Profitable Winds: European Utilities Investing in U.S. Renewables

It is certainly no secret that wind-farm development is a booming industry in the United States today. According to the American Wind Energy Association, the addition of more than 7 gigawatts (GW) of wind capacity last year boosted the nation’s wind-driven electricity output by 9 percent. While this growth is really just a continuing trend, the 2017 ranking of leading developers illustrates the growing presence of European utilities in the market. Four of the top five developers—in terms of added capacity in 2017—call Europe home.

As opportunities across the European Union stagnate or decline, European utilities have been drawn to the U.S. renewable-energy market, which continues to grow. In the early 2000s, European nations expanded wind and solar rapidly to meet ambitious carbon-reduction goals. Now, subsidies there are either gone or being phased out. In the United States, however, a federal production tax credit will still be in effect to some degree through the end of 2019, and additional incentives might be available at the state level. Also, corporate energy planners are helping to support wind development by signing power purchase agreements (PPAs) that guarantee wind-power sellers a steady income stream over a decade or more.

“I think, if you talk to the companies themselves, they’d give a different answer, but anything that has a stable revenue support is going to be attractive to a utility,” said Meredith Annex, a senior associate covering utility business strategies out of Bloomberg New Energy Finance’s London office.

The companies leading this European emigration to North American shores are subsidiaries of Europe’s largest utilities.

EDF Renewables, subsidiary of the French utility EDF, signed a 200-megawatt (MW) PPA with Google for output from the Glaciers Edge wind farm, which is under construction near Marcus, Iowa. That facility will bring the utility’s capacity in Iowa to 1.1 GW.

EDP Renewables North America, a subsidiary of Portuguese utility EDP, calls the United States its biggest market and claims to be the nation’s third-largest wind farm owner in terms of net installed capacity. Its share could grow significantly if plans for a proposed floating wind farm 20 miles off the California coast come to fruition.

E.ON Climate & Renewables North America, subsidiary of Germany’s E.ON, owns the 782-MW Roscoe (Texas) Wind Farm, which was the world’s largest when it was completed in 2009. In January, the company began construction of its 23rd U.S. facility, the 201-MW Stella Wind Farm in Kenedy County, Texas.

Avangrid Renewables is a U.S. subsidiary of Spain’s Iberdrola. Three of its newest wind farms—totaling more than 500 MW of capacity—came online in the closing weeks of 2017, raising its total new capacity for the year to 800 MW.

Though headquartered in Europe, these companies are contributing to the growing U.S. renewable-energy job market, and their success has been a boon for employment here. New wind farms hire hundreds of workers during construction and require an ongoing maintenance crew once they start churning out kilowatt-hours. “Wind turbine service technician” now is second (after “solar photovoltaic installer”) on the U.S. Bureau of Labor Statistics’ list of fastest growing job titles.

“[Corporate PPAs are] a growing part of the renewable energy picture,” Annex said, especially as the federal tax credits wind down over the next two years.

Under these agreements, corpo- rations sign long-term contracts—generally a decade or longer—for a designated portion of a wind farm’s production. It is important to note that this output often does not feed corporate operations directly. Instead, the corporate buyers take ownership of the renewable energy credits related to each kilowatt-hour produced. These credits have actual value on the open market. In fact, buying these credits is another way companies can claim to be reducing their carbon footprints. However, large corporate PPA participants almost always retire the credits, which ensures the renewable projects they are supporting add to the total green energy the nation produces.

Annex noted that European utilities could have an advantage with large American corporate buyers, because multinational corporations could see value in partnering with energy developers, who also have a global presence.

“Especially a company like Google—they may want to find partners that they can work with on multiple sites,” Annex said. “A lot of the regulated U.S. players may be more cautious.”

The corporate PPA market isn’t infinite, however. The RE100, an international collaboration of more than 100 companies seeking to drive private industry demand for renewable energy, anticipates its current members need to procure an estimated 172 terrawatt-hours (TWh) of renewable capacity by 2030 to meet their commitments. Bloomberg New Energy Finance estimates total global renewable-energy generation will reach 12,000 TWh. At some point, both U.S. and European developers will need to step into the more volatile open electricity market in a big way.

“Corporate PPAs may be the majority of the noise right now, but utilities really will have to learn how to handle the exposure,” Annex said.

About the Author

Chuck Ross

Freelance Writer
Chuck Ross is a freelance writer and editor who has covered building and energy technologies for a range of industry publications and websites for more than 25 years. He specializes in building and energy technologies, along with electric-utility bus...

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