Decarbonising through renewable power purchase agreements

  • Decarbonisation through power purchase agreementsDecarbonisation through power purchase agreements
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October 2022


85% of electricity consumption expected to be green by 2050. The International Renewable Energy Agency (IRENA) projects that to meet the Paris Agreement climate goals, the share of renewable will need to increase from 20% in 2016 to at least 85% by 2050. For the construction and infrastructure sector, this means an increase in renewable energy to at least 18,700 TWh by 2050 from 2,700 Terawatt-hour (TWh) in 2016.

Strong renewable energy capacity growth in Asia. Asia accounts for 60% of total global renewable capacity installed in 2021. China accounted for 121 Gigawatt (GW) of the 155GW installed in Asia, with solar making up the bulk of new capacity installed at 53GW.

Climate change unlikely to impede solar installation growth trajectory. With rising global mean surface temperature as well as increased cloud coverage, this will impact the solar photovoltaic (PV) system’s efficiency. Despite this, solar PV as a candidate for low-carbon energy transition alternative is unlikely to be curbed as these factors would primarily be offset due to technological improvements and increase in solar irradiance in key solar deployment areas.

Corporate renewable energy procurement to lead renewable energy demand. As sustainability awareness increases amongst investors and customers, procurement of corporate renewable energy is gaining traction globally. As such they are actively exploring a combination of procurement and self-generating renewable energy as part of their decarbonisation strategy.

Benefits of corporates entering into a Power Purchase Agreement (PPA). Corporate buyers and power producers enter into a PPA arrangement typically to reduce cost and revenue uncertainty. However, there are also other factors woven on top of this shared interest that should be mentioned: (1) greening of corporate operations; (2) sensible project economics; and (3) focus on core business competencies to reduce resource wastage.

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