2019 brought yet another annual record for U.S. renewables purchases from corporate and industrial customers. These annual record topplings have become almost trite as the corporate renewables market has continued to build momentum.
But all things must be reconsidered after the coronavirus outbreak, and the solar market is no different.
A quick recap
First, a quick recap of the trends in the U.S. corporate renewables market.
The overall market has been growing and deepening. In 2017, purchasers led by Google committed to buying a record 2.76 gigawatts of renewable power. That ballooned to 6.39 gigawatts in 2018, before jumping again to 9.33 gigawatts in 2019, according to the Renewable Energy Buyers Alliance, an organization of large-scale renewable buyers.
The space traditionally has been dominated by large technology companies with significant load and large geographic footprints, but now first-time buyers have deepened the bench of companies looking for renewable solutions.
The industrial sector, including companies in manufacturing and food production, procured just 14 percent of projects in 2018. In 2019 that figure rose to 35 percent of total projects.
Though data centers owned by big technology companies are more energy-intensive than many industrial facilities, industrial consumers have larger overall demand. That means their growing interest in renewables could result in larger emissions reductions.
“The industrial sector is a much bigger market to tap,” said Colin Smith, senior solar analyst at Wood Mackenzie.
Each year, the number of companies participating in RE100, a group committed to reaching 100 percent renewable electricity, increases. A new WoodMac report on corporate purchases of wind and solar shows the number of RE100 signatories surging from 87 in 2016 to 230 in 2019.
While the corporate market has been growing, that's especially been the case for solar, which is expected to eclipse wind in the 2020s as the largest U.S. renewables market both annually and cumulatively.
Commercial and industrial solar procurement increased 60 percent last year, according to WoodMac, beating out wind for the first time.
“We’re on this precipice, pivoting from wind being the dominant technology of the two to utility solar being the dominant technology procured by corporate offtakers,” Smith said.
In Texas, the top market for C&I procurements, the interconnection pipeline has shifted from about 44 percent solar in December 2018 to 62 percent solar in March 2019, according to data from ERCOT.
Enter the coronavirus
That growing C&I solar market, however, has been affected by the coronavirus pandemic, which in addition to sickening hundreds of thousands has crippled the economy, halted some solar construction and pushed back project timelines.
Analysts expect the virus and the prevailing economic uncertainty to slow the market considerably, but the extent of the damage depends on how long the crisis continues. Smith calls volatility in financial markets “the biggest unknown” for the future of C&I renewables procurements.
So far, contracts and project financing appear to be holding. But timelines are already shifting, as are corporate priorities.
Despite the growing number of companies committing to renewables and sustainability targets, the coronavirus pandemic has forced corporations to redirect attention to the immediate impacts of the COVID-19 virus. That’s likely to undercut ambitious environmental targets to some extent.
“What we expect to see in general is corporations putting less pressure on each other,” said Smith.
Despite the uncertainty, several projects with high-profile names attached have hit development milestones in recent weeks.
BayWa r.e. — a developer with operations across the globe — recently announced closure on tax equity and construction financing for a 133.6-megawatt solar project in North Carolina, which will provide power to companies such as Bloomberg, Salesforce and Gap through a unique virtual power-purchase agreement arrangement.
The Spotsylvania Solar Energy Center, a 620-megawatt project in Virginia developed by Utah-based sPower, an independent power producer with a 2-gigawatt renewables and storage portfolio, also announced a tax equity commitment in April for a project that will supply Microsoft. And Lightsource BP, backed by oil major British Petroleum, inked a contract for 43.8 megawatts of solar with the Southeastern Pennsylvania Transportation Authority, the sixth-largest transit system in the U.S.
And that was just last week.
But those installations all come with big names. Some of those projects had made progress on negotiations long before the scope of the coronavirus became well understood. BayWa’s project, for instance, “was financially structured well before the outbreak,” said Jam Attari, CEO of the company’s solar project team.
It's likely that large companies such as Salesforce and Microsoft will continue to have an advantage in renewables buying due to having more experience and resources. Contracts from lesser-known purchasers could wane even as their interest in renewables waxes.
Commercial and industrial offtake agreements can be complicated, especially when a company doesn’t have a template. And as corporations hunker down, fewer are pouring resources into renewables strategy.
“If you’ve already purchased renewable energy and you’re managing it as an investment, it makes it a little bit easier for you to take on new investments or expand that portfolio than it is for a new company to do it for the first time,” said Smith.
Coronavirus-related pressures could modulate the trend of new entrants joining the market. Since 2017, more than 20 new companies have joined the market each year. Smith said would-be 2020 entrants may now wait until 2021 or 2022 to commit to projects.
“We expect the coronavirus to cause a drop in new entrants and [lead to] fewer contracts being signed this year,” said Smith.
It's still too early to make any predictions. But depending on how long the pandemic lasts, 2020 could be the first year since 2017 without a new corporate record.
