Ahead of the curve: why multinationals are investing in wind

As COP21 negotiations progress, global multinationals will play a key role in achieving tough targets. The European Wind Energy Association’s Malgosia Bartosik explains why businesses are investing in wind.

As COP21 climate change negotiations progress in Paris, wind energy is high on the agenda as a key strategy in helping countries meet their INDCs. Wind offers a scalable, clean and competitive solution to meet climate targets.

But it’s not just government leaders that are looking to wind. Leaders of some of the world’s foremost blue-chip companies are making significant investments in wind energy. With the cost of wind power decreasing, many new investors have been attracted to the sector. Institutional investments in renewables in the EU alone leapt from €300m in 2004 to €6bn in 2015. This goes beyond utilities and includes global business and blue chip companies that are not traditional energy companies.

More and more major global companies are turning to wind as their primary renewable energy source as they move – or already have become – 100% renewable or carbon-neutral. Many business leaders are seeing that wind makes good business sense, and are making substantial, long-term investments in the energy. Companies such as Google, SAP, Unilever, Aveda, IKEA, Lego and more are leading from the front in making long-term investments in wind energy.

The business case for wind energy rests on three main pillars: a mature technology with a successful track-record of introducing technology evolutions, a predictable revenue stream based on regulated tariffs and prudent wind forecasts, and the increasing economic competitiveness of wind power.

The main reasons global corporations say they are investing in wind energy are:
· It allows companies to own energy production and thereby successfully predict their energy supply;
· It reduces companies’ exposure to the cost volatility of hydrocarbons and affords them long-term pricing predictability;
· It allows companies to use their purchasing power to drive a major change in business models of energy use. Doing this early gives them a longer-term competitive advantage;
· It drives down long-term business energy costs: the cost-effectiveness of the market is beneficial to growth, and investing in wind helps increase demand and thus the competitiveness of the market, which will further drive down long-term energy costs;
· It allows companies to respond to customer and societal demand: Lego, for example, understands that investing in renewables support a better future for its young customers and therefore also benefits its business.

“Investing in windfarms makes good business sense”, Doug Greenholz, US President, IKEA Property, Inc, says. “Wind is limitless, renewable and free and it helps keeps our costs down which fits perfectly into Ikea’s vision. Our renewables strategy gives us more control and it provides a hedge against the volatility of energy prices and ultimately that helps us keep prices as low as possible for our customers.”

Joseph Kava, Global Vice President for Google, echoes that sentiment: “Wind PPA’s [Purchase Power Agreements] give us long-term visibility into our pricing and is also great for business predictability in the future””. Renewable energy – mostly wind – powers 35% of Google’s data centres. Kava observes that many other technology and traditional companies are following suit: “I believe we’re starting to see industry in general realize that this is good business”.

This is something that is confirmed by the financing resources allocated to wind by major investment banks. For example, BNP Paribas recently announced that it will more than double the financing resources allocated to the renewable energy sector, from €6.9bn in 2014 to €15bn in 2020. Explaining this rationale, Jean-Laurent Bonnafé, CEO of BNP Paribas says that “wind power constitutes a competitive source of electricity”.

Other examples include software giant SAP, which has heavily relied on wind energy to power its business and increase its use of renewables from 43% in 2013 to 100% in 2014. “SAP is committed to buying from renewable sources, and we mainly focus on wind energy” said Bill McDermott, CEO of SAP. IKEA has invested €500m in wind power. By producing its own renewable energy IKEA says it is able to reduce costs and protect itself against fluctuating energy prices.

Estimated new wind power installations are expected to grow to 260GW by 2019 and to 590GW by 2024. Global cumulative installations are now estimated at 960GW by 2024. The scalability of wind energy has helped it emerge as a viable alternative to fossil fuel. Wind energy’s share of renewable electricity generation has more than doubled in the previous decade achieving more than one quarter (27.4%) of all renewable generation in 2013. This trend is set to continue – the European Commission expects wind to represent at least 43-45% of all renewable energy produced by 2030.

Whatever the political deal that emerges from COP21 – and we strongly encourage world leaders to make it ambitious and workable – one thing is clear: in business, the smart money is investing in wind.