Historical Stock Chart
3 Months : From Jan 2020 to Apr 2020
By Emre Peker
BRUSSELS -- U.S. companies are underwriting the European Union's ambitious climate goals, fueling the bloc's green-energy transition with power deals that cut emissions and costs.
Alphabet Inc.'s Google bought enough wind and solar energy for its EU data centers last year to power roughly a half-million European homes annually. Investments from Amazon.com Inc. are underwriting Ireland's first wind farm to operate without subsidies, as well as renewable projects in Spain, Sweden and the U.K.
Alcoa Corp., McDonald's Corp., Facebook Inc. and Microsoft Corp. also are buying renewables in Europe.
More than half of all corporate long-term renewables contracts signed for electricity in the EU since 2007 are with U.S. companies, which report savings of up to 10% from stable and competitive prices. The deals are helping transform European electricity grids long dominated by coal, gas and nuclear powered plants.
U.S. investments come as the EU seeks to cut greenhouse-gas emissions to net-zero -- neutralizing releases of carbon dioxide and other gasses contributing to global warming -- in part by nearly doubling the share of renewable energy to 32% by 2030. Meeting EU climate goals will cost the bloc EUR260 billion ($290 billion) a year over the next decade, officials say.
"We need a significant rise in investments into renewables," EU Energy Commissioner Kadri Simson said, urging a blend of public and private cash to drive a clean-power transition.
The challenge, power buyers say, is getting electricity from one part of Europe to another. Europe's plans for greener energy must overcome markets that are still divided by country, some of which subsidize power producers in ways that undercut corporate electricity deals. Only in Northern Europe are power markets integrated and liquid, while France, Germany and markets further south are more segmented.
"Europe is so Balkanized in its regulatory structure around renewables," Amazon Web Services' Energy Strategy Director Nat Sahlstrom said. "It has gotten a lot better in the last five years, but it's still not seamless."
In the U.S., where companies say regional markets are more integrated, corporate buyers contracted almost 30,000 megawatts of wind and solar capacity since 2006, compared with 8,263 megawatts in Europe, according to clean-energy research provider BloombergNEF.
Still, U.S. companies see EU climate goals as a chance to economize because suppliers want to sign long-term contracts. Rising renewable capacity and plummeting upfront costs have made wind- and solar-energy prices competitive against fossil fuels. Shifting to zero-emission sources also helps companies burnish their environmental credentials.
Amazon said in September that by 2040 it would meet Paris Agreement goals to curb global warming, as thousands of its employees demanding action joined a global climate strike.
Google, the world's biggest corporate buyer of renewable energy, signed its first renewables contract in 2010 in the U.S. Aided by the EU deals, Google sourced all its power globally from renewables in 2017 and 2018.
Facebook is looking to replicate Google's achievement this year, and Amazon said it would use 100% renewable energy by 2030.
American companies underwrote 53% of all corporate-backed wind and solar projects in the EU, according to BloombergNEF. Their investments bolster demand and underwrite the expansion of green power, just as EU countries are removing subsidies that for decades underpinned renewable energy projects.
The cornerstone for corporate renewable deals rests on so-called power purchase agreements, or PPAs, that U.S. companies have been using over the past decade.
Under PPAs, companies typically finance projects that add renewable energy sources to the grid that powers their operations. That allows firms to claim renewable-energy credits based on the capacity of a solar or wind farm, which often matches a buyer's annual demand. It also means that on days when the sun doesn't shine or the wind doesn't blow, companies can rely on other power sources feeding into the grid, including fossil fuels, nuclear or stored energy.
"What we've seen is Europe really accelerate corporate PPA uptakes. As a result, we were able to accelerate our engagement in Europe," Google Head of Energy Strategy Neha Palmer said in an interview.
The investments are coming despite obstacles including Europe's antiquated and fragmented power grid, impediments to certifying green-power purchases and transmission limits.
"These PPAs are very important because they could be a very good way to fund, with private money, renewable-energy generation. However, there are still important barriers," said Felice Simonelli of the Brussels-based Centre for European Policy Studies and co-author of an EU-commissioned report on corporate renewables purchases.
Still, businesses motivated by competitive long-term prices and green credentials mark a turning point for Europe's energy transition, Mr. Simonelli said. Renewable power contracts can reduce operating costs by as much as 10%, his study found.
Corporate-backed renewable projects in the EU also could generate an estimated EUR750 billion in investments and 220,000 jobs by 2030, according to Mr. Simonelli's report. The flood of private money would come as the EU seeks to mobilize EUR1 trillion under its European Green Deal to help coal-reliant economies transition into cleaner energy and finance investments to meet the bloc's climate goals.
"It's music to governments' ears," says Sam Kimmins, head of RE100, a group of more than 200 multinationals -- including Apple Inc., Google, Mars Inc. and Citigroup Inc. -- committed to using 100% renewable energy.
Plummeting costs for green energy also have contributed to the surge of investments in Europe.
In the 2015 to 2018 period, onshore wind prices were on average 7.5% lower than major European market prices, while solar was almost 4% cheaper, Citigroup analysts said in a report earlier this month. Some EUR500 billion of investments by 2030 will fuel a massive renewables expansion, Citi said, making wind and solar power 20% and 15% cheaper, respectively, than broader European market prices.
"Europe is catching up and may overtake the U.S.," Mr. Kimmins said. "There's certainly competition there."
Write to Emre Peker at firstname.lastname@example.org
(END) Dow Jones Newswires
January 19, 2020 07:44 ET (12:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.