Geopolitics could spur US corporate renewables as contracted capacity tops 58 GW

Introduction

Tracked renewable energy capacity contracted by non-utility U.S. corporations has grown nearly 20% since S&P Global Commodity Insights' April 2021 update, coming in at more than 58,000 MW worldwide. Capacity procured through solar and wind projects within the U.S. accounts for more than 82% of this figure. In the U.S., solar is now on track to overtake wind as the preferred technology among corporate off-takers, topping 24,600 MW after 2025 vs. about 22,700 MW for wind. For perspective, solar accounted for about 16% of contracted U.S.-based corporate renewable capacity only three years ago.

Rapidly deteriorating geopolitical dynamics shine a spotlight on renewable energy's global business rationale, potentially substituting the wave of federal and state incentives that initially powered the U.S. renewable energy sector in sustaining corporate-tied green capacity momentum.

* Contracted corporate renewable capacity remains on a steep upward trajectory, fast closing in on 60 GW.

* Slowing federal and state incentives could pass the baton to fossil-fuel hedges corporate renewables' next leg up, as geopolitics deteriorate.

* Trailing contracted capacity in regulated states, however, underline red-tape hindrances.

Perhaps unsurprisingly, technology features prominently in the list of U.S. companies that expanded their renewable energy portfolios from April 2021 through 2022. Online retailer and cloud services provider Amazon.com Inc. leads the pack, contracting about 4,000 MW in solar and wind capacity worldwide over the interval.

Microsoft Corp. is a distant second with an additional 686 MW of inventoried renewable capacity since our 2021 update. The Redmond, Wash., software behemoth notably signed a 430-MW power purchase agreement — the largest inventoried deal in the April 2021-February 2022 interval — with Ørsted A/S's Texas-based Buffalo Creek Solar Plant (Old 300 Solar).

Search and advertising giant Alphabet Inc. added more than 400 MW through deals with MidAmerican Energy Co.'s Macksburg Wind (Wind VIII Project) and Lundgren Wind (Wind VIII Project). Google has also inked an agreement with Germany's 900-MW Offshore Borkum Riffgrund Wind III (OWP West Offshore), to come online in 2025, for 50 MW.

High-profile communications companies Verizon Communications Inc. and Windstream Holdings Inc. signed sizable wind energy agreements. Verizon contracted 200 MW in capacity with the Blackford Wind Plant in Indiana. The farm, projected to begin operations in 2023, is owned by Tri Global Energy LLC. Verizon says it has accumulated about 2.6 GW in corporate renewable energy capacity. The leading U.S. carrier by prepaid wireless customers ambitions to source 50% of its electricity consumption through renewables by 2025. Broadband provider Windstream contracted 199.5 MW with Texas-based Wilson Ranch Wind Project (Infinity Live Oak). ENGIE North America Inc. owns the Wilson Ranch plant.

To date, Commodity Insights has identified nearly 340 specific U.S. projects in 38 states procuring renewable energy to almost 130 different corporate off-takers. A little over 60% of this inventoried corporate renewable capacity has been contracted with renewable energy projects in deregulated states. Texas alone accounts for about a third of these corporate deals, not surprising given the state's commanding lead in both operational wind capacity and planned solar capacity.

Ohio and Illinois are neck and neck for the number two spot, with approximately 3,400 MW in corporate-tied capacity each. Illinois edges out Ohio in operating and planned solar and wind, with Commodity Insights data showing 7.7 GW in operating solar and wind and an additional 8.1 GW coming down the pike. The Buckeye State ranks ninth in operating and planned solar and wind capacity in the U.S., at a combined 12.5 GW according to Commodity Insights data, boasting one of the most ambitious pipelines for solar projects, despite a relatively lax renewable portfolio standard, or RPS. All top three states by contracted corporate renewable energy capacity are deregulated.

The marked differential in contracted renewable energy capacity between regulated and deregulated states suggests red-tape hindrances on overall U.S. corporate renewable energy progress. Deregulated markets generally offer greater latitude for corporate off-takers to procure renewable power directly from solar or wind generators. Achieving actual renewable energy procurement can be more challenging in regulated states, where utilities are vertically integrated.

Green tariffs are an option that, via various mechanisms, allow utilities to coordinate the delivery of renewable energy and associated renewable energy credits, or RECs, to interested corporate customers. They do not ensure 100% renewable electricity, however. That said, the growing number of corporate off-takers turning to green tariffs could compel vertically integrated utilities to augment their renewable generation capabilities, increasing the percentage of renewable sources in their power mix.

Virtual power purchase agreements help circumvent renewable procurement obstacles to hit corporate clean energy targets. They contribute to displacing fossil fuels in overall electric generation, concomitantly layering a non-negligible green public relation veneer, but leave corporate off-takers tied to the mix of electricity provided by local utilities, which may still rely heavily on fossil fuel generation in some markets.

The above underlines the role of policymakers in providing the fertile ground for renewable energy to expand, and for corporations increasingly to procure their power needs via renewable sources. That said, this, arguably, is a circular argument. Ultimately, corporations play a vital role in reaching federal, state and local decarbonization goals given their share of total electricity consumption. RE100, a consortium of businesses committed to 100% renewable electricity, estimates that businesses account for about half of global electricity usage.

Outside the policy realm and aside from short-term financial windfalls, switching to renewable energy is commercially sensible, particularly when sourced directly from green generators. It helps businesses hedge power consumption against the vicissitudes of international markets, which heightened geopolitical tensions may magnify. It reduces exposure to fossil fuel inflation. It decouples electricity procurement from foreign energy hubs, providing insulation against transport lane disruptions and geopolitical pressures. Sourced locally and vertically integrated, it arguably provides energy independence.

This commercial edge should compel companies with a slow renewable energy start to up their games if they want to avoid falling behind, setting in motion a positive feedback loop that should help maintain a strong corporate renewable momentum.

^{Regulatory Research Associates is a group within S&P Global Commodity Insights.}

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