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Ford powers up on renewables as credit lines go green

© Shutterstock / Jonathan WeissFord.

Global car manufacturer Ford continues to integrate ESG metrics into its business. Building on its 2021 decision to align over $15 billion in credit to sustainability metrics, it announced the largest renewables PPA in Michigan to date.

Ford will buy carbon-free electricity from Michigan’s larger renewable energy producer, DTE energy, via its voluntary renewable energy program MIGreenPower.

Sustainability goals set in 2021 include a 76% reduction in Scope 1 and Scope 2 emissions, and 50% in Scope 3 emissions by 2035.

Part of the net proceeds from sustainable financing at Ford Credit will be allocated and invested in the installation of charging infrastructure for individual customers and dealers.

In a move that will enhance its sustainability credentials, Ford (NYSE:F) has signed a power purchase agreement (PPA) agreement with Detroit-based energy provider DTE Energy (NYQ:DTE) to add 650 MW of solar Energy in Michigan by 2025.

The move is aligned with one of its core climate goals, to use 100% locally sourced renewable energy for all manufacturing plants by 2035. As a maker of electrical vehicles, this could support its customers via the building of new renewables-based charging infrastructure, which will also reduce Ford’s Scope 3 emissions.

Record deal with US utility will boost installed solar in Michigan

Ford’s agreement to purchase 650 MW of solar power from DTE Energy will result in a 70% increase in installed solar in the state, besides being the largest-ever renewable energy purchase from a US utility. Although, it should be noted, this is from a very low installed base – Michigan ranks 32nd in the U.S. for installed solar (2021) capacity.

The state also had a renewable portfolio standard of 15% in 2021, which specifies the fraction of electricity that energy supply companies must generate from renewable energy sources. This compares with California’s RPS of 50%, which also leads the nation in solar installations.

This isn’t Ford’s first foray into green power with DTE – in 2019, Ford was the first corporate customer to enrol in DTE’s MIGreenPower voluntary renewable energy program, through which it is purchasing 525,000 MwH of wind energy annually from DTE’s Isabella and Fairbanks wind parks in Michigan. Wind power accounts for over 50% of the renewable energy generated in the state, followed by biomass and hydroelectric, while solar accounts for less than 1%.

Ford backs up its sustainability ambition with investment

Ford’s sustainability goals include commitments to reduce Scope 1 and 2 emissions from operations 76% by 2035 (from a 2017 base) and to reduce Scope 3 emissions by 50%. This adds to the existing goal of achieving carbon neutrality by 2050, using 100% locally sourced renewable energy for all its manufacturing plants by 2035.

Ford was also among the first US auto maker to issue green bonds, a $2.5 billion unsecured bond in 2021 to fund its investment in electric vehicles, including the Mache-E, F-150 lightning and E-Transit models, the latter of which is about to be used in a FedEx pilot programme.

Ford also has tied ESG metrics to its $15.5 billion in revolving credit lines which could pave the way to converting them to green and sustainable lines of credit on renewal. arrangement comprises extensions of three revolving credit lines:  a five-year, $10.1 billion facility maturing in September 2026, along with a three-year, $3.4 billion facility and a three-year, $2.0 billion supplemental facility, both maturing in September 2024.

A total investment of $50 billion is planned in EVs and battery production between 2022 and 2026.

A tale of two Ford’s?

Ford is planning to split its company into two – one making internal combustion engine fuelled cars, and the other making electric vehicles. The former, traditional business will be called Ford Blue, while the EV business will be called Ford Model E. The company sees Ford Blue as an engine of cash and profitability for the whole company.

While Ford’s deal with DTE bodes well for improving Michigan’s renewable energy profile, and its sustainability commitments may create a lot of positive buzz for it around Detroit, as a global business it is also planning EV and sustainability investments elsewhere. Its $7 billion plan for making EVs in the US, for example, sits alongside a $4.4 billion joint investment with its South Korean battery making partner, SK Innovation (KSE:096770). This is focused around a new large-scale campus in Tennessee, with battery plants in Kentucky.

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