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Can Silicon Valley Beat China In Clean Energy Tech?

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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Big Oil And Big Tech Are Spending Billions On Renewable Energy

Given the option, most Americans would not only prefer to choose their own utility companies but also have more of the energy that powers their homes coming from clean energy sources. That’s according to a Consumer Report survey where 81% of respondents agreed that reducing pollution from power plants is a worthwhile goal. It’s a decision that’s not entirely in their hands, though, since only 50% of Americans have the option to purchase renewable energy directly from their power suppliers though everybody has the option to purchase renewable energy certificates (RECs). Corporates’ relationship with renewable energy might not be as straightforward. For many companies, the cost of climate change, not a change of heart, could be what has been forcing them to restrategize and reduce carbon footprints or think about reducing fossil fuel consumption.

Nevertheless, corporate organizations have emerged among the biggest buyers of renewable energy.

According to a Bloomberg New Energy Finance (BNEF) report, global corporations have been striking a record number of clean energy power purchase agreements, or PPAs. In 2019, corporations purchased 19.5 gigawatts of clean power through long-term contracts, marking an impressive 40% Y/Y increase. Indeed, over the past three years, companies have quickly ramped up their clean energy purchases from 4.3GW in 2016.

When it comes to which corners of the corporate world have been buying the most renewable energy, well, there are no surprises here as Big Tech easily takes the cake. 

Related: Why China Can’t Quit Coal However, the big surprise is that Big Oil, a sector that is frequently castigated for its outsized role in climate change, is beginning to make its presence felt here in a big way, too.

Source: BNEF

Big Oil to rival Big Tech 

Over the past half-decade or so, tech giants Google, Amazon, Facebook, and Microsoft have been dominating clean energy procurement and are looking to continue being renewable energy’s biggest customers.

Last year, Google signed contracts to purchase over 2.7GW of clean energy globally, the biggest clean energy commitment by any company on the planet. That included contracts to buy 1.9GW of clean energy in six countries. Google employs a unique reverse auction process when signing renewable energy contracts, with developers taking part in a live, public bidding process.

Facebook had the second-largest commitments (1.1GW), while Amazon (0.9GW) and Microsoft (0.8GW) took third and fourth spots, respectively. Google has signed up to $2bn wind and solar investments with plans to use the clean energy to power its massive data centers. Meanwhile, Amazon has revealed plans to invest in four new renewable energy projects to support the company’s objective to achieve 80% renewable energy by 2024 and 100% renewable energy by 2030. 

These four internet giants operate massive, power-hungry data centers that have been blamed for their copious greenhouse gas emissions. It’s, therefore, probably not surprising that they are putting some effort into ameliorating at least some of the damage.

Big Tech might be the clear leader in the renewable energy space, but Big Oil might soon rival it.

Occidental Petroleum (NYSE:OXY), Chevron (NYSE:CVX) and Energy Transfer Partners (NYSE:ET) all signed solar contracts in 2019, following in the steps of ExxonMobil (NYSE:XOM), which signed several large PPAs in 2018.

Back in November 2018, Exxon signed a PPA with Danish utility Ørsted (CPH:ORSTED) that will see the oil major buy 500 MW of wind and solar power from Ørsted’s parks in Texas for the operations of its Permian Basin oil fields.

Last year, Occidental announced the start-up of its 16-MW solar park in Texas as well as the signing of an off-take contract for an additional 109 MW of solar power.

In the same year, Chevron announced that it had signed a 12-year PPA with a wind farm in West Texas to purchase 65MW of wind energy.

Related: EIA Sees WTI Crude Averaging $44 In 2021

Meanwhile, pipeline company Energy Transfer Partners agreed to a 15-year PPA deal with Canadian Solar’s (NASDAQ: CSIQ) wholly-owned subsidiary, Recurrent Energy, LLC, for the construction of a 28 MWac Maplewood 2 Solar Project. The PPA marked Energy Transfer’s first-ever dedicated solar contract.

Robust clean energy demand

Currently, there are 270 global companies that have joined the RE100 club, i.e., companies that have committed to source 100% of their energy needs from renewable sources at some point in the future. That’s a 22% increase from last year’s tally of 221 members.

BNEF says that sustainability commitments as well as the powerful ESG megatrend will ensure that clean energy procurement from corporations continues to thrive. In fact, the energy watchdog estimates that last year’s 221 RE100 companies will need to purchase an additional 210TWh of clean electricity in 2030 to meet their targets, which in turn will catalyze an estimated 105GW of new solar and wind build globally and nearly $100B in clean energy infrastructure.

Source: BNEF

But with RE100 membership expanding at such an impressive clip, you can bet the actual clean energy and infrastructure figures are bound to be 2-3x higher than BNEF estimates.

By Alex Kimani for Oilprice.com

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  • Lyle Stevick on December 06 2020 said:
    Oil is only investing in renewables because it is in denial of climate change. Not the standard right wing variety of denying temperature increases or carbons role in those increases. The left wing denial we do not talk about, denial that the carbon contributed to the triple digit crop yield increases we have had , denial that carbon is realistically responsible for over fifty percent of those crop yield increases, 3-4 billion lives. And denial in the center, that we must have technical solutions to control the earths temperature. That accumulation and emissions are not the same thing. That carbon accumulates and dissipates slowly, compared to emissions and our current temperature increases. That reducing emissions will not avoid a catastrophe, we must have technical solutions. Denial that oil could play an outsized role in those technical solutions. From direct roles like using plastic to make green houses to evaporate sea water and create cloud cover, to indirect roles like investing in research to engineer crops to turn white after harvest. Hundreds of other people would put forward hundreds of other ways of addressing climate change while keeping our carbon increases, our crop yield increases, and our billions in population increase. When big oil and gas invest in renewables they are denying that carbon is good and worth saving while we control our climate. When they give up on carbon and invest in renewables instead of technical solutions, they expose their denial. This position does not change one bit when we factor in, that the effect of warming, will be worse than we are being told. With 90% of our land in the north, 90% of our ice in the south, and a tight relationship between the two, sea level rise has way more regional potential than the 270 feet we are told. Does this omission give authorities the right to not tell us about the good side of carbon. The whole problem with not telling the truth is that we eventually have people setting policy, who do not know the truth. So, in the rush to condemn carbon, the connection between the crop yield increase and the population increase got dropped, now the tripling of our population was brought about by Western medicine, not by the tripling of our food supply. Carbon had nothing to do with it, and carbon can now safely be called evil. Pretending carbon is evil, does not make it evil, no matter how ignorant the pretender. An intelligent position of denying nothing, still leads to strong investment in technical solutions that preserve carbon, not renewables that leave us with reduced crop yields.

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