Going green through renewables: a quick guide for corporates

Today, sustainable energy is one of the buzzwords commonly used in political and economic discussions. Companies across the globe are setting ambitious renewable energy targets, aiming to achieve the dual mandate of reducing emissions and managing their energy costs. There are several reasons for this: on the one hand, in many parts of the world the technologies for generating electricity from wind, sun, water, biomass and geothermal sources have become more mature, reliable and, more importantly, cheaper than traditional ones. On the other, more and more shareholders, customers and communities are pressuring businesses to take climate action: two thirds of people around the world think climate change is a global emergency and they support climate action, according to a recent UN Development Programme (UNDP) survey of 1.2 million respondents in 50 countries. But how do you know which path to take on your journey towards renewables? Which options for going green are right for you? First you must understand the alternatives that are currently available on the market, and how they might fit with your company's business strategy, energy needs and sustainability targets. Purchasing green certificates The first step on a corporate’s journey towards renewables is usually to buy so-called green certificates, officially known as Energy Attribute Certificates (EACs). EACs are issued as proof of electricity produced from renewable sources: each EAC endorses that one megawatt-hour (1 MWh) of power was generated and delivered to the grid by a specific source, such as a wind or solar plant. Green certificates are easy to implement and relatively cheap. However, they provide no direct link between your operations and the renewable energy utility. As well, the cost of the certificates is independent of your energy bill — so they don’t provide any price risk management benefits. There are different EAC systems around the world, so the terminology can get confusing. The European Union calls them Guarantee of Origin (GO). In the United States and Canada they are called Renewable Energy Certificates (RECs), while other parts of the world where green energy certification systems are not yet in place use International RECs (I-RECs) and/or Tradable Instruments for Global Renewables (TIGRs). What solutions do we have in countries that don’t belong to any of these international schemes? In order to meet our customers’ expectations and help them credibly claim their sustainable energy choices, Enel Green Power has created its own Green Label mechanism, which is backed up by independent third-party certification. Green tariffs In many countries, utilities offer optional green tariffs that allow customers to source their electricity from renewables. A green tariff means that some or all of the electricity you buy is “matched” by purchases of renewable energy that your supplier makes on your behalf. In most advanced markets, such as Germany or the UK, you can even specify the type of renewable energy you want, or whether you prefer local renewable sourcing. These instruments are relatively easy to implement, usually by means of 2-3 year contracts. Unfortunately, this option is not available in every market and you will be usually charged something extra on your electricity bill. In addition, as in the case of certificates, the renewable energy source is not directly related to your production site or business, so it’s not easy to explain this mechanism to your customers. Installing your own renewables Another option is to install an on-site renewable power plant at your facility, office or factory. This is the most visible and therefore compelling solution: for example, clients can see the solar panels on your rooftop, or you can use photos of them in your promotional materials. However, you need to have enough rooftop footage or land — and that space may not be enough to cover all your power requirements. In other words, on-site solar panels might meet the electricity needs of a medium-sized office, but not necessarily those of a steel factory. The viability of such solutions depends on the wind and solar resources available near your production site as well as technical factors and legislation, so they are not always attractive from the economic point of view in terms of installation costs vs. energy produced. Power Purchase Agreements (PPAs) We believe the most effective instrument to fight climate change are Power Purchase Agreements (PPAs). A PPA is a contract between a buyer or off-taker, such as a company, and a renewable energy supplier to purchase power at an agreed-upon price. PPAs are not a new phenomenon, as the first such contracts were signed about 10 years ago. However in recent years they have increased in both size and frequency, with a record capacity of 19.5 GW contracted globally in 2019 (+43% compared to 2018). The increasing popularity of PPAs is not just due to their sustainability impact. They can also improve a company’s resilience and competitiveness, for example by hedging against long-term commodity price risk. As well, they do not require high upfront capital expenditures by the customer. In most PPAs, a power plant is built, owned and operated by the power producer, and the off-taker pays an agreed-upon tariff. Another benefit is that PPAs are tailor-made contracts and are customized according to the buyer’s consumption profile, sustainability targets and risk appetite. During negotiations, the parties agree not only on a tariff but also on its structure (whether fixed or indexed to spot electricity prices), as well as energy volume, contract duration and other variables. One of the most common mistakes is to think that sourcing electricity directly from renewables is very expensive. Thanks to technological advances and economies of scale, renewables are becoming more and more competitive and sustainable, not just in environmental but also in economic terms. Many businesses opt for PPAs because they enable the construction of new and bigger renewable plants where the energy is sold to different off-takers, reducing the final energy cost thanks to economies of scale. This in turn provides a further benefit: by supporting the expansion of renewables, companies can claim additionality, which means they are helping to displace fossil fuels by reducing conventional energy sources on the grid. Lastly, PPA buyers receive the associated EACs along with their renewable energy — sending a compelling message to clients and stakeholders about their commitment to decarbonization and environmental protection. Entering into a PPA ensures that you can make demonstrable claims about your renewable energy use in your communication and marketing campaigns — whether you are powering your retail operations with solar panels or brewing beer with 100% renewable electricity from wind turbines. While there is no one product that is right for every company, you can certainly find a sustainable energy solution that fits your business size, location and objectives. By making informed decisions and setting ambitious goals, corporates can lead by example and help create a greener planet for everyone.

Going green through renewables: a quick guide for corporates

Going green through renewables: a quick guide for corporates

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