Many Fortune 500 companies, especially in the fossil fuel or shipping/logistics industries, are now the target of public focus on climate change. In addition to climate-focused litigation and demonstrations, many companies are facing Environmental Social Governance requests from shareholders seeking to have companies value their climate impacts; rising demand for "green" investment funds or some evaluation regarding environmental impacts; and consumer pressure to link brands to climate protection.
While it is debatable whether a response to such pressures is required, many companies have been responding to increased pressure to act on climate change in a variety of ways, including building their renewable energy portfolios, investing in green technologies, and incorporating climate change into their public messaging.
On October 24, 2019, Amazon announced two major renewable power purchase agreements in the US and one in Scotland. The first-of-its-kind wind farm in Scotland will have a maximum capacity of 50 MW with an expected 168,000 MWh per year and would be the UK's "largest corporate wind power purchase agreement," according to Amazon. The two US solar projects in North Carolina and Virginia will have a combined capacity of 215 MW with an expected 500,997 MWh per year. The projects are expected to begin generating energy in 2021. While these projects are not owned by Amazon, the company has made a commitment to purchase the energy output through a power purchase agreement (PPA). This PPA will in turn fund the construction of the solar and wind farms.
Amazon is not the first Fortune 500 company to make significant strides to associate its energy consumption with renewables from PPAs. These types of deals have been fairly abundant over the last couple of years, though the rate and number of companies entering into them have increased more recently. Just last month, Google announced its largest procurement deal consisting of 18 new wind and solar deals across the world with a combined 1.6 GW of renewable energy. And earlier in June, Starbucks purchased a three-project renewable energy portfolio with a collective capacity of 146 MW. These three facilities were not necessary to offset electricity use in its stores. That was already accomplished in 2015. Starbucks now is working to purchase renewable energy from regions where it may use energy in its supply chain.
Purchasing renewable energy through PPAs is not the only way companies are promoting renewable energy. Several fossil fuel companies have begun to invest in renewable technology start-ups or create spin-off companies focusing on the same. For example, BP currently owns over 1.4 GW of US wind and power and entered into a joint venture with Lightsource in 2017 for solar projects and with DuPont for next-generation renewable fuels. Its new leadership also recently announced that in addition to pledging to spend at least $500 million a year on low-carbon activities, it plans to "really lean into" its renewable investments in response to pressure from investors, shareholders, and the public.
Similarly, both Total S.A. and Chevron created spin-off investment companies focusing on renewable technology. Total Energy Ventures has invested over $160 million in 20 start-ups which focus on technologies spanning solid-state lithium ion batteries, microbial fuel factories, and enhanced cellulosic sugar recovery. It also owns 56% of the solar panel manufacturer SunPower and has created the Cathay Smart Energy Fund focusing on renewable investments in China. Chevron created Chevron Technology Ventures, which invests in projects using renewable power for fossil fuel equipment, along with renewable diesel infrastructure. Similarly, ExxonMobil has been allocating around $1 billion per year to conduct research in low-carbon technologies. According to ExxonMobil's website, this has resulted in "nearly 150 publicly available papers, including more than 50 peer-reviewed publications, and nearly 300 patents for cutting-edge technological advances in emissions reductions and other related applications."
The above-mentioned companies are only a small sample of the number of companies getting into the business of promoting renewable technology, and it seems that, especially in the fossil fuel / logistics sector, companies have begun to enter into PPAs and other joint partnerships at an increasing rate. This is likely a result of the favorable renewable energy laws recently passed in many US states, which we discussed in a prior blog post.
Even putting societal expectations aside, investing in the development of renewable energy may be a beneficial financial choice for some companies looking to invest in an industry that is currently on the rise. In fact, on November 19, Heliogen, a start-up which Microsoft founder Bill Gates was apparently secretly backing until now, revealed that it “created the world's first technology that can commercially replace fuels with carbon-free, ultra-high temperature heat from the sun.” Its plan is to “grow quickly and go public,” which will undoubtedly benefit its financial backers.
Squire Patton Boggs attorneys will continue to keep you posted on the latest developments in this area and can assist with any questions regarding renewable energy sector developments, financing or investment trends, along with any new state laws that emerge.
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