January 23rd, 2018 by Joshua S Hill on Clean Technica
Corporations around the world signed a record volume of Power Purchase Agreements in 2017, amounting to 5.4 gigawatts of clean energy by 43 companies across 10 different countries, which is an impressive 25% increase over 2016.
A new comprehensive analysis of corporate clean energy procurement published this week by Bloomberg New Energy Finance (BNEF) found that corporations signed a record volume of clean energy Power Purchase Agreements (PPA) in 2017, despite increasing political uncertainty and stability in two of the world’s leading markets — the United States and Europe.
The new report from BNEF concludes that 43 corporations across 10 different countries signed 5.4 GW (gigawatts) worth of PPAs, up 25% from 4.3 GW signed in 2016, and the previous record of 4.4 GW in 2015. While the figure might seem small when compared to other clean energy figures we are often accustomed too, it nevertheless represents an important step forward for corporations. Consider that only last week, Nike announced that it had signed an 86 MW (megawatt) PPA with Avangrid Renewables in Texas which, in addition to an undisclosed PPA (again with Avangrid) in the Columbia Gorge region of Oregon, sources 100% clean energy for its North American owned and operated facilities.
In other words, small megawatt-size PPAs go a long way for corporations, and 5.4 GW represents a lot of operations being covered by clean energy. Consider also that, according to BNEF, corporations have now signed contracts to purchase nearly 19 GW worth of clean electricity since 2008 — an amount comparable to the generation capacity of a country like Portugal. Further, 76% of this activity was completed since 2015.
Global corporate PPA volumes
These figures are also heartening considering the growing political uncertainty that plagues the United States and Europe. While the clean energy industry had a friend in the White House when Barack Obama was President, the tables have turned and it now literally has an enemy in Donald Trump. Nevertheless, most of 2017’s activity was in the United States, with 2.8 GW worth of PPAs signed, up 19% from 2016.
Similar uncertainty grips the European market, but the region experienced near-record PPAs with over 1 GW signed. 95% of this volume was centered in the Netherlands, Norway, and Sweden, which only serves to confirm the uncertainty that is so common in other European countries like the UK, Germany, and France.
“The growth in corporate procurement, despite political and economic barriers, demonstrates the importance of environmental, social and governance issues for companies,” explained Kyle Harrison, a corporate energy strategy analyst for BNEF.“Sustainability and acting sustainably in many instances are even more important, for the largest corporate clean energy buyers around the world, than any savings made on the cost of electricity.”
Looking forward, BNEF expects growth to continue in 2018 and surpass 2017’s record level of PPAs, thanks in part to a consistent level of corporate commitments to rely on renewable electricity, especially those 100% commitments made through the RE100 campaign. Considering that 35 new companies signed on to RE100 in 2017, bringing the total number up to 122, this is likely to be a central driver of clean energy PPAs for many years to come.
RE100 electricity demand
Amidst the madness of 2017, a bigger shift was missed than probably any other — right at the commanding heights of the economy: Natural gas fizzled out of the plan for the future.
Natural gas is no longer a contender or pretender, just a relic of the past, likely to fall as far and as fast as Old King Coal, and maybe faster. This has repercussions for the economy of many states and nations, and the politics of the transition in terms of what we ask for and what we will get.
Here’s what I’m thinking:
The big signal that got some coverage in the pink pages (FT) and energy-wonk trade press in November was the closure of Siemens and GE’s gas turbine-making capacities. Just to recap for those that missed it, first Siemens, the giant European champion of the electric power revolution, laid off 7,000 workers. Siemens reported that it had a capacity to make 400 100MW gas turbines annually but only had received orders for 110 in 2017. Ouch. Retrain!
And then GE: Two weeks later, it laid off 20,000 workers in its gas-related business, including turbine-making teams around the world. Remember, just about five years ago Siemens and GE battled for the gas business of Alstom, the French descendent of the same companies GE came out of in the early 20th century. GE paid $10 billion for it and declared a coup.
But now, they’re writing it off. Their strategic choices under Jeff Immelt are being questioned by the market: while the Dow is up about 30 percent over the past 12 months, GE’s stock is down about 45 percent. (Indeed, GE won the “honor” of being the Dow Jones Industrials worst-performing stock of 2017.)
