New Delhi: Despite all the losses and economic damage caused by the coronavirus pandemic, it has also managed to disrupt efforts to combat climate change
Business demand for clean electricity has declined for the first time as more employees than ever before are working from home. This is especially true for companies in the RE100, which have all committed to 100% offsetting their electricity consumption with clean energy.
94 of the 222 RE100 companies that released electricity demand data for 2019 and 2020 reported a decrease in their consumption as they adapted to remote work environments over the past year, said Kyle Harrison, a New York-based energy strategist at BloombergNEF.
“The RE100 is still an incredible clean energy investment, but the long-term outlook has clouded over slightly,” said Harrison.
While large energy consumers like QTS Realty Trust (29%), General Motors (28%), Schneider Electric (25%) and Vodafone (17%) saw their electricity consumption grow significantly, that was not enough to offset the falls from other companies, said Harrison. Notable companies that saw the biggest drop were AstraZeneca (13%), Signify (23%), and Siemens (36%).
For some, the decline in consumption can be a temporary setback, but for others, it can take years for businesses to recover as businesses move to a full or hybrid remote work environment.
The more than 300 companies in the RE100 that set themselves 100 percent clean energy targets will have to buy an additional 247 terawatts (TWh) of clean energy in 2030, according to estimates by the BNEF. That’s less than the research firm’s previous January 269TWh forecast, and marks the first time the outlook for 2030 has fallen.
The largest providers of clean power to businesses, according to BNEF, are Invenergy LLC, Ignis, Engie SA, NextEra Energy Inc. and Orsted A / S. While the outlook for clean electricity remains bullish for now, developers should keep an eye on the decline in electricity consumption from the private sector, Harrison said.
The volume of corporate power purchase agreements increased 86% in the first half of 2021 compared to the same period last year, when the world emerged from the worst wave of the pandemic. “While corporate demand remains a healthy opportunity for clean energy developers, the Covid-19 pandemic can still show its ugly head across the board,” he said.
Microsoft Corp. announced 35 new solar and wind power purchase agreements last week to become the second largest corporate consumer of clean energy in the world. The agreements underpin Microsoft’s broader strategy to match hourly electricity usage with clean energy anytime through 2030, Harrison said.
The S&P Global Clean Energy Index, which includes NextEra and Orsted, is up 177% since early 2019, including this year’s 21% decline.
Despite the recent sell-off, green electricity companies Orsted, Neoen SA and Solaria Energia y Medio Ambiente SA are still trading at a higher enterprise value-to-earnings ratio before interest, taxes, depreciation and amortization (Ebitda) than most integrated utilities (Enel SpA, Iberdrola SA and Engie SA) and even some tech giants (Alphabet Inc. and Facebook Inc.), according to Bloomberg intelligence analyst Elchin Mammadov.
The tremendous prospect for capacity growth for wind and solar energy developers and the rise of ESG investments could “continue to support the premium ratings of the green subsector after the recent downgrade,” he said.