Fast-growing corporate demand for renewables-generated power is expected to move up the gears this year fuelled by climate crisis – and shareholder – pressured shifts within companies including heavy-emitters to adopt ‘decarbonisation packages’ necessary to meet Paris climate emission reduction targets, according to latest forecasts from WoodMackenzie.

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But the analyst group cautioned that despite “packaged broader low-carbon solutions to help end-users decarbonise being high on the corporate agenda”, acceleration of the global climate action agreements inked at the COP26 conference hid “rising near-term risk” for investors and developers.

“Business leaders will need to address a range of concerns to build credibility on how they will deliver competitive advantage in the fast-changing world of the energy transition,” said Norman Valentine, director of corporate research at WoodMac.

“Energy system electrification, accelerated renewables growth, battery deployments and expansion in power-to-X will be recurring corporate strategic themes – set against a background of growing competition, rapid technological change and policy uncertainty.”

“Utilities and energy companies will see demand from corporate clients that want broader decarbonisation packages accelerate in 2022 – with customers, such as industrial and chemicals companies, under growing pressure from stakeholders to confirm their strategies,” he said.

WoodMac principle analyst Akif Chaudhry stated: “The number of companies setting emissions targets has risen sharply and many are now aligning with net zero goals. COP27 [planned for Sharm El-Sheik, Egypt], in late-2022, will focus on raising ambition for 2030 targets. Scrutiny on tangible corporate progress towards emissions targets will heat up rapidly.

“Companies need to prove they are meeting their lofty ambitions in terms of decarbonisation at all levels of their operations – to the point of looking at localised grid-edge solutions beyond installing EV charging points outside their premises.

“Strong demand for renewables assets will come from new entrants, institutional investors and corporate energy users seeking to decarbonise supply,” said Chaudhry. “Competitive pressures in established markets will see [developers] position themselves [for] growth in alternative markets and segments through new partnerships and alliances – and partnering to reduce competition in license rounds.”

WoodMac expects the merger and acquisition market to hot up as corporates increasingly see take-over as the “most expedient way to capture the growth potential of renewables”.

The analyst group flagged, however, that the “complexity of achieving project progress with buy-in from investors may be the biggest barrier to meeting [corporate energy transition] targets being set”.

“Calls for improved disclosure on emissions performance and environmental impact are increasing as investors seek best-in-class performance on ESG [environmental, social and governance practices], so companies need to outline plans to decarbonise their entire business, including intermediate targets on the road to net zero,” said the report.

Valentine highlighted potential problems lying in wait for the renewables industries due to market maturity-linked cost increases. “Renewables’ growth can’t meet global energy demand at its present rate of expansion, with some project costs doubling or quadrupling in the last year and remaining at those levels into 2023,” he said, adding that “significantly greater complexity” in project construction would raise risk levels.

“Where to bid, when to bid and what to bid will be under the microscope, in what is already a complicated process,” he said.

“At the same time, competition for generation assets is increasing, not least as the European oil and gas majors [including] BP, Shell, TotalEnergies, Eni and Equinor have entered the fray, bringing their deep pockets and ambitious targets,” Valentine added.