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Strong Growth Predicted for Renewables Market in 2023

(February 22, 2023)

As key uncertainties resolve, expect new business deals for renewable energy to grow in 2023.

Last year will go down as the year that corporate renewable energy procurement indisputably defied all original expectations, even as deal announcements slowed down a bit from the gangbuster previous year. 

Why? Because in May 2022, the market for corporate and institutional renewable energy deals surpassed BRC-Canada's original goal of 2 gigawatts (GW) of deal volume, three years ahead of schedule. 

That’s a big deal. BRC-Canada had set the target for 2025 upon launching in 2019. It felt ambitious at the time. The largest deal announced to-date was a government purchase of solar energy, which could not be replicated to reach this type of scale: the private sector would need to bring its purchasing power to the cause. But the private sector deals announced to that point would need to be scaled up over 40-fold to reach the target in six years. Few could have guessed it would take half that long. 

The keen-eyed may have noticed in our most recent Deal Tracker that 2022 showed a marked slowdown from 2021 in terms of deals announced.  


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But while some might wonder if the market for corporate procurement has peaked, there is good reason to believe it will continue to grow. Reason enough, in fact, that BRC-Canada has quintupled its goal, now targeting 10 GW of announced deal volume by 2030. 


2021 Was a Unique Year Driven Partly by Pent-up Demand 

Looking back from today’s vantage, it was always going to be tough to live up to 2021. Active negotiation for renewable energy offtake deals kicked off in earnest in 2019. Rumours began to swirl about deals under negotiation, building anticipation for new announcements to show a rising market and strong 2020. 

We all know how 2020 turned out. So many business activities slammed on the brakes for at least the first half of the year. Teams of negotiators, consultants, communications and management focused on the plethora of logistics, supply chain, market, and human resources crises wrought by the pandemic. Buyers hunkered down to focus on core business. Grid electricity prices plummeted, for nobody knew how long, undermining one of the drivers for contracting new energy generation capacity. 

In the end, the Alberta market went nearly seven months without a new deal announcement, the last time we’ve seen an empty stretch over five months. The smattering of deals over the course of 2020 resulted in a 39 per cent decline in deal volume from 2019. 

But businesses got back to the heavy lift of negotiating deals and 2021 saw a resurgence in grid power costs, reigniting interest in long-term contracts-for-difference against energy market prices. The dam broke with four new announcements in April 2021 alone, including two in one day, kicking off six months straight of at least one new deal per month. The 1,262 megawatts (MW) of deals announced in 2021 alone still accounts for over half of all deals struck. New solar and wind energy flew off the shelf the way toilet paper did a year earlier. 

By the end of 2021, the tempo had slowed, with no new deal announced in the fourth quarter. Hindsight is 20/20, but matching 2021 was always going to be a heavy lift. Plus, Alberta’s market, vibrant as it is, is not big enough alone for the signal to appear through the noise. To illustrate: the two largest deals to-date, by far, were both announced in 2021. Had announcements for either one of those been delayed just a few months into 2022, the two years would have come out about even. 

Altogether, you can only conclude so much from comparing one year to the next in isolation. As it is, deals announced in 2022 more than doubled any year before 2021. The two years together account for 80 per cent of all deals ever announced. The fact is that 2022 was a strong year by any standard – other than, perhaps, the outstanding but unique pace set in 2021. 

To learn more about the state of the market from market expert Ben Thibault, watch our webinar recorded in January


Has Renewable Energy Demand Built Up Again for 2023? 

The more interesting question is whether recent conditions have conspired to create another log jam. There are good reasons to believe this is the case. But when the jam breaks could be anyone’s guess. 

Anyone who follows the news has probably heard a good deal about inflation, logistics challenges and supply chain disruption in 2022. If you’ve ordered something from abroad or taken a trip, you’ve probably felt it yourself. Disruptions from lingering COVID outbreaks in China alongside the invasion of Ukraine combined with the unleashing of pent-up demand from the pandemic and domestic labour shortages have all made it hard to buy things or get projects done. 

