US corporate and industrial (C&I) clean power procurement activity declined a “notable” 23% in the first quarter versus a year earlier as “uncertainties in project development timelines” were among the issues leading buyers to be more cautious in entering new deals, according to the American Clean Power Association (ACP).
C&I buyers announced 3.31GW of new long-term power purchase agreements (PPAs) in Q1, less than half of the 6.34GW in total deals nationwide, the industry advocacy body recorded in it Clean Power Quarterly 2022 Q1.
The downturn was also due in part to rising PPA prices, according to Hana Colwell, a research and analytics manager at ACP. “Wind and solar PPA prices increased this quarter across every region due to supply chain disruptions and increasing prices for commodities and labour,” she said.
“We expect corporate demand for clean power to continue to be strong, but in light of market constraints and policy uncertainty, it may not rise to its full potential over the next few years,” added Colwell.
Verizon, announcing 859MW of new PPAs, was the top corporate purchaser this quarter. The Markley Group came in second with 400MW of deals for solar projects signed, and QTS Reality Trust in third with 350MW of solar PPAs. In fourth and fifth places are Nucor Steel (315MW) and Comcast Xfinity (250MW), respectively
Utilities bought 2.51GW, while the remaining 517MW of capacity was contracted by other non-utility buyers such as Vanderbilt University in Tennessee, or was undisclosed in cases where terms of the PPA are not yet public.
Uncertainties ranging from availability of federal tax credits and material and shipping cost escalation, through potential new US tariffs on solar modules from Southeast Asia, the source of 86% of imports, to supply chain disruptions from Covid-19 and the Ukraine war, have been central to the drop in C&I PPAs, noted Wood Mackenzie principle consultant Aaron Barr, speaking at the ACP Cleanpower conference last week in San Antonio, Texas.
“All these things are adding up to make a really challenging environment,” said Barr, adding that the supply chain across renewables “is really fractured and a lot of it is broken”.
There is little visibility into whether these headwinds will last over the next several quarters or years, leaving both the industry and its customers on edge. The US political equation also looks increasingly negative for majority Democrats in Congress.
Polling in the US today suggests that opposition Republicans will regain control of both houses in November national elections. This could potentially endanger President Joe Biden’s ambitious climate agenda and policies that support renewables, a scenario that companies have begun to factor into their decision-making for energy purchases.
Still, solar and wind continue to have a cost advantage over coal, natural gas, and nuclear. Barr noted that natural gas plants are exposed to the same materials concerns, citing steel as an example, while renewables have no fuel risk or greenhouse gas emissions.
The figures revealing the fall in C&I commitments were a disappointment after they exceeded 50% for the first time in 2021 when new PPA announcements totalled a calendar year record 29.1GW, up 28% from 2020.
A total 6.34GW of PPA procurements were announced in the first quarter, down 10% from a year earlier. Solar dominated comprising 72% of deals made public, followed by wind (21%), and battery storage (7%).
