Commercial, Distributed Generation, Industrial, Solar, Sourcing Renewables, Wind  -  September 13, 2017

Report: Cost reduction most important driver of corporate interest in renewable energy

As an ever-expanding group of U.S. businesses commit to using more renewable energy to power their operations, a new study has found that for many companies, cost savings is the single most important reason for doing so.

This is according to results of the first major survey of large electricity users since President Donald Trump announced his decision to pull the U.S. out of the 2015 Paris climate agreement, conducted by SED Research. The Sept. 13 report, "Post-Paris: the State of Corporate Renewable Energy Sourcing," analyzes responses from executives at 94 companies and institutions, more than 40 of which are in the Fortune 500.

Among an array of motivations commonly thought to be driving corporations to make renewable energy purchases, cost reduction was the most commonly cited most important reason among respondents whose companies were considering or have completed renewable energy purchases. And among that same group, nearly 60% said their company’s interest in renewable energy had increased over the past year.

The survey results show that while companies have looked to using renewable energy for a number of different reasons, such as customer demand or to boost their image, "the price and cost savings are the showstoppers," SED Research quoted one large industrial executive as saying. Energy cost reduction was followed closely by greenhouse gas reduction targets as the single most important reason for turning to renewable energy, while brand image/appearance and demand from either customers or investors were the least selected by companies as the most important reason.

"This finding explodes the myth that brand image/marketing value is the leading reason to source renewable energy," Smart Energy Decisions founder and editorial director John Failla said. 

As solar and wind prices continue to decline, the improved economics of renewable energy are creating a much wider net of opportunities for corporations that are looking at renewables as a means to lower and/or stabilize their energy cost. This is increasingly being recognized by a wider range of businesses, and industrial companies in particular, according to the report, which appear to be gearing up to enter the market for renewable energy purchasing in a large way.

The survey found that 22.2% of respondents from industrial companies were considering their first renewable energy purchase; 36.1% of them have completed more than five purchases and 30.6% had completed two to five. These responses put data behind industry chatter that this trend is on the horizon, following a number of large, energy-intensive corporations such as Corning, General Motors and Toyota announcing ambitious renewable energy and/or carbon reduction goals in recent years. Corning, for example, in speaking with Smart Energy Decisions in 2016 about their first U.S. solar PPA, said the deal made good business sense as it encouraged efficiency and lowered its energy costs.

"We think this is a unique, albeit necessary, step in our energy-management journey," Patrick Jackson, the director the company's global energy management said at the time.

SED Research believes the potential impact of a broader number of industrial companies turning to renewable energy for their electric supply is significant, as their electric loads far outweigh those of the commercial sector.

Respondents from companies with larger overall annual electricity spends reported being further along in their renewable energy journey. This is reflective of the common refrain of large, energy-intensive technology giants such as Apple, Google, and Microsoft being the early movers into the space with the most experience in sourcing renewable energy. But this finding also implies that companies with the largest electricity costs have been more motivated to embrace renewable energy for electricity cost reducing and/or cost stabilizing benefits.

The survey also found that beyond industrial companies, commercial companies and those with smaller energy budgets are increasingly looking to renewable energy sourcing. The report correlates that primarily to the continued decline in renewable energy costs; advancement in and expansion of purchasing mechanisms and financial terms available to corporations looking to deploy renewables; and pressure from large companies with major sustainability commitments -- such as Apple and Wal-Mart Stores Inc. -- that are creating ripple effects within their supply chains to adopt renewable energy.

The survey was conducted in June, shortly after President Donald Trump announced his decision to pull the country out of its commitments to the 2015 Paris climate agreement. Results reflect that U.S. corporations and institutions are maintaining and in many respects strengthening their interest in renewable energy following the shift in federal policy.  

Smart Energy Decisions is hosting a discussion around the key findings of the Post-Paris report as part of Climate Week NYC on Wednesday, Sept. 20. The panelists will be Cindy Quan, VP of environment and social governance at Goldman Sachs, David Tulauskus, director of sustainability at General Motors and Blaine Collison, managing director at Edison Energy LLC. Edison Energy is the corporate sponsor of Smart Energy Decisions’ report and the Climate Week NYC panel.

To learn more or purchase a copy of the report, head to the Smart Energy Decisions research center.

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