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 emre.peker@wsj.com
(END) Dow Jones Newswires
January 19, 2020 07:44 ET (12:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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