Corporations Procuring, Investing and Trading in Renewable Energy

The relationship between corporate sustainability and renewable energy

Some of the world‘s leading organizations are actively promoting and investing in the production of renewable energy. In fact, global investment in renewable energy increased by 30 percent between 2009 and 2010, reaching levels of $243 billion. This growth is attributable not only to the utility companies seeking to comply with carbon emission reduction requirements but also to corporate organizations’ sustainability efforts.

Renewable Energy Part of Corporate Sustainability

It is clear that renewable energy is increasingly becoming an integral part of corporate sustainability; many companies are choosing to examine their supply chains and procure from renewable energy sources, however more excitingly, there is a increased trend for larger corporations to become part of the growing global renewable energy revolution themselves, and invest in or build their own power plants.

Achieving reductions in energy usage is one of the many tasks that demonstrate a commitment to corporate sustainability. As competition intensifies to be the greenest brand within the marketplace, there are increasing numbers of companies which have decided to include renewable energy as part of their corporate sustainability strategy.

An overwhelming majority of FTSE 500 companies now voluntarily measure, manage, and publicly disclose their carbon emissions; and a collection of hi-tech solutions, clean technologies and market tools have evolved in recent years to meet these demands.

Driving change through a corporate sustainability strategy is a constant challenge, however an impressive 81 percent of the CEOs surveyed by The Guardian stated that sustainability issues are now “fully embedded” into their companies’ strategy and operations, with many extending this focus to their subsidiaries and supply chains, specifically including the procurement and investment in renewable energy sources.

It is clear that organizations which harness renewable energy, and even better, generate it, will be strong contenders in the drive to become the most sustainable businesses across the globe. Initiatives such as the Carbon Plan, Green Investment Bank and the Electricity Market Reform demonstrate how the UK coalition government is well on the way up the regulatory escalator towards encouraging zero-carbon emissions within business.

In addition, the UK government’s CRC Energy Efficiency scheme which came into effect in 2010 is a mandatory carbon emissions reporting and pricing scheme, with the first report due from organizations, which use more than 6,000MWh per year of electricity, in July 2011. Whilst there has been some controversy about the scheme, it still remains that from 2012, participants will be required to buy allowances from the Government, each year, to cover their emissions in the previous year.

This means that organizations that decrease their emissions can lower their costs under the CRC. Companies better positioned to improve their energy efficiency and save on CRC costs, will be those with a CSO or Head of Sustainability in place. A skilled professional who is able to oversee energy management, sustainable procurement and corporate social responsibility issues, coupled with implementing accurate carbon reporting is vital for every 21^st century corporation. At Allen & York, we are seeing the growth of renewable energy and its place within the modern company’s energy portfolio.

Procuring Renewable Energy

Sustainable procurement within corporations includes a whole variety of “greener” purchasing options one of which is buying into renewable energy, whether it’s buying the power straight from the grid through specific specialized utilities, purchasing Renewable Energy Credits (RECs) or creating your own wind farm and producing energy directly.

RECs have enabled corporations to have access to power generated by renewable energy sources, through purchasing green certificates or credits through their utility company.

Purchasing a number of RECs provides companies with that flexible tool that enables them to achieve green energy goals, without having to change energy suppliers or construct their own private wind farm. Often the procurement of RECs are useful for corporations that are based in regions where green pricing programmes are unavailable or where there is a lack of policy support for the building of renewable energy projects. The huge benefit to corporations of purchasing RECs is that they do not need to move supplier and are not limited by their geographic location.

RECs are intended to give an additional source of funds to the renewable generator and also to make it simpler for companies to meet Renewable Purchase Obligations (“RPOs”).

One REC represents 1MWh of renewable energy generated; the actual power produced is sold to the grid and the REC is sold as a commodity (a certificate) into the market place. A common misconception is that organisations can purchase RECs as a method of carbon offsetting.  This is not the case. RECs and carbon offsets are different mechanisms that accomplish different goals. Carbon offsets allow companies to reduce their greenhouse gas (GHG) emissions liability by purchasing the emission reductions made by another corporation, so that each carbon offset purchased represents the equivalent of one ton of carbon dioxide (CO2) emissions. Whereas when a corporation buys an amount of RECs, often equal to their electricity consumption, they are perceived to be purchasing the power direct and can therefore claim to be renewable energy powered.

