Commercial, Industrial, Solar, Sourcing Renewables, Wind - June 28, 2016 - By John duPont
Your roadmap to 100% renewable energy: Taking the 1st steps
Your CEO has committed to source 100% of your organization’s energy from renewables by 2030. By the way, she mentions, every energy investment you make needs to have a positive financial return.
This might seem like a daunting task, but if you’ve gotten this far, you’re actually well-positioned to succeed. Even if you haven’t yet secured that top-down mandate to transform your energy supply, you can get there by following a pragmatic approach.
A year ago, your immediate response might have been to wait it out, as promises of grid parity seem to be forever one or two years away. With the installed cost of solar photovoltaic systems (including modules, balance of system, and soft costs of integration and financing) declining 15% each year, it’s easy to understand an argument for delaying investment. But even amid a new era in energy markets with natural gas prices hitting historic lows, many organizations are taking major strides to reach massive renewable energy goals. And they’re doing it now.
What has changed, and how can you achieve similar results?
1. Think big to drive action
One of the most interesting shifts in the sustainability and energy management landscape has been the widespread commitment to massive renewable energy goals among large companies. Coca-Cola Enterprises, for example, committed in December 2015 to power 100% of its operations with 100% renewable energy by 2020. At this year's Clean Energy Summit in London, Coca-Cola's Director of Corporate Responsibility and Sustainability, Joe Frances, explained the power of a big goal to rally interest among the many necessary stakeholders across the company.
"A lower target wouldn't have brought the right people to the table," he said at the event.
To get your organization’s decision makers’ attention — and, more importantly, support — set sustainability goals that will effect meaningful change. Then, publicly commit to those goals to hold your team accountable.
2. Develop a ‘loading order’ to align your goals and strategies
Achieving big goals doesn’t happen by chance. You'll need to build a strategy to mobilize resources within your organization in pursuit of the right objectives.
The State of California provides a model for how this type of structure can drive action. Following the California energy crisis of 2003, the state’s energy and utilities agencies jointly adopted an energy action plan that established a "loading order" of investment in energy efficiency, demand response, renewable energy, conventional energy generation, and infrastructure to unify the state's approach to achieving energy goals. The loading order established that energy efficiency and demand-side investments would come first, followed by renewable resources, and finally by conventional energy supply like natural gas. Importantly, this strategy gives everyone across the state a shorthand mantra for priorities and aligns subsequent decisions toward a common goal. And it has been successful: Per capita energy consumption has remained constant in California since the 1970s, while the rest of the country has seen consistent growth.
3. Onsite or Offsite? Consider local resource quality, utility costs and risks
Once you've found a place for renewables in your loading order, another strategic decision arises: invest in onsite resources like solar panels and battery storage, or purchase a stake in large offsite solar and wind plants? You can start with the simple math—does your organization have the rooftop and parking area space available to offset all of your electricity consumption with solar? If you have a large footprint of warehouses, expansive stores, or distribution centers, it might make sense to prioritize on-site investments to offset your full retail utility bills. If you own and operate tall commercial buildings, or run energy-intensive manufacturing or industrial operations, you'll almost certainly have to source off-site renewable energy to hit your goals.
But how should you strike the right balance between onsite and offsite resources? There are many factors at play in this decision, but the primary drivers are resource availability, utility costs, and your organization’s perspective on energy price risk. The economics for onsite solar are quite strong in many U.S. electricity markets, buoyed by the extension of the federal investment tax credit, or ITC, and state-by-state incentive policies. But you’ll also need to assess your current utility costs (including retail supply and local distribution utility charges), the availability of rooftop or parking lot areas, and the amount of sunshine in each location to prioritize sites. While both onsite and offsite resources typically provide some security against energy price volatility, only onsite resources address the entire retail component of your bill.
4. Explore financial structures to make big investments
Finally, you’ll need to decide how you’ll invest in renewable resources: whether you'll own the systems or finance through a third-party power purchase agreement, or PPA; whether you'll take physical delivery of the power or invest in a purely financial transaction; whether you'll keep or sell the environmental attributes — typically as renewable energy certificates — from your investments.
Again, many factors come in to play here, so your strategy should consider your organization's location and objectives.
Organizations with a strong balance sheet and an appetite for the tax credits offered by the federal ITC and production tax credit might be more inclined to take ownership of their renewable projects. IKEA, for example, has pursued a direct-ownership approach, with investments in rooftop solar, biomass generation, and large wind farms accounting for 62% of its total energy consumption last year (see more in IKEA's sustainability report here). Other firms with shorter holding patterns or leases on their facilities, higher cost of capital, or other objectives for capital investment are pursuing third-party financing. Over the past five years, the proportion of commercial PV installations financed by third parties has risen from 36% to 65%, according to a recent GTM Research report.
Finally, new financing structures previously only available to large utilities buying renewable energy are starting to unlock new opportunities for businesses. These "virtual" power purchase agreements, in which the counterparties agree to swap a fixed price for the floating market price of the power generated over the term of an agreement, are allowing large corporations to make big investments in solar and wind projects and hedge energy price volatility without taking delivery of the power. Taking a major position in the offtake from an offsite investment also enables firms like Google to show the "additionality" of their investment, that is, providing the cash stream to the developer that other financing partners need to see from the project to get it built and operating. Without these big investments, such projects simply wouldn't happen, so large corporations can really show their leadership in driving progress toward renewable energy.
As industry leaders like Google, Apple and Microsoft close in on their 100% renewable energy targets, it's important to remember that your firm doesn't have to have the resources of these tech titans to have similar success. By following a pragmatic approach that starts with committing to big goals, you can lead your organization to transform your energy supply, delight your customers and meet your investors' increasing expectations.
As a member of EnerNOC's Distributed Energy Resources, or DER, team John duPont works to develop relationships with enterprises interested in learning more about and implementing a DER strategy that works for them. Previously, John worked on EnerNOC's Product Marketing and Energy Services teams. John is a licensed mechanical engineer in the state of California and a LEED AP.
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