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BASF signs 21 TWh PPA over 25 years with Engie, sets up green energy unit

Highlights

BASF sees own power consumption triple from 9 TWh/year

Gradual switch to renewables for 2050 net zero goal

Engie PPA, BASF's existing activities focus on wind

German chemicals company BASF has signed a 25-year power purchase agreement (PPA) with French utility Engie for renewable energy in Europe, Engie said Nov. 29.

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Under the PPA, effective Jan. 1, 2022, Engie will provide the world's biggest chemicals maker with up to 20.7 TWh of renewable electricity. On average, this would be 828 GWh/year.

BASF consumes around 9 TWh/year of electricity at its European sites.

BASF CEO Martin Brudermueller described the agreement as a "significant next step on our path to climate-neutral chemical production" as it "secures substantial volumes of electricity from renewable sources."

"It makes BASF an enabler for green energy triggering additional projects for renewable power in Europe," the BASF CEO said.

Multiple BASF sites across Europe will be supplied from Engie's renewable project portfolio, it said.

Initially, supply will come from onshore wind farms in Spain. In future, Engie will have the option to deliver from future onshore and offshore wind farms, it said.

Engie CEO Catherine MacGregor said that, thanks to its "large, diverse and growing portfolio of renewable energy production, Engie is able to provide carbon-free energy."

The statement did not provide any financial details.

The latest S&P Global Platts quarterly PPA tracker, which monitors offer prices on Zeigo's platform, showed Spanish wind PPA offers averaging Eur37.50/MWh in Q3 2021.

German power prices have risen sharply with year-ahead power hitting Eur100/MWh for the first time in September.

Average generation costs for gas-fired power across Europe soared above Eur200/MWh for Q1 2022, up sixfold year-on-year, Platts data show.

Platts Analytics sees gas and power prices falling over the next five years, but remaining significantly above the 2016-20 average.

BASF in October warned that high energy costs may impact ammonia production. BASF's Ludwigshafen is one of the largest chemical production sites in the world.

The complex consumed 6.2 TWh of electricity and 18.2 million mt of steam in 2019 produced from a combined 16.6 TWh of fossil fuel mainly gas, company data show.

The site hosts four gas-fired power turbines, with 1 GW capacity generating 4.9 TWh of electricity in 2020.

Renewables bundling

BASF is bundling its activities in renewable energy under the umbrella of BASF Renewable Energy as of Jan. 1, 2022, it said in a separate statement Nov. 26.

It forecasts its European power consumption to increase three to four times by 2050 from the current 9 TWh/year mainly generated from fossil fuels to electricity from renewable sources to reach its net zero goal.

The subsidiary will focus on supplying BASF in Europe with electricity from renewable energies and electricity trading activities in Europe.

To this end, it will initiate new projects to generate renewable energy with partners and conclude long-term PPAs with energy producers, it said.

BASF already signed an agreement with Vattenfall for a 49.5% stake in a 1.5 GW Dutch offshore wind project for a combined Eur1.6 billion ($1.9 billion) and teamed up with RWE for 2 GW of North Sea wind projects not yet awarded.

In November, BASF signed a 25-year PPA with Orsted for 189 MW of supply from the planned 900 MW Borkum Riffgrund 3 offshore wind project.

"As the leading company in the chemical industry, we are already one of the largest industrial electricity consumers in Europe," BASF Renewable Energy head Horatio Evers said, adding that "our demand will increase significantly in the future."

"Reliable and efficient supply to BASF with sufficient quantities of electricity from renewable sources at competitive prices is necessary for the implementation of our goals," he said.

BASF has set a target to reduce its greenhouse gas emissions by 25% by 2030 compared with 2018 and to achieve net zero emissions by 2050.

In addition to procurement and power trading, BASF Renewable Energy will also provide expertise and advice on renewable energy within the BASF Group worldwide.

BASF GREEN ENERGY MILESTONES

Projects / PPAs
TWh/year
Start
Stake in 1.5 GW Dutch offshore wind at HKZ
3.3*
2023
189 MW PPA with Orsted for Borkum RG3
0.8*
2025
Engie PPA (initially onshore wind Spain)
0.8
2022
Current supply
Currently electricity demand by BASF in Europe
9
2020 gas-fired generation at Ludwigshafen
4.9

Source: BASF, S&P Global Platts (*estimate based on 50% load factor)