In a world where margins are slim and energy costs are in flux, there’s an enormous opportunity for companies to save both money and reduce environmental impact — with the right mix of renewable sources.
The motivation to use renewable energy is more than just sustainability. Large companies recognize that though energy prices are low now, they need to protect themselves against future increases. However, companies are challenged to find technologies that will deliver a high return on investment, a task complicated by the fact that there is no one-size-fits-all solution.
This is especially true for companies that have a diverse footprint, whether it’s global, local, or a mix of leased and owned buildings. Consider the following statistics from a recent Pricewaterhouse Cooper (PwC) renewable energy survey:
- 72 percent of companies are actively pursuing clean energy.
- Of that group, 76 percent indicated that the drive to purchase is an attractive return on investment.
- 59 percent of the 72 percent are procuring clean energy as a way to limit their exposure to energy price variability.
So what strategies can energy managers use to replace brown energy with green — and capture annual savings, all while reducing their carbon dioxide footprint and risk exposure? Since some facilities are not suited for on-site generation, companies can still access the potential savings of switching to renewables by using a mix of strategies that don’t require solar panels or wind turbines in the backyard. But understanding how to traverse this bold new world and achieve the best possible outcomes isn’t easy.
Renewable energy technology prices are dropping and government incentives have been extended to make clean energy more attractive. For example, the U.S. offers an Investment Tax Credit
(ITC) and Production Tax Credit (PTC) to help encourage the use of renewables. Similarly, in the U.K., there are a number of support mechanisms ranging from Carbon Price Floor to Contracts for Difference to Renewable Heat Incentive.That means a solar power project that didn’t pencil out 10 years ago may prove to be a smarter option today.
In many cases, renewable energy is now cheaper and more predictable than grid energy. The global average cost of electricity continues to decrease for wind and solar power while the cost of traditional sources, though relatively inexpensive, continues to trend upward. For instance, over the course of 2015, the cost for coal-fired generation increased from $66 to $75 per megawatt-hour (MWh) in the Americas and $82 to $105 in Europe, while the global average cost of wind energy decreased from $85 MWh in the first half of 2015 to $83 in the second half. And photovoltaic (PV)-solar dropped from $129 to $122.
What’s more, for the first time ever, solar beat out natural-gas capacity additions, with the installation of 59 gigawatts of solar PV globally in 2015, up 34 percent from 2014 numbers.
No wonder corporate procurement of clean energy is on the rise. Of the Fortune 100 and Global Fortune 100, 24 companies have set specific targets for investing in renewable energy. Increasing legislation and incentives are expected to bolster this trend. For example, the historic COP21 agreement saw 196 countries sign — a climate deal likely to move the needle significantly.
Additionally, 120 countries already have policy targets for longer-term shares of renewable energy, including a 20 percent target of all electricity generated for the European Union by 2020 and 20 percent for the US by 2030. Meanwhile, traditional brown energy sources are expected to continue their ever-increasing price climb.
There’s also lot of interest in combining renewables driven by a range of needs that include avoiding power outages, shifting power consumption away from peak-load periods and balancing intermittent renewable energy sources. While the potential value of these and other applications have long been recognized, electricity storage investments to date have been deployed primarily as demonstration projects since storage costs were not competitive with alternative technologies.
However, due to recent developments, electricity storage appears to be on the verge of becoming quite economically attractive, especially where demand charges are high, distributed generation is popular and local incentives are attractive. Many industry leaders expect to see near-term adoption rates of energy storage to rival those of solar.
While there are many opportunities to access renewable energy, some companies may feel discouraged when looking at their global footprint. Going global is possible, and should be considered a priority for companies when building out a renewable energy strategy that spans multiple countries and continents.
Bear in mind, options and strategies change based on location, but remembering these three considerations can make all the difference.
- Going global means crossing not only borders, but government lines. Onsite options may be best when looking into global opportunities as there is heavier oversight of utilities when it comes to offsite procurement. Get to know the policies and regulations in the area to find the best procurement option.
- When offsite opportunities arrive, act fast. Short time tables means companies need to be well versed on the options in these areas so they are able to move quickly while avoiding unnecessary risk.
- Prioritize countries where renewable energy installation are growing at a rapid pace. Developing countries such as China, Brazil, and South Africa are among the leaders in clean energy investment. At the same time, Europe reached the continent’s record for financing offshore wind projects in 2015, at $16.8 billion, up 11 percent.
Global or local, to take advantage of lower costs, reduced emissions and get ahead of government policy, sustainability and energy managers must consider new renewable energy procurement strategies — and face an increasingly complex mix of options.
To learn more about these strategies, download our Renewable Energy Strategies for Every Company whitepaper, and check back for a deep dive on renewable strategies that companies can adopt to fit their global footprint.