The landmark international climate change nearly 195-nation agreement that came out of COP21 late last year sent a message to the world that a low-carbon future is imminent.
The Paris Agreement, for the first time, brings all nations into a common cause based on their historic, current and future responsibilities. Its main aim is to keep a global temperature rise this century well below 2 degrees Celsius and to drive efforts to limit the temperature increase even further to 1.5 degrees Celsius above pre-industrial levels. The 1.5 degree Celsius limit is a significantly safer defense line against the worst impacts of a changing climate.
Amping up investments in renewable energy is an important, if not self-evident, strategy for meeting these international carbon emissions reductions. Months before world leaders met in Paris last December, one of President Obama’s senior advisors called renewable energy the “key” to climate action in a blog post discussing the United States’ official greenhouse gas emissions-cutting target to the United Nations. The proposal formalizes a U.S. commitment to reducing emissions 26 to 28 percent below 2005 levels by 2025.
Why should businesses start caring about renewable energy now rather than later?
Leading businesses already care! And this is simply because they understand the risks but also the opportunities associated with climate change. On the production side, the growth of renewable energy capacity, which has seen another record year, is clear evidence. On the consumption side, leading corporations are leveraging both their market power and brand to become agents of change. Business initiatives such as the RE100, the Corporate Buyers' Principles and the Breakthrough Energy Coalition, to name a few, are supporting the wide-scale adoption of renewable energy. The question is no longer why care but how businesses can contribute to the energy transition called for by the Paris Agreement.
Most people/companies know about solar and wind, but what other renewable energy solutions are currently available on the market? How does a company decide which solution is best for it?
Obviously the types of renewable energy options available depend very much on the natural environment, as well as the industrial and energy structure in a specific country. They can come in the form of solar, wind, hydro, biomass, geothermal, etc., but a combination is needed on a global scale to power a cleaner world. Companies and consumers alike are becoming more demanding about how exactly their power is produced and want to see a change in their electricity-mix — a move away from fossil fuels.
There are various ways to purchase renewable energy and the best solution very much depends on a company’s resources, location and volume of their electricity consumption. This can be a challenging environment to navigate — especially for businesses who have an international footprint. We assist companies in maximising their impact within their budgetary constraints. For some, like IKEA, direct investment make perfect business sense. For others, long-term Power Purchase Agreements (PPAs) or unbundled purchases of green electricity via renewable energy certificates (RECs) are the best fit. When opting for RECs, you maximise your impact by choosing renowned eco-labels like GoldPower, EKOenergy or naturemade star.
What is the best approach when it comes to integrating renewable energy into business strategy & what are businesses in different sectors already doing?
Every sector will be affected by the global transition to a low-carbon economy, and they will all need to start looking into integrating renewable energy into their corporate operations, whether they are a producer or a consumer of electricity. For the latter, it will be chiefly about reducing the scope 2 footprint — this refers to the indirect emissions from the generation of purchased energy. Mitigating direct emissions from owned sources (scope 1) or indirect emissions that occur in the value chain (scope 3) can be easily done by purchasing carbon credits from additional renewable energy plants that replace fossil-fuels. In addition, it makes business sense to combine ambitious clean energy sourcing efforts with efficiency measures that aim to reduce the overall energy use — and costs, of course.
SAP, for instance, is just one of growing number of companies who opted to source renewable electricity for all its operations. The company has chosen to use GoldPower, a REC with eco-label. GoldPower is generated from plants that feed additional clean energy to the grid. According to the Gold Standard Foundation additionality means that the plants would not have reached financial closure without the revenues from the sale of environmental attributes, i.e., the RECs issued from the plant in question. Also PwC and Tetra Pak are using Gold Power to support communities in developing countries with clean energy infrastructure.
Sustainable Brands is of course another good example. Your series of global events will be fully powered by renewable energy. Together we are measuring the power usage and ensuring that the corresponding amount of renewable energy is fed into the grid.
Adopting renewable energy can have a high upfront cost, even if it pays off in the long run. How can companies finance these technologies and make the business case for it to the C-Suite?
The way in which a company chooses to integrate renewable energy into its strategy and operations will of course vary — and it is true that kicking off production of renewable electricity from own on-site or off-site facilities can be nine-figure affairs and that not everyone can afford that. Bearing in mind that electricity generation is not part of the core business of many of the companies we work with, companies do not even look for that level of investment in the first place.
This is where alternative solutions — such as RECs — can once more play a role: For example, for North America, RECs can be sourced from U.S. power plants; Guarantees of Origin from renewable power plants can be retired to match electricity consumption in Europe, while for other locations, solutions such as I-RECs and GoldPower exist to match electricity consumption. These solutions are typically also a first step for all corporations planning to decrease their GHG emissions as they imply very low risks in terms of capital, counterparties and currency.
Where is renewable energy headed in the near future?
Despite the recent sprint towards renewable energy, we still have a marathon to run. In order to achieve international climate and development targets, we need to double the share of renewables in the world’s energy mix by 2030. The future for renewable energy will be influenced by, among others, the pace in which we can bring down the costs of the technology and create business models that work in different environments. We will hopefully continue to see the encouraging amount of business leadership on climate change that has begun to emerge.
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Founder & Principal Consultant, Hower Impact
Mike Hower is the founder of Hower Impact — a boutique consultancy delivering best-in-class strategic communication advisory and support for corporate sustainability, ESG and climate tech.
Published Mar 29, 2016 10am EDT / 7am PDT / 3pm BST / 4pm CEST