Covid-19 pandemic has darkened the clean energy market, Energy News, ET EnergyWorld
Business demand for clean electricity is dropping for the first time as more employees work from home than ever before. This is particularly notable for the RE100 companies, which have all committed to offset 100% of their electricity consumption with clean energy.
Ninety-four of the 222 RE100 companies that disclosed electricity demand data for 2019 and 2020 reported declines in their consumption as they adapted to remote working environments last year, a said Kyle Harrison, New York-based corporate energy strategist at BloombergNEF.
“The RE100 still presents an incredible clean energy investment opportunity, but the long-term outlook has dimmed slightly,” said Harrison.
While large energy users have seen their electricity consumption increase significantly, such as QTS Realty Trust (29%), General Motors (28%), Schneider Electric (25%) and Vodafone (17%), this was not enough to offset declines from other companies, Harrison said. Notable companies that reported the biggest drops are AstraZeneca (13%), Signify (23%) and Siemens (36%).
For some, the drop in consumption may be a temporary setback, but for others, the recovery may take years as businesses turn to a full or hybrid remote working environment.
The more than 300 RE100 companies that have set 100% clean energy targets will need to purchase an additional 247 terrawatts (TWh) of clean energy in 2030, according to BNEF estimates. That’s down from the research firm’s previous forecast of 269 TWh in January, and marks the first time that the outlook for 2030 has come down.
The largest providers of clean electricity to businesses are Invenergy LLC, Ignis, Engie SA, NextEra Energy Inc. and Orsted A / S, according to BNEF. While the outlook for clean electricity remains optimistic for now, declining private sector electricity use is something developers should watch out for, Harrison said.
The volume of business power purchase agreements rose 86% in the first half of 2021 compared to the period a year earlier, as the world emerged from what had been the worst wave of the pandemic. “While business demand remains a healthy opportunity for clean energy developers, the Covid-19 pandemic could still emerge,” he said.
Microsoft Corp. last week announced 35 new power purchase agreements to make solar and wind power the world’s second largest buyer of clean energy. The agreements underpin Microsoft’s broader strategy to match its hourly electricity consumption to clean energy at all times by 2030, Harrison said.
The S&P Global Clean Energy Index, which includes NextEra and Orsted, has risen 177% since the start of 2019, and that includes this year’s 21% drop.
Despite recent sales, green energy companies Orsted, Neoen SA and Solaria Energia y Medio Ambiente SA are still trading at enterprise value multiples before interest, taxes, depreciation and amortization (Ebitda) higher than most integrated utilities (Enel SpA, Iberdrola SA and Engie SA) and even some tech giants (Alphabet Inc. and Facebook Inc.), according to Elchin Mammadov, analyst at Bloomberg Intelligence.
The huge capacity growth prospects for wind and solar power developers and the surge in ESG investments could continue to “support the premium valuations of the green sub-sector after the recent downgrade,” he said.