand-side measures, as well as actions to ensure adequate renewable energy supply – not just to meet corporate demand, but to deliver EU climate neutrality by 2050. According to WindEurope, the EU needs to install 27 GW of wind capacity per year to meet its 2030 emissions reduction targets. It is currently set to build closer to 15 GW per year. SolarPower Europe forecasts 588 GW of solar capacity will need to be deployed by 2030 – 75% higher than current member state forecasts.
The first country where we see forward-thinking policy measures is in Spain, where action has translated to robust growth in the corporate renewable energy market. Spain has flourished since signing its first corporate PPAs in 2018 to rank first in Europe by 2020, with more than 1.3 GW in PPA announcements (34% market share). Companies from telecommunications (e.g., Orange, Vodafone) to pharmaceuticals (e.g., Novartis, Bayer) to consumer goods (e.g., DSM, Ball) announced PPAs in 2020 and Spain is set for another strong year with 0.9 GW signed so far.
In 2020, the Spanish government announced increased targets for renewable energy development as part of its National Energy and Climate Plan. To help meet these targets, the Ministry of Industry also introduced a new reserve fund for large industrial energy users. This fund provides PPA credit guarantees for energy-intensives signing PPAs for at least 10% of their annual electricity demand, enabling them to reduce their risk as they make the switch to renewables.
In addition, the Spanish government made it possible for public bodies to enter into long-term power contracts by extending the term limit from four to 10 years. They also removed various taxes and tolls related to on-site generation, making this option more appealing to corporates.
Thanks to measures like these, combined with plunging solar costs, Spain will continue to be a major player in the corporate renewables sector. We are likely to see more deals such as the one between Danone and Iberdrola to supply 73 GWh of solar power per year to the food company’s Spanish operations.
Until very recently, Italy’s PPA market lagged. Last year, there were less than 0.1 GW of corporate PPAs announced in the country, compared to 1.3 GW in Spain and 0.8 GW in Germany. To date, Italy has only accounted for only 2% of total European corporate PPA capacity.
Record-low wholesale electricity prices had a dampening effect last year on PPA transactions, but they were not the only roadblock. Project permitting procedures have historically been far too lengthy and complicated in Italy, limiting consumer access to cost-competitive renewables.
However, that is set to change. In Italy’s post-Covid recovery plan, the government outlined its intentions to cut red tape and align with the Renewable Energy Directive, which calls on member states to shorten and simplify permitting processes for renewable energy projects. In the meantime, as economic conditions improve in Italy, we are heartened to see deals like the PPAs signed in May by Italian company Telecom Italia (TIM) and Ferrero, the maker of Nutella.
Lastly, to Poland, where major changes to the regulatory framework are expected in the coming months. This includes amendments to the 10H localization rule, which currently blocks the development of new onshore wind projects, and updates to enable direct-line connections between renewable projects and offtakers.
As we can see, policy and regulatory changes are critical to unlocking European corporate sourcing potential. Concrete actions to remove regulatory barriers, provide financing and de-risking facilities, and ensure adequate renewable energy supply all help to create the right enabling environment. The RE-Source European Corporate Sourcing Directory is available today as a free resource for corporates to track policy and regulatory developments across all European markets.
About the author
Hannah Hunt is the impact director of the RE-Source Platform, Europe’s leading forum for corporate renewable energy sourcing. She was previously senior manager of business development at REsurety, where she worked to empower renewable energy buyers through better risk management. Her background includes renewable energy policy and regulatory advocacy at the American Wind Energy Association.
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