Topping the number of RECs bought is Google, which has committed to buying RECs for the next 20 years

The search engine giant Google has a subsidiary, “Google Energy,” which has signed a 20-year power purchase agreement with NextEra Energy for the entire output of a 114MW capacity Wind Farm in Iowa.

Google cannot directly use all the clean energy generated by the wind farm, so they will sell the excess power on the regional spot market, where utilities and electricity retailers go to buy power when there is an increase in demand and when they have a shortfall. This is an interesting Renewable Energy model, in which Google Energy provides the Iowa wind farm with the financial support to be able to build additional clean energy projects and in return Google is able to claim that it is renewable-energy powered. Often renewable energy developers find funding is the main stumbling block to expanding and building new projects, so this financial commitment to purchase a large amount of energy over 20 years is an important enabler for future projects.

This rapid increase in Renewable Energy & Low Carbon trading opens up new job opportunities around the globe. Allen & York Energy Services Consultant Peter Hoskin comments that “there is a growing demand for Low Carbon & Energy trading professionals who are able to manage corporations’ portfolios and understand the legalities and logistics of the commodities markets.”

As the demand for renewable energy increases, Technical and Executive professionals are increasingly required to work on new renewable energy projects, such as those that are being funded by renewable energy trading projects, like Google Energy’s. On a more technical level, the renewable energy job market is seeing an increase in Mechanical and Design Engineers to undertake the feasibility studies and project management of the increasing number of renewable energy facilities e.g. wind and solar farms worldwide.

We are seeing an increased demand for Environmental Planners / Project Developers to find suitable sites, undertake the audits, carry out the environmental impact assessments and so forth, required pre-project. We are also seeing a significant rise in the number of Grid Connection vacancies for skilled technicians when the facilities are complete. As such, Tom Wolsey, Grid Connection Recruitment Consultant at Allen & York comments, “As the demand grows in the development for renewable energy technologies, so does the need to ensure that this energy is integrated into existing networks.  Our clients require specialist electrical engineers to manage the often complex and challenging task of ensuring that the connection of renewable energy is both technically and economically robust. Candidates for these roles are highly sought after due to a shortage of these skills within the current market place.  This would be a fruitful area of specialisation for professionals within the electrical industry.”

For the increasing number of businesses that are choosing to generate their own renewable energy, each could benefit from average returns of 11-12%, with the potential for returns in excess of 20%, according to new Carbon Trust Advisory analysis. According to this new analysis, factors such as new financial incentives, energy market trends and building regulations contribute to making a compelling case for companies to develop their own renewable energy production.

As energy prices are estimated to grow by 37 percent by 2020, the opportunity to reduce huge energy bills is a fundamental incentive.  Moreover, UK Government incentives for example, the Renewable Heat Incentive (RHI) and Feed in Tariff (FIT), mean companies can not only save on utility bills, but can also benefit from the capped level of funding available.

It is retailers and consumer goods brands that are leading the way with the production and use of renewable energy; ASDA, IKEA, John Lewis and Marks & Spencer have all set a target of using 100% renewable energy by 2015. One organisation which has made strong progress in this area is IKEA, which now obtains 80% of its total energy use from renewable sources and has invested in a mix of ground source heat pumps, biomass, solar panels and wind power. Charlie Browne, IKEA UK and Ireland Sustainability Manager, explains;

“Taking care of people and the environment is integral to how we do businesses. As part of our global ‘IKEA Goes Renewable’ program, we are committed to heavily investing in making IKEA buildings more energy efficient and using more renewable energy. Our recent investment into a 12.3MW wind farm in Aberdeenshire and a £4million investment to fit over 39,000 photovoltaic (solar) panels to the rooftops of 10 IKEA stores, show our clear actions to reach our goal of 100% renewable energy supply”.

