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Based on current trends, the International Renewable Energy Agency (IRENA) estimated that by 2050 only 20 percent of total commercial and industrial electricity demand will be addressed by renewable energy sourcing. Problem: this leaves a 65-percentage-point gap to fill to reach Paris Agreement targets.
For organizations across both private and public sectors to truly play their part in the global response to climate change, renewable energies must take on an increasingly significant role within their electricity demand mix. This is especially so as renewables become more and more competitive. Notably, solar and wind power are already cheaper than conventional sources in almost all regions.
As prices continue to lower, state financial contributions to support renewables are expected to be gradually reduced. Hence, it will be on the shoulders of corporates to ensure the development of sustainable energy sources. That there is now an urgent imperative to act is beyond any doubt. As the latest report from the Intergovernmental Panel on Climate Change (IPCC) reveals, unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach.
For corporates, renewable energy sourcing brings benefits in three ways: energy procurement competitiveness, net-zero strategy implementation success, and improved brand image. In this context, how can a company secure maximum profits from its renewable energy sourcing strategy, while staying ahead of the competition?
There are various types of renewable energy sourcing solutions: Corporate Power Purchase Agreements (CPPAs), energy labelling, self-consumption whereby you generate and consume your own (renewable) energy, purchase of electricity from companies with sustainable credentials, renewable certificates, etc. These solutions differ in terms of engagement, ease of implementation, environmental value, and financial benefits. For instance, CPPAs are the most effective in terms of carbon emission reduction and potential savings but are more difficult to implement. Choosing the right renewables partner to contract with for a CPPA can be a complex process, requiring in-depth knowledge of the energy sourcing market and hands-on expertise in all aspects of tendering. On top of this, let’s not forget that the relevance of renewable energy sourcing solutions, such as a CPPA, varies significantly depending on regions and sectors.
So, where do you start? At Capgemini Invent, our Net Zero Strategy service portfolio puts clients on a trajectory that takes them from climate pledge to climate action. It includes a focus on renewable energy sourcing. We believe that any renewable energy sourcing roadmap should begin with a dual assessment – internal and external. The former aims at building an understanding of clients’ global energy consumption and trends (by region, by usage), and how they manage energy procurement. The latter identifies locally-available and relevant solutions (financial impacts, ease of implementation, etc.). Renewable energy sourcing scenarios can then be designed, analyzed and prioritized.
Beyond procurement, designing and implementing a renewable energy sourcing strategy requires the involvement of many functions, notably: the CSR department, the legal team, risk management, operations, financial direction, etc. It is crucial to onboard these functions as soon as possible in the strategy design as they will play a key role in the implementation phase. For instance, the legal team will need to deep-dive into innovative long-term contracts, while the CSR team might assess the carbon and social impacts of projects, considering benefits as well as risks. In another instance, procurement may work with external parties on sustainable options for vehicle leasing (electric vehicles).
Therefore, each and every stakeholder should have a deep understanding of their role and involve themselves accordingly. Implementing and maintaining such cross-cutting programs requires structured governance and robust program management, highly dependent on each company’s specific context.
Defining and implementing a renewable energy sourcing strategy (from scenario design to partner selection and project development) is a complex process, requiring practical expertise and an overarching decarbonization vision. Get it right and renewable energy sourcing will bring tremendous value, efficiently supporting a company’s successful net zero strategy with strong financial and brand image upsides.
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Find out more about Capgemini Invent’s recommended approach to renewable energy sourcing and how our Net Zero Strategy offer can guide your journey.
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