Friday 4th November marks the beginning of the historic Paris Agreement to limit emissions of greenhouse gases (GHG) on a global level. This means that all countries must now begin to implement the plan laid out in their ‘Intended Nationally Determined Contributions’ (INDCs), including regular reporting on efforts to reduce emissions.
INDCs provide clearer direction as to how governments will limit levels of dangerous climate change and renewable energy will play a crucial role in helping countries meet the challenging targets they have set themselves.
What are businesses doing?
Businesses will need to take action to ensure their strategies are aligned to the INDCs laid out by the countries they operate in. Increasingly businesses are responding positively to the climate change agenda driven by the Paris Agreement, government policy and stakeholder interest. This has been evidenced through our research into the sustainability performance of the FTSE 100. We found that:
- The number of FTSE 100 companies using renewable energy remained fairly consistent between 2012 and 2015.
- However, for 2016 there is a significant increase in companies using renewable energy.
- Similarly, there has been a large increase in the generation of onsite renewables, after a fairly consistent level of activity during the 2012-2015 period.
- The use of purchased renewables has increased steadily since 2012, but again 2016 has seen a large increase in companies buying renewable energy.
Why more renewables?
There is no one reason why there has been such a significant uptake of renewable energy in the past 12 months, but there are a number of influencing factors.
- Global initiatives such as RE100 may have had some effect. Many of world’s most influential companies have signed up to the RE100 initiative and committed themselves to purchasing 100% renewable power. Indeed 10% of the FTSE 100 have now signed up to RE100.
- Uncertainty over energy supply and improved economics may have led to the increase in onsite renewable as companies look to both secure their energy supply by making full use of their assets (i.e. solar panels on the roof of large buildings) as well as decrease their carbon footprint.
- Companies may have improved the reporting of renewable energy activity, aided by the introduction of the market/location based reporting standards. As well as the requirement by the GHG Protocol that companies must evidence the quality of their renewable procurement. 17 FTSE 100 companies now report both market and location based Scope 2 emissions.
Sourcing ‘good’ renewable energy
However, switching to renewable energy and proving the validity of a renewable tariff can present a few challenges. Companies are demanding more and more transparency over the source of the renewable electricity they purchase, with the large companies sometimes unable to provide the necessary information.
When businesses buy renewable energy from electricity suppliers, in effect it takes the form of a ‘bundled’ package of electrons and green energy certificates. However, tracking the renewable energy back to its source is not always straight forward, and the buyer has no control over which renewable projects the certificates are purchased from. This can make transparency for auditors and proof of good quality renewable procurement difficult.
Unbundling energy procurement helps companies to source their energy from the grid, and purchase their renewable energy certificates from the market. Creating a verifiable renewable energy package that is superior to a bundled package at the same or better pricing.
Guarantee of Origins (GOs), Renewable Energy Guarantees of Origins (REGOs) and Renewable Energy Certificates (RECs) are all types of attributable tracking certificate. These certificates provide the necessary tool to prove the quality and source of your renewable energy.
By purchasing GOs, REGOs or RECs you are able to choose the location, technology and quality of the renewable energy projects you would like to support, whether that be solar, onshore/offshore wind, tidal or hydro power.
Finally, by purchasing certificates, you are actively helping to increase the financial viability of renewable energy projects, allowing more clean-power producers to enter the marketplace.