What’s significant is the timing of these announcements. Is it a coincidence that they happened as South Australia was turning on a 100-megawatt battery that had been built in just 100 days by Tesla and a consortium? If the reality is that we can build large-scale storage that can do all the functions of a fast-ramping gas turbine at, say, 100MW scale, and we can build it in less than six months (gas peakers would take six years) for less money, then I think there will be no market for gas turbines to provide peaking services.It’s pretty binary. And I think Siemens and GE know it.
That is not to say they will not sell any turbines. Or that someone else won’t try (although I am not sure who). The point is, the world’s best companies at making gas turbines are starting to get out of that business. And what Tesla and friends did in South Australia is about to become commonplace. Storage is cheap enough to build at these scales, and the more it is built the cheaper it will become. No wonder Siemens is working with Gamesa on making hot-rock storage as a competitive technology — so it doesn’t get completely left behind by batteries.
But that’s not all.
A few other heavy blows were dealt to natural gas over the past few months. In November, the Norwegian Sovereign Wealth Fund, derived from hydrocarbon riches and one of the world’s largest pools of capital, proposed to stop investing in oil and gas. In December, the World Bank announced it also will swear off financing of upstream oil and gas projects, albeit not until 2019. That means key money taps for the industry are closing. Norway’s are the kind of trillions you need to develop new gas fields, and the World Bank’s catalytic billion-scale capacity is oft needed to get such flows going. Alas, they will be no longer.
But what about customers?
Here in California, we’ve had some pretty strong signals from key buyers in the world’s sixth-largest economy that it wants to get off natural gas. Stanford University — an innovation economy bellwether — swore off its gas contracts in an effort to electrify everything and experiment in climate solutions at scale. The city around it, Palo Alto, then decided to wean its public utility and people off gas. It can get solar power for less money and is rebating citizens to swap out gas heaters and stoves with electric appliances. A sign of things to come.
Probably more important is the California Public Utilities Commission and the California Energy Commission — the two agencies pretty much designing and approving the state’s energy assets — saying they no longer need natural gas in their toolkit. (The California ISO agrees.) This came in the context of hearings around a particularly offensive gas peaker plant called Puente in Southern California — especially after the politically disastrous Aliso Canyon gas leak of 2015-16 and the deadly San Bruno gas explosion before that, in 2010.
It is a consensus that must send shivers up the spine of long-term gas sellers. Aside from being a big market for gas (even since the gas guys screwed the state with the energy crisis of 2000-01), California is often a driver of things to come. When it comes to energy, as goes California, so goes the nation and often the world. When California claimed it basically would get off coal 20 years ago, it was poo-pooed and parodied. It has taken until this year to get completely off the black-rock power supply fully — but, lo and behold, the rest of the world is pretty much following suit.
And it will with natural gas. A fully renewable energy supply and the electrification of everything is the emerging plan in California, wherein electric vehicles are a distributed asset and thermal power is dying.Of course, many will read this and doubt or decry it. And by no means am I saying it is definitive. There are some contraindications. More gas pipeline projects kicked off in the fracking fields of America this year than this screed would suggest. But those were likely committed to in 2015 or before. I’d imagine that investors today are worried about them becoming stranded assets. I think the evidence around fracking-well depletion rates and leakage rates has become clear: Natural gas is not a climate solution.
A bridge fuel to nowhere.
Beginning of the end
When we know what we know about flaring and lifecycle global warming potential, I think it is intellectually dishonest to keep pretending gas is better than oil or coal. It is not. But what this turn of the market — the reality that it is no longer essential in the electricity grids of California and beyond, and that no one is buying it when they can buy storage of electricity itself for less — allows, is for us to abandon the bridge-fuel nonsense.
For now, simply know this: 2017 was the beginning of the end for gas.
A little over two years ago, David Hochschild, a California Energy Commissioner, and I published an op-ed in the San Francisco Chronicle declaring “the end of coal is near.” At the time, the article was the subject of some vitriol and ridicule but it largely has been borne out.
Of course, we were not alone (nor am I now) on willing the end of the natural gas industry. But I think it’s important to reflect that in 2017, for all its other problems in the clean-energy industry and our nation more broadly, the gas industry became, if not dead, at least a dead man walking.