Q4 2021: Amazon goes bigger, industrial players engage, deal formats morph
This article was adapted from Energy Weekly, a free newsletter about the clean energy transition.
Despite supply chain disruptions and economic uncertainties, corporate demand for renewable energy stayed strong in 2021. The fourth quarter brought the second-largest capacity add by U.S. companies, reaching 6.7 gigawatts (GW). The largest recorded rise in capacity for a single quarter was Q4 2020’s 7.3 GW.
The final quarter of the year saw the continuation and expansion of several dominant clean energy procurement trends: The big deals are getting bigger, more industries are getting involved, more resource types are available and deals are taking new structures.
Amazon goes even bigger
Most of the quarter’s capacity came from a usual suspect: Amazon. The online retail giant and web services provider announced the largest bundle of clean energy purchase contracts to date: 18 projects that collectively reach 5.6 GW.
That amount dwarfs the previous capacity record, also set by Amazon: 3.4 GW in Q4 2020. The company says the latest deal increases its total clean energy capacity by 40 percent.
In addition to its own operations, Amazon says the procurement will cover the electricity used by every customer’s Echo device, showing the company is considering Scope 3 emissions within its clean energy targets.
The massive procurement further highlights Amazon’s approach to clean energy procurements. While other clean energy leaders, such as Microsoft and Google, are working to better match real-time energy demands with carbon-free energy sources, Amazon is going big, working to increase the amount of clean energy generally where it operates. Thankfully, both approaches are needed to decarbonize electricity.
Offshore wind takes off
The final quarter of 2021 saw three U.S.-based corporations sign onto Ørsted’s new offshore wind project in Germany: the Borkum Riffgrund 3.
While the Clean Energy Tracker has included offshore wind deals in the past — Microsoft in 2019, Amazon and Nestle in separate deals in 2020, and Amazon in Q1 2021 — the three separate agreements inked by BASF, Google and Amazon is the most we’ve seen in a single quarter.
According to a release from the developer, Borkum Riffgrund 3 is the first large-scale offshore wind farm to be awarded with zero bid, meaning the project will rely solely on the wholesale electricity prices. That explains why the length of the power purchase agreement is so long for BASF — 25 years, the longest terms yet for an offshore wind procurement — and indicates that the cost of offshore wind, when the factors align, is becoming cost-competitive.
Industrial players turn to clean energy
The cast of players in corporate clean energy procurement continues to expand, with more industrial and manufacturing companies turning to clean energy deals. Of the 11 top contracts noted in the latest tracker, more than half come from companies in the manufacturing, chemical and industrial sectors. That’s notable as tech giants usually dominate this roundup.
Chemical giant BASF inked the above-mentioned offshore wind deal as part of its goal to reduce its emissions by 25 percent by 2030. While the goal might not sound that ambitious, it’s notable given the challenge of the chemical industry to decarbonize.
“In the common fight against climate change, it’s partners like BASF that will make the difference,” said Mads Nipper, CEO of Ørsted, in a statement. “The chemical sector has a challenging path towards decarbonization, but it will also make one of the biggest contributions.”
Other industrial players inking top deals last quarter include PPG Industries, a supplier of paints, coatings and specialty materials, Dow Chemical and railroad company Norfolk Southern.
Deals become harder to track
Since beginning the Clean Energy Deal Tracker, I have delighted in seeing the proliferation of contract models and types of companies that have gotten involved. Looking back at 2021, I recognize that this proliferation makes this tracker — and the rigid format to report capacity — limiting.
Last quarter included smaller companies and interesting deal formats that could not be easily be plugged into our table. For example:
- As previously mentioned, railroad company Norfolk Southern Corporation inked deals to purchase 100 percent renewable power to supply operations into regions of Pennsylvania.
- U.S. supermarket chain The Giant Company signed an agreement to power its Pennsylvania operations.
- ECOS, the sustainable cleaning product brand, signed onto a community solar agreement to power 100 percent of its operations.
Deals such as these are important. They show how corporate clean energy procurement is becoming more democratized and accessible to more customers.
To acknowledge the changing nature of corporate clean energy procurement, GreenBiz is exploring new partnerships to uplevel our procurement trend tracking. Stay tuned.
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