Note: this article was updated in August 2022 to reflect recent changes in the industry.
The Global Clean Energy Investment Landscape
The cost of renewable energy continues to become more competitive with fossil fuels as LCOE drops. Following passage of tax cut legislation at the end of 2017, Greentech Media reports, "Much of the conversation in clean energy circles…has revolved around a potential shrinking of the tax equity market -- which accounts for between 40 percent and 60 percent of finance for individual solar and wind projects -- because of the reduction in value of renewables credits." According to Greentech Media, however, it appears that - so far at least - corporate America is showing "continued interest in direct renewables investments."
The Rapid Growth of Clean Energy Sector
Solar power is now the fastest-growing source of new energy, according to the IEA. With this growth, clean energy project managers are seeing a higher interest in development and clean energy investment from major buyers. We spoke with Apex Clean Energy's Chief Commercial Officer, Steve Vavrik. He explains (bolding added for emphasis):
“We’re seeing a doubling of the number of inquiries about investing in projects than we saw last year," Vavrik said. "We haven’t seen a lot of deals announced under this trend yet, but we’re certainly sharing it as a request.”
Cleantech Investment Path Sorely Needed to Reach a "Low-Carbon Energy System" By 2050
In a previous post, we looked at the IEA’s most recent report on reaching a low-carbon energy system by 2050. This would require renewable energy's share of the global energy mix "to double by 2030 and more than triple by 2050 from today’s level." But the good news is that, according to the report, "supplying two-thirds of global 2050 primary energy with renewable sources is technically and economically feasible."
This chart below shows how much investment in the clean energy market is needed to keep global temperature change beneath 2C.
So Why Should Companies Invest in the Clean Energy Market Now?
Beyond the dire planetary need to transition to a 100% clean energy grid, there are great economic opportunities in the clean energy market.
Apex Clean Energy said the cost will continue to be central to corporate decision-making on clean energy investment. As the economics of clean energy have shifted favorably, so has the mindset around analyzing benefits.
“Corporates are realizing that not all power supply is equal,” said Vavrik. “They’re looking to invest in sustainability.”
Also worth highlighting is the comment by Erik Haug, also at Apex Clean Energy, who notes that "We’re seeing the clean energy market overall broaden in terms of the products [companies] are looking for and the approach they’re bringing to the table."
Prices are dropping and offerings are diversifying, making renewable energy an economically smart choice for corporations.
The tide is turning on expectations of corporate responsibility from customers. Society wants — and needs — companies in energy-intensive industries to invest in clean energy and decarbonize their businesses. In fact, a recent Gallup poll says 65% of consumers worldwide prefer products that are made with wind energy.
Apple is one company that’s listened, and it has such a large renewables portfolio that it’s filed to register as a utility. American Clean Power estimates that corporate buyers have contracted 46 GW of wind and solar to power their businesses, and expect an 85GW demand by 2030. And the presence of established groups like the Clean Energy Buyers Association imply that there is a permanent shift coming from corporations procuring renewable energy instead of fossil fuels.
In sum, although there's a fair amount of uncertainty following tax reform, Greentech Media concludes - and people like Steve Vavrik and Erik Haug agree - that, "although certainty in the market has waned, interest in direct project investment has not."