Big businesses step up to buy energy from new wind and solar farms

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Big businesses are stepping up to buy power from new wind and solar farms in a boost to the renewables industry as cash-strapped governments come under pressure to cut subsidies.

The amount of renewable electricity sold to companies under long-term power purchase agreements (PPAs) rose 35 per cent last year, according to data from BloombergNEF. The biggest increase was in the US, where tech companies have been buying renewable energy to power data centres.

“Amazon was the number one company by far,” said Nayel Brihi, an analyst at BloombergNEF. But he added that another significant driver was companies in the chemicals, mining and raw materials sector, especially in developing countries. 

The rise comes as Markus Krebber, the chief executive of RWE, one of the world’s largest renewable developers, said this week his company needed long-term commitments before it would proceed with any new offshore wind projects.

“There’s always the objective [ . . . ] to have the capacity fully contracted,” he told an energy conference in London, adding that without such agreements, “financing costs get out of control”. 

In January, Denmark suspended all offshore wind auctions, after receiving no bids to build three North Sea wind farms without subsidies.

“If the markets for [power] are not there, or in certain markets like Denmark they are too small, and industries are not there, bidders are reluctant . . . because for us it’s important to have bankable projects,” Krebber said.

He also said he expected the pace of renewables development to slow because of higher interest rates, tariffs, supply chains challenges and geopolitics.

“We are in a much more uncertain and unstable environment than we were five years ago and that means we have more focus on risk. In today’s environment, you better forgo a good investment opportunity than do a bad one,” he said.

The amount of new wind capacity added to grids in Europe has fallen for two consecutive years and was 13 per cent lower last year than the record set in 2022, according to trade body WindEurope. After years of record growth, the rate of new solar farms being added to the grid in the EU slowed by 92 per cent last year, according to SolarPower Europe. 

One senior energy banker said there remains plenty of money for new renewable projects, “if there are long term deals” to buy the power. He pointed to the tech, food and agriculture industries as leaders in signing deals for renewable energy.

Arla, the world’s fifth largest dairy company, signed five PPAs last year in addition to 10 existing contracts and has pledged to use 100 per cent renewable energy in Europe from the end of this year. 

“We could just go out and buy it on the open market and have green electricity,” said Mia Bredal Duus, director of Arla’s sustainability project management office. “But we said actually we want to be the reason that [wind and solar] parks are being built. So right now around two-thirds of our electricity is from new parks where we have helped by creating this power purchase agreement.”

Unilever, meanwhile, said it wanted to increase its number of PPA deals, adding that this would not only help to increase renewable energy capacity, but also offered the consumer group predictable power prices over a long period. “Developers rely on companies like Unilever to help mitigate the risks and demonstrate the financial viability of their projects to lenders,” a spokesperson said. 

The increase in PPAs is likely to continue, said Brihi, driven both by data centre demand and by members of the RE100 initiative; companies that have committed to use 100 per cent renewable energy. He said while PPAs are still a “small share of overall renewable energy additions”, he expected them to gain in importance as governments cut subsidies. 

Data visualisation by Janina Conboye