Mercedes ramps up switch to renewables with Iberdrola deal

Mercedes-Benz said on Thursday it had signed a power purchase agreement (PPA) with Spain’s Iberdrola for 140MW of wind energy from a Baltic Sea wind park, part of the carmaker’s push to make production costs more predictable.

Production chief Joerg Burzer said Mercedes was focusing on securing wind capacity in north Germany and installing solar capacity in the south, which gets more sunshine but is less windy.

The Iberdrola deal, in which Mercedes will invest a threedigit million-euro figure, means the carmaker has solar, onshore and offshore wind PPAs for capacity equivalent to half of its electricity demand in Germany by 2025, Burzer said.

PPAs are long-term contracts to buy electricity directly from a generator at a pre-negotiated price, providing producers with guaranteed financing. Big companies, including carmakers, are signing such deals to better control production costs and cut carbon dioxide emissions.

The contract is one of the largest signed with a car company, Iberdrola said, but also did not disclose its value.

Iberdrola said the Baltic Sea Windanker project would have 315MW of capacity and would operate fully in 2027. The Spanish power utility already operates the 350MW Wikinger wind farm, also in the Baltic Sea, and is building the 476MW Baltic Eagle in the same area.

Mercedes aims for 70% of its energy demand from vehicle production to be covered by renewable sources by 2030. It said on Thursday it has reached its target of a 50% reduction in carbon dioxide emissions from 2018 levels by 2030 early, and so is raising that target to 80%.

Burzer said he was confident battery storage would develop to the point of enabling consistent renewable power supply, and that hydrogen would play a role in providing baseload energy.

“Of course there are periods where the sun doesn’t shine and the wind doesn’t blow, but these are not so common in Europe. Hydrogen can secure the remaining part,” he said.

“It is the last few percentage points that are the hardest ... there is still a lot to do on the technology side,” Burzer said.

Renewable energy accounted for 46.9% of German power consumption in 2022, with the rest coming from coal, nuclear, and natural gas. In Europe, the latest available figures from 2021 show about 22% renewable energy consumption.

Plans to fuel industry via hydrogen in Germany are still in their infancy, with the construction of the first hydrogen pipeline network approved in December 2022.