Wind and solar energy are by no means immune to these dynamics as they are both part of global supply chains for manufactured components and serious construction projects in their own right. Given the time-lag in project development from offtaker agreement through final investment decision and onto component procurement and construction, it can be very hard to settle on negotiated terms while managing the risk of subsequent price increases and supply chain or construction delays. The current conditions accentuate the importance of allocating and mitigating these risks. This adds to the complexity of negotiating, drafting and finalizing contracts. 

Add to this the emergence of critical policy uncertainties in 2022 and we can see that external factors have not been kind to corporate renewable deals. In 2022, the Government of Alberta initiated two regulatory reform initiatives that have the potential to impact renewable energy economics - a transmission policy review and an industrial carbon pricing renewal. Neither met their optimistic initial timelines for resolution, which could have happened by the summer in both instances. 

As such, policy and regulatory uncertainty – the wet blankets of investment allocation in any sector and jurisdiction – only aggravated the global pricing and economic uncertainties plaguing renewable energy deals. Throw in the increased attention to renewable energy in the United States thanks to the supports in the U.S. Inflation Reduction Act of 2022, and both renewable energy developers and buyers alike had reason to look to other markets on the continent, at least for the time being. 

Could the 2022 Log Jam Break in 2023? 

Predicting economic trends in the time of COVID and its wake is tantamount to asking a Magic 8-Ball. But if you did inquire as to whether strong growth in corporate renewable energy procurement will resume in 2023, “Signs Point to Yes” would be a good guess. 

Governments and central banks have now been live to the present inflationary period and applying fiscal and monetary party to come out of it. There is no guarantee that price increases will come back to the lows of recent decades, but some stability and predictability should return. Meanwhile, markets are working – as they do – to resolve supply and labour constraints. Supply chains, onshoring and manufacturing alternatives and innovations don’t appear overnight, but dynamic markets have a way of finding equilibrium. 

Meanwhile, the policy climate should also improve. Alberta’s updated Technology, Innovation and Emissions Reduction (TIER) amendments for industrial carbon pricing were released in December 2022 and will help drive demand from major emitters for renewable energy offsets to comply with tighter emissions benchmarks and higher carbon prices scheduled out to 2030. That means more impetus to snap up long-term solar and wind contracts. Unfortunately, we’re still waiting on more details about the rate of offset generation available to new wind and solar projects that come online after 2023, but that is expected in short order and is likely to continue to reflect renewable energy’s ability to offer the lowest-cost emissions reduction option to offset-seeking emitters. 

The federal government is also helping with its investment tax credit (ITC) for renewable energy. With the express intention of matching U.S. supports to maintain a competitive investment climate in Canada, the government announced a 30 per cent ITC in its fall economic statement, to be implemented following its spring budget. This will counterbalance rising costs, keeping virtual power purchase agreements affordable and cost-competitive for buyers. It should also foster more eagerness among prospective renewable energy buyers who are already feeling increased motivation from unprecedented electric energy costs in Alberta’s power market. 

And perhaps the biggest opportunity to grow the renewable energy purchasing pie is the appearance of other provinces – particularly Nova Scotia, Saskatchewan and Ontario – into the game. BRC-Canada has been touting Alberta’s renewable investment wins and other provinces with emitting grids are starting to realize how they’re missing out if they don’t lace up and join the field. (Learn more about Alberta's corporate renewable procurement advantage.) These could become crucial markets if Alberta fails to resolve the growing threat of transmission constraint that could begin to impede new low-cost renewable energy supply. Building more baskets to hold our renewable energy procurement eggs will help secure steadier growth in deal-making going forward. 

The market for corporate purchasing of renewable energy is still nascent enough to make it challenging to put a precise finger on clear trends and trajectories. But the stars are aligning for some big steps this year and next toward our new ambitious, but achievable, goal of 10 GW by 2030.