Solar, wind and diesel: European companies tool up in energy crisis
07/04/2022 12:00
By Victoria Waldersee, Isla Binnie and Stine Jacobsen
BERLIN/MADRID/COPENHAGEN, April 7 (Reuters) - Big companies
aren't waiting around for Europe to wean itself off Russian
fossil fuels. With Moscow's invasion of Ukraine deepening the
region's energy crisis, some are taking matters into their own
hands.
Luxury carmaker Mercedes-Benz MBGn.DE is working to
increase its energy independence this decade with investments in
solar energy and wind farms, while the dawning realisation that
prices of oil and gas may stay higher for longer is prompting
ever more interest in new kinds of power supply agreements.
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"In the short term it is of course about protecting energy
security but in the long-term, accelerating the path to
independence," Mercedes-Benz CEO Ola Kaellenius said this week.
The war in Ukraine, which Russia calls a "special
operation", has heaped further pressure on European energy
markets where supply and demand were already roiled by the
ripple effects of COVID-19.
A standoff with Russia over its demand to be paid in roubles
for its gas -- part of a wider economic tit-for-tat between
Moscow and the West -- has Brussels looking for alternatives to
its biggest energy source.
Russia’s exports of crude and petroleum products to Europe
are the second largest bilateral flow of oil between two trading
partners, according to data from BP and Europe relies on Russia
for 40% of its gas. The bloc is aiming to slash that by two
thirds this year.
A global shortage of gas had pushed prices to record highs
even before the Russian invasion, inflating the prices of
alternatives – including dirtier ones such as diesel and coal.
Average diesel prices at the pump in Europe are now more
expensive than gasoline for the first time in history.
Despite the expense, Danish Crown, one of the world's
largest pork exporters, started to retrofit four of its
gas-fired slaughterhouses in Denmark in the wake of the invasion
of Ukraine so that they can run on diesel if needed. Denmark's
third-largest brewer, Harboe HARBb.CO , has rented a fuel oil
generator to keep production running if gas falls short.
Sales of diesel generators to both businesses and private
households in Denmark have surged 300-400% according to Kim
Andersen, owner of Power Generator, one of the country’s biggest
suppliers.
A LOT OF ROOFS
Europe's mission to cut back on Russian fossil fuels will be
difficult and costly but it could also speed up a shift to wind
and solar resources.
International firms including Alphabet's Google GOOGL.O
and Amazon AMZN.O have long track records of signing renewable
power purchase agreements (PPAs) whereby they agree to pay a set
price for several years, linked to a particular generation
plant.
Ingka Group, the owner of most of the world's IKEA stores,
said this week it was spending 340 million euros on nine solar
projects in Germany and Spain as part of a longterm strategy to
boost consumption of renewable energy. A spokesperson said these
would sell power through power supply deals. urn:newsml:reuters.com:*:nL5N2W33ZM
Whipsawing global energy prices have stoked demand for this
kind of deal, said Joop Hazenberg, Policy and Impact Director at
the RE-Source Platform a European group that promotes PPAs.
"We see the energy security and price crises facing the
continent are making the guarantee of long-term price stability
even more valuable. Companies now realise this," he said
Due to high demand, the European Commission decided to speed
up publishing guidelines for such deals which had originally
been due next year, Hazenberg added. "Following the Russian
invasion of Ukraine, we now expect the publication next month."
In the first 10 months of 2021, 203 clean power supply deals
were signed globally for a total capacity of 22 gigawatts --
roughly equivalent to 22 nuclear plants. That's a 44% increase
on the same period of the previous year, according to data from
Spanish power firm Iberdrola IBE.MC .
Silicon metal producer Ferroglobe GSM.O aims to sign this
kind of deal for 50-70% of its energy needs, but price
volatility has disrupted negotiations over the past year, Chief
Executive Marco Levi told Reuters.
"A couple of times we had a term sheet on the table but it
was withdrawn because in the meantime energy prices rose a lot,"
he said.
Heavy power users are also setting up onsite generation.
Italian carmaker Stellantis STLA.MI said in February it
had installed a 30,000-square metre solar array on the roof of a
factory in Madrid which could produce 30% of the centre's power.
In the long term, clean power purchase trailblazers Google
have described their renewable energy purchasing strategy as
being "additional" - or helping to create more renewable power.
Mercedes-Benz aims to install more renewable power at some
of its sites, and also meet the same objective as Google.
"We have a lot of roofs we can use," CEO Kaellenius said.
"We talk of additionality - not just buying away green energy
but adding something to the pot."
(Additional reporting by Anna Ringstrom in Stockholm, Zandi
Shabalala in London, Jacob Gronholt-Pedersen and Nikolaj
Skydsgaard in Copenhagen; Editing by Carmel Crimmins)
((isla.binnie@thomsonreuters.com; +39 06 8522 4392; Reuters
Messaging: isla.binnie.thomsonreuters.com@reuters.net))