Climate Change: Why firms such as Covestro, with ambitious net-zero emissions goals, have a hard time buying green power in China
- German firm Covestro plans to invest €250 million to €600 million globally by 2030 to reach its net-zero goal
- It has bought 100 million kWh through a one-year agreement from solar farms owned by Datang Wuzhong New Energy
It plans to invest €250 million (US$274.8 million) to €600 million globally by 2030 to reach its net-zero goal. It also has an interim target to slash emissions by 60 per cent to 2.2 million tonnes by 2030 from 2020.
The German firm was among more than 250 domestic and international companies that last September negotiated and struck deals on renewable energy through a pilot trading system for generators, end users and retailers. Initially for solar and wind power only, the trading system is expected to also cover hydropower and other renewable electricity at a later stage.
Covestro, which has for the first time added greenhouse gas emissions to employees’ key performance indicators, bought 100 million kWh through a one-year agreement to buy power from solar farms in northern China owned by Datang Wuzhong New Energy.
This was enough to meet 10 per cent of the annual needs of Covestro’s Shanghai plant. The firm will be paying “several million yuan” more for green electricity over the course of this year compared with what it would pay for electricity from the local grid, Lei said.
Covestro hopes to be able to sign power purchase agreements lasting 10 or 15 years through the trading system, as it has done in Europe and the United States, so that it can lock in supply to meet its decarbonisation commitments, Lei said.
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“In China, we want to completely shift to green energy whenever it is possible,” she said, adding that renewable energy accounted for about 40 per cent of energy consumed by its Belgium plant last year.
“Last year, we actively lobbied government officials and regulators for help to quickly build up the infrastructure,” she said. “We are also talking to energy producers to see if they can work with a multi-year agreement approach. It is challenging, but we are seeing light at the end of the tunnel.”
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The next round might take place this month or next month, said David Fishman, a Shanghai-based senior manager at energy consultancy The Lantau Group, which helps large power users solicit bids and secure green power supply.
“Whether there can be multiple rounds of trading this year really depends on supply,” he said. “Tradeable green power is already sold out for 2022 and the supply for 2023 will probably be bought very quickly as well, given the high demand.”
Green power supplies from only subsidy-free renewable energy projects were allowed to be traded in the open markets, he said. While subsidies for new projects ended at the end of 2020, some projects installed last year were approved earlier and still enjoyed subsidies.
Moreover, few green power suppliers would sign up to agreements longer than three years in China, due to a lack of clarity over future demand and supply, Fishman said.
