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Energy intensive sectors need guidance when investing in renewables, reveals survey

Date
02 September 2015
Energy intensive sectors need guidance when investing in renewables, reveals survey

LONDON: There is a strong economic case for renewable energy across different sectors – from energy-intensive industries such as chemicals and cement companies to oil and gas, services, conglomerates and retail companies – but big business needs better guidance on how to obtain it, according to research.

The findings come from a survey conducted in early 2015 by WBCSD (World Business Council for Sustainable Development), a CEO-led association which is a founding partner of the We Mean Business coalition along with The Climate Group.

WBCSD surveyed companies representing 250 TWh of global annual electricity consumption which together gave a range of business reasons for switching to renewables.

Of the respondents, 21% said the main driver for transitioning to renewables was their own carbon emissions reduction targets. Increasing renewable energy competitiveness on the global market was a main driver for 17% of respondents, while 14% cited volatile prices of fossil fuels as the main reason.

renewable energy sourcing

The results also reveal the preferred options for companies to source renewable power. Respondents said they prefer power purchase agreements (PPAs) with renewable energy facilities, or direct investments onsite or offsite, mainly through solar PV. But the evidence shows the most common choice is actually voluntary programs with utilities, which ensure the utility provides a certain proportion of renewable power to the company.

This mismatch shows companies need more guidance when choosing how to power themselves with renewable electricity to find the ideal option for their specific case – something that RE100 is already helping with, through its Technical Working Group workshops in areas like India and China – as well as more flexibility from suppliers when it comes to procuring renewable energy.

Challenges include a lack of transparency in costs, regulatory restrictions, complicated and time consuming contractual and administrative procedures and lack of flexibility in contract terms such as tenor.

María Mendiluce, Director of Climate and Energy at WBCSD explains: “The survey shows what we’ve been advocating for a long time: the business case for renewable energy is a fact, both for the supplier and for the companies that procure electricity. The rapid improvement of the competitiveness of renewables is helping companies to step up and increase the share of renewable energy procured, but there are still some barriers that we need to overcome.

“Firstly, we need stable regulatory frameworks. Predictable and clearer governmental policies provide a favorable environment for improved returns on renewable energy investments. And carbon pricing mechanisms are needed to ensure there is a level playing field for renewables.

“We also need to make procurement via PPAs a less complicated procedure. This is a particularly attractive option for companies because limited upfront investment is required, and it reduces exposure to volatile electricity prices.  

“Finally, increasing collaboration between financial institutions, renewable suppliers and companies, by sharing expertise and procurement options, is fundamental to scale up renewables procurement.”

overcoming barriers

Based on the findings of the study, WBCSD is developing action plans that will address some of these key barriers as part of its Low Carbon Technology Partnership Initiative. It wants to create a “marketplace” where suppliers and buyers can share best practice and knowledge which will allow companies to understand the best procurement choices, their cost, and the long term PPA benefits of stable energy prices.

WBCSD will also provide recommendations to streamline and simplify the contractual and administrative procedures that will enable massive uptake across the industries.

With influential companies increasingly making commitments to 100% renewable power – highlighted by the growing group of corporates that have joined The Climate Group and CDP’s RE100 campaign – it is critical to ensure hurdles for accessing renewable power are addressed.

Emily Farnworth, RE100 Campaign Director, The Climate Group says: “The conversations we are having with corporate partners of RE100 mirror the findings in WBCSD’s latest survey. Providing better information for businesses to understand the wealth of options for purchasing renewable power is critical to ensure they make the best choices for their businesses.” 

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