Transitioning to a low-carbon economy is seen as the most effective tool to mitigate climate change. The political commitment behind the transition was confirmed by the 2015 Paris Agreement, which demands that global greenhouse gas emissions fall to net zero in the second half of the century.
We are still in the early stages of this transition and it is not yet evident how all the changes and their consequences will play out. However, it is clear that – next to energy companies – large energy intensive corporates have a leading role in significantly reducing emissions, through energy efficiency programs and/or by procuring renewable energy.
Lowering carbon footprint
Every year large corporates spend millions on energy. Outside the energy-intensive industries, the majority of firms treat energy procurement as a cost to be managed rather than a strategic area for risk reduction and value creation. However a significant amount of companies – primarily in Europe, Asia and the US – already report renewable energy consumption.
Clear ambitions regarding renewable energy targets have been communicated, implying further growth of renewable energy sourcing in the future, among other things, driven by falling costs of renewable energy sourcing.
A large part of the biggest global corporate consumers of energy have renewable energy targets in place, some of them committed to procuring 100% of their electricity from renewable sources.
A set of opportunities with different investment characteristics is emerging, creating new services and business models within the energy space for corporates to benefit from.
- Energy efficiency projects Projects: leading to reduced carbon emissions due to decreased energy consumption or less emissions per energy unit
- Certificates: Acquisition of bundled or unbundled energy (or carbon offset) certificates
- Renewable energy procurement through PPA: Off-site installation owned by a third party supplied through grid Off-site installation owned by a third party supplied through direct cable to facilities On-site installation owned by a third party supplied through direct cable to facilities
- Renewable energy: through self-generation On-site or off-site renewable energy installation owned by the company
A proven approach
Renewable energy sourcing requires an integrated and phased approach
1. Evaluation of corporate objectives & constraints
- Definition and evaluation of short-term and long-term objectives
- Definition and evaluation of key measures to be taken, decision drivers and corporate constraints:
- Financing & tax
- Technology & operations
- Social & environmental
2. Sourcing options & strategy
A four-step approach to evaluate/develop local projects:
- Baseline calculation
- Technical options
- Market conditions (sourcing options, pricing, tax & incentives, readiness & social acceptability)
- Commercial/financial models (capex/opex) scenario analysis
3. Develop strategy
- Options for evaluation & decision-making
- Projects clustered into short-/long-term sourcing strategy
- Financial options development and implications for the clusters
- Definition of go-to-market strategies and programme governance
4. Validation & roadmap
- Validation of most viable options and go-to-market strategy and implications with decision-makers
- Develop short-/long-term roadmap for implementation
- Set up programme structure & governance model
- Manage the procurement process and interact with vendors for comparative assessment
- Contracting and negotiations taking into account legal risks related to complex structures
- Develop governance structure and processes