How could car makers accelerate European interest in wind PPAs?
Car manufacturers across Europe are waking up to the benefits of wind PPAs - which is great news at a time of dwindling government subsidy. Ilaria Valtimora investigates
The types of companies looking to buy electricity from wind farms are changing – and thank goodness for that.
We’ve written so often about how pioneers of corporate power purchase agreements including Amazon, Facebook and Google are buying wind power that, to be honest, it's become a little boring. But thankfully, as the price of wind energy has become more competitive, more firms in a wider range of industries have begun to sign PPAs.
This broadening has been most visible in the US, where we have seen PPAs agreed in sectors including food, beverages, and telecommunications. But European firms have been getting in on the PPA action too. In our Europe’s PPA Revolution report we analysed why Scandinavia has led the growth of wind PPAs across the continent.
The next step for PPAs
However, we think a recent deal in Poland could pave the way for a new wave of corporate PPAs in central and eastern Europe. German carmaker giant Mercedes-Benz agreed in July to buy the entire output produced by the 45MW Taczalin wind farm in Poland, operated by local developer VSB Energie Odnawialne Polska, to power its manufacturing facility in the south-west of the country.
We have a handful of examples of companies in the automotive sector signing wind PPAs, but not many.
The best-known car manufacturer in this regard is General Motors. GM has committed to power its global operations entirely from renewables by 2050 and this has resulted in the car giant being one of the most active buyers of renewable energy in the US in the last decade. This includes over 200MW of wind PPAs signed in the last 12 months alone.
There are other examples too. This month, Argentinian developer YPF Luz signed a ten-year PPA with Toyota. While small in size at only 16MW, the deal is still a positive move and part of a growing trend. German giant Volkswagen signed a deal in 2013 to buy 130MW at the 180MW La Bufa wind farm in Mexico. And, in renewables more widely, BMW signed an agreement with BayWa in May to buy 252MWh of solar power in Mexico to power one of its manufacturing facilities in the country.
This is only a handful of examples, but they show that renewable power can make sense for car makers. And this is particularly relevant in central and eastern Europe, where the heavy presence of car manufacturing facilities could mark the start of a wider and much-needed wave of PPA deals.
In fact, as government subsidies for wind farms dwindle and merchant risk rises, developers and investors in Europe are seeing corporate PPAs as an increasingly attractive way to take projects to financial close. Even so, the support of European governments, and recently-agreed changes to the Renewable Energy Directive, will be key to removing barriers for PPAs.
So, why does wind power make sense for car makers?
First, making cars and car parts requires energy-intensive processes. This makes them an easy target for developers that want to sell electricity from their wind farms.
Also, car manufacturers have numerous decentralised operations and manufacturing plants, and are always on the look-out for convenient energy supply sources. These companies could potentially get involved in the construction of new projects to power their facilities, particularly for plants in remote areas with little or no grid connection. Virtual PPAs are another solution in this scenario.
Finally, there is an advantage in terms of reputation. Producing and running cars is a carbon-intensive industry, and the increase in electric vehicle sales shows that car buyers are getting greener. The VW ‘dieselgate’ scandal of 2015 and the growth of electric vehicles, for example, have made car buyers more aware of sustainability and environmental issues. Green PPAs could offer some redemption for carmakers.
There is still a long way to go, but the potential for renewables PPAs linked to the automotive industry in Europe is huge.
According to the European Automobile Manufacturers Association there are currently around 300 automobile assembly and engine production plants across Europe. This includes well-established wind markets such as Germany, France, and Spain, as well as emerging markets for renewables including Croatia and Romania.
If this was a race, then Mercedes-Benz may be in first position on the grid, but we’d like to see more car manufacturers competing too.