Renewable energy for corporates: the tipping point? - BNP Paribas CIB
Friday 22 November 2019

As costs fall and stakeholder demand increases, corporates are increasingly seizing the opportunity to use renewable energy.

The cost of renewable energy is falling worldwide, and it is becoming increasingly competitive. At the same time, concern about climate change is growing. Younger consumers and workers in particular are increasingly seeking to ensure that companies make efforts to reduce their CO2 emissions. All this, together with price stability, could mean that buying renewable energy reconciles ecological and economic concerns, while creating new ecosystems linking buyers and providers.

The second EnR Entreprises conference, held at the French Finance Ministry in Paris on 20 November and sponsored by BNP Paribas, brought together a mixture of companies, public agencies and other key actors to discuss energy consumption and the opportunities offered by renewable energy.

Panel participants at the conference noted companies' continued shift towards and interest in renewable energy since the inaugural event the previous year, with a marked increase in the number, type and geographies of those committing to using only renewable energy in the near future. Some companies – such as L'Oréal and Solvay – have already succeeded in disconnecting business growth from emissions.

The renewables solutions envisaged are increasingly diverse, including not only solar and wind farms but also biomass, geothermal energy and heating networks that use waste incineration. Some solutions are also locally sourced.

With awareness of the bigger picture of climate control also growing, companies are actively looking at how to align themselves with the European Commission's vision for a "climate-neutral" economy by 2050. Described as "pioneers" by one participant, the companies at the conference are seeking to deal with emissions that go beyond scope 1 (direct) to scope 2 (from purchased energy) and even scope 3, e.g. those of their clients.

This awareness is also particularly relevant at a time when the idea of the (social) "licence to operate" – the acceptance of a company's business practices and procedures by employees, other stakeholders and the general public – is coming to the fore. Participants in the conference warned that companies that do not meet new demands for more planet-friendly energy use and business practices may well lose clients and have problems recruiting and keeping talented young employees, as well as losing out financially as climate-unfriendly practices are increasingly penalised.

Producing and buying renewable energy: corporate PPAs

In 2018, 13.4 Gigawatts of electricity in the world came from corporate power purchase agreements (PPAs), which are medium- to long-term contracts to buy renewable energy at a set or regulated price. PPAs benefit buyers by locking in energy costs – which can otherwise be highly volatile – in the medium to longer term, while reducing companies' carbon footprint. For energy providers, the benefit lies in securing their revenue streams, which may be a prerequisite for financing further assets.

Close to 70% of existing PPAs (by volume) are in the US, while in France – which lags behind certain other EU peers such as Spain and Scandinavia – this is a new business model. In March this year, German B2B food distribution company Metro became the first firm to sign a corporate PPA for renewable energy from an existing windfarm in France, which is owned and operated by Eurowatt. EDF subsidiary Agregio acted as the energy provider.

Two other PPAs have followed in France in 2019, both for new solar sites and both with renewable energy provider Voltalia. The first was for retailer Boulanger, for 5 MW for 25 years, and the second for train operator SNCF, again for 25 years but for almost 150 MW. The construction of new sites in the context of a PPA is known as "additionality", as it effectively adds new renewable energy to the electricity grid. This may be seen as more "virtuous", but at the same time it involves much more counterparty risk on both sides – linked, for example, to the construction of the asset and the longevity of the parties to the agreement. A further constraint is the time taken – especially in France – to receive the relevant permits to set up the new site. Other issues that must be addressed include the necessary involvement of a third party energy provider to deliver the power and ensure the provision of a balanced supply of energy at all times, as most renewable energy is intermittent.

Participants in the EnR conference agreed that the complexity and funding challenges involved in PPAs – especially agreements with additionality – mean that they are largely accessible only to larger companies. The "massification" of these agreements to make them more accessible to smaller ones is seen as a vital element to ultimately ensure the success of this new model in France. One effort being made in this direction is the production of standardised contracts: France Energie Eolienne, a wind power specialist, recently published a free-to-use contract (with the support of a working group that included BNP Paribas). Another is offered for pan-European use by the European Federation of Energy Traders (EFET) and RE-Source Platform, which represents European clean energy buyers and suppliers for corporate renewable energy sourcing.

Contractual solutions panel : Dominique Darne (FEE Administrator), Sylvie Perrin (Plateforme Verte), Romain Talagrand (BNP Paribas Head of Power and Renewables), Corinne Duvermy (Energy strategy and PPA advisor, Orygeen), Sylvain Guedon (Director General, Agregio)

Another problem for smaller companies is that they may not have visibility concerning their long-term electricity needs and may not have the necessary credit standing to allow the producer to secure financing for the project. However, finding a way to give them access to these contracts on a shorter-term basis, for example by using multi-buyer projects – as is already beginning to happen in Australia – would reduce the financial advantage of such contracts because energy prices would only be locked in for only short periods.

Using PPAs also means acquiring new skillsets, both for buyers and providers. Without a PPA, most companies use a single energy provider to buy all their energy in the market. They need to know little about the actual energy or the market. However, with PPAs comes a paradigm shift. Buyers need to know exactly what they need in terms of renewable energy – what kind of energy, from what age of plant, at what price, what kind of relationship with the buyer, for what period and starting when. They also need in-depth knowledge of their energy flows and probable requirements over the next several years. In short, a PPA needs to be part of a company strategy.

Energy providers too need to acquire new expertise in their move from pure producers to providers of tailored electricity solutions for individual clients.

Not enough or too much: the duck curve challenge

Two further, contrasting challenges to renewable energy use were discussed at the conference. The first is the danger that there may not be enough renewable energy projects to meet increasing demand, due to real and perceived technical, legal and financial complexity and to notoriously long lead times for new projects in France.

The second challenge relates to storage capacity. This issue would only occur if renewable energy projects – especially solar-based ones – were to further flourish in France and Europe. Most kinds of renewable energy are intermittent, and solar power is harnessed throughout Europe at similar times during the day. The surplus of energy in the grid during daytime – and the current lack of energy storage capacity – could mean a lack of power in the evening. This imbalance between peak supply and demand is known as the duck curve.

Renewable energy stakeholders must urgently address the issue of how to ensure that the stability of the energy system as a whole is maintained. This calls for the rapid development of storage solutions on a massive scale, for example hydrogen and batteries.


Give us your feedback

Please validate CAPTCHA.


Investors' advocacy and governments' net-zero commitments will push Asia's responsible recovery, spurring a boom in sustainable finance in 2021.

On October 8 2020, Movin'On Community of Interest on Energy Efficiency & Financing Transition ran virtual...
On October 8 2020, Movin'On Community of Interest on Energy Efficiency & Financing Transition ran virtual working session...
Movin'On partners BNP Paribas, Solar Impulse, Michelin and Engie are teaming up to scale up investment...
Movin'On partners BNP Paribas, Solar Impulse, Michelin and Engie are teaming up to scale up investment in energy efficiency...
A return to the Paris Climate Agreement is serving as a catalyst for an acceleration of clean energy...
A return to the Paris Climate Agreement is serving as a catalyst for an acceleration of clean energy investment by US corporates...
BNP Paribas partners with the Zayed Sustainability Prize's 20by2020 initiative to provide clean energy...
BNP Paribas partners with the Zayed Sustainability Prize's 20by2020 initiative to provide clean energy to vulnerable communities...