Tech giants' investments in renewable power purchase agreements lead the way

As major fossil fuel companies experience huge drops in market capitalization due to the oil price bottoming out, the spreading covid-19 pandemic and the consequential share market slide, major technology companies are instead facing their next boom.

At the end of 2019 the fossil fuel energy sector commanded just 4.3% of the Standard & Poor’s 500 index (and probably just half of this today in March 2020), down from 25% in the 1980s, when oil and gas companies represented seven of the top 10 companies. Today there are none, with big tech giants commanding half of the top ten spots.

The largest players in ICT — Amazon, Apple, Facebook, Alphabet’s Google and Microsoft — have been investing in renewable energy projects for some time, and have all committed to renewable energy targets.

Similarly, nine of the ten largest banks in the United States have committed to 100% renewable energy in their operations (and three are already there). Seven of them have set meaningful targets to provide sustainable, low carbon or renewable energy financing.

Both sectors have driven renewable investment by the global need to reduce carbon emissions, and at this current juncture with fossil fuel majors and markets collapsing around us, are likely to drive even further investment into low cost deflationary sustainable renewable energies.

While governments may be doing little, or worse — backtracking in the U.S. and spinning in aimless circles in Australia — corporate energy users are getting on with it. 

Corporates use of renewable power purchase agreements (PPAs) and, to a lesser extent, direct investment in renewable energy projects has continued apace.

Companies do this partially to promote themselves as good corporate citizens to employees, customers, and increasingly, investors, but mainly because it is simply good business: renewable energy can be obtained cost-effectively and in a way that reduces future price uncertainty.

This commentary surveys the progress in renewable energy investment in the ICT industry, including in the take-up of corporate renewable PPAs.

Last year saw a new record for corporate renewable PPAs in the U.S., with $13.6 gigawatts (GW) of capacity contracted by U.S. companies under either PPAs or green tariffs.

Sixty-nine American companies have now joined RE100 — a global leadership initiative bringing together businesses committed to 100% renewable electricity. This compares to 31 companies in the United Kingdom, 10 in Australia, and 59 in the European Union. Some have quietly been 100% renewable for years, some have set ambitious targets and are meeting them, others have done little more than put a target in place.

Purchasing 100% renewable energy is a good step as PPAs lower costs while supporting investment in new renewable projects. For many firms it is just one element in the overall carbon emissions reduction picture: supply chain emissions from manufacturing processes and building emissions are often far larger sources.

But that picture is changing. As the pandemic continues and oil and stocks continue to suffer shocks, investment in renewable energy projects is the way forward now.