In addition, IKEA Canada is financing the installation of 3,790 solar panels totaling $4.6 million, this renewable energy investment will be the largest rooftop solar installation affiliated with Ontario’s Feed-in Tariff program. IKEA Canada expects that its solar panels will generate about 690,000 kilowatt-hours of clean energy per year – enough to meet the electricity needs of approximately 100 homes. They will receive 71.3 cents per kilowatt-hour for the energy that these panels feed back into Ontario’s utility grid, which means that IKEA could earn as much as $684,000 a year in extra revenue through this renewable energy investment.

John Sauven, Executive Director at Greenpeace UK said, “IKEA is providing a powerful voice to those who believe a better energy future for the world will come through energy efficiency and clean, renewable energy”.  Corporations following in IKEAs footsteps can not only generate renewable energy for their own buildings, but also contribute to increasing the overall amount of renewable energy available to consumers and other businesses.

The Importance for Renewable Energy for the Global Community

This September the UN launches an initiative to promote sustainable energy for all, Secretary-General Ban Ki-moon announced on September 21^st that there is a lack of access to affordable and clean energy, which is jeopardizing the achievement of the global targets to combat poverty and disease.  Renewable energy was described as “critical for human progress – for health, education, job generation and economic competitiveness,” by the Secretary-General.

The core of the initiative is a vision of achieving universal access to modern energy services, doubling the rate of improvement in energy efficiency and doubling the share of renewable energy in the global energy mix, all by 2030.  As Countries are asked to provide significant new commitments, the establishment of public-private partnerships to spur private investment towards the main targets will be key.  Hence, the growing relationship between renewable energy development and the sustainability actions of large global corporations.

With 1.4 billion people worldwide estimated to have restricted access to electricity and another billion having to deal with unreliable electricity networks. In total, nearly three billion people rely on solid fuels, such as coal or traditional biomass for their basic cooking and heating and it is the development of renewable energy that can create a more sustainable future for these countries and communities, in which global corporations can play a pivotal role.

The Secretary-General announced that a “Framework for Business Action” was being developed to help inspire and guide business support for achieving Sustainable Energy for All.  The framework, which is being developed in conjunction with leading businesses in the UN Global Compact, is an initiative that seeks to foster socially responsible corporate practices and outlines three ways of engaging with the UN. They are through a company’s core business and internal operations, social investments, and advocacy and government engagement.  At Allen & York we have written previously about the rise of the CSO and Sustainability Director, and initiatives such as the “Framework for Business Action” compounds this requirement for sustainability professionals to be at the heart of the global business.

It is heartening therefore to highlight another example of corporate investment with Samsung, who aim to provide renewable energy to the grid through the FiT initiate. This autumn, Samsung have acquired a large 180MW wind project in Ontario. This project is another in their growing portfolio of renewable energy projects; earlier this year; Samsung purchased land development rights to expand the previously planned South Kent Wind Farm in the UK to a 270MW output and in 2009 they signed a ‘Green Energy Investment Agreement’ again in Ontario to establish four manufacturing plants in the province and develop up to 2500MW of renewable energy projects, leading to the creation of about 16,000 direct and indirect renewable energy jobs.

It is clear that renewable energy is increasingly becoming an integral part of corporate sustainability; procuring renewable energy through purchasing RECs has quickly become a popular way for corporations to not only support the future of alternative power, but to benefit from the renewable attributes attached to each REC, as they are traded by and between corporations. By supporting green energy corporations demonstrate that there is a need for it.  With companies directly investing in renewable energy and building their own facilities, they can secure the future development of projects throughout the globe, as well as making a significant financial investment for the future of their business.

Victoria Kenrick is a specialist at Allen & York, a leading international Sustainability Recruitment consultancy, offering jobs in Environment, CSR & Sustainability, Renewable Energy and Carbon Management, plus Health and Safety Management. Allen & York has 18 years of experience recruiting for the built environment and sustainability sector. To see how we could fulfil your recruitment requirements and to see our latest job opportunities, please visit www.allen-york.com or come and speak to us at the RenewableUK Conference in Manchester 25-27^th October at the Careers Fair on Thursday 27^th on stand C11.