Consumers, stakeholders and employees demand businesses operate in a sustainable manner, and in response corporations must adopt clean energy practices. Businesses have responded to this shift in various ways, with renewable energy integration at the forefront of sustainable investments even helping drive market development. In fact, corporate renewable energy procurement reached a new record in 2018, with 3.57 gigawatts (GW) of clean energy projects announced this year to date in the United States. Driven by various motivators – from the potential for energy savings, the creation of diverse business strategies, and a desire to reduce greenhouse emissions, and keeping consumers happy – incorporating renewable energy presents organizations with the opportunity to increase cost efficiency and reliability, while reducing their environmental impact.
When determining a path to incorporating renewable energy solutions, businesses are confronted with a variety of factors. Those diverse factors include the type of business, geographic distribution, market availability, appetite for risk, building type and business priorities. Given that there is no “one size fits all” for renewable procurement, here are five steps procurement teams should follow before exploring and adding renewable energy.
Step One: Know Your Business, Know Your Data
To set their organization up for success when implementing renewable energy, companies must measure their energy usage. The process of measuring and assessing a portfolio will identify areas of waste and current usage. All locations and departments must also undergo analysis to help develop the most efficient renewable energy strategy. This wealth of data from across the business will ensure that energy procurement teams are armed with the appropriate information when they present the renewable energy plan to various company stakeholders.
Step Two: Consider Stakeholder Priorities
Fifty three percent of businesses report the challenge of receiving internal stakeholder agreement as a barrier to renewable energy adoption. These stakeholders range from shareholders, employees and customers. Each group has varying priorities that must be considered. One group may be motivated by the financial pay-off, while another focuses on environmental concerns.
To address this lack of alignment and ensure that each stakeholder is presented a plan that addresses their exact priorities and concerns, the internal procurement team should consist of cross-functional employees that can accurately identify all stakeholder priorities.The internal procurement team can then work to develop a plan that meets all needs and highlights how renewable energy fits into broader sustainability initiatives.
Step Three: Identify Barriers to Success
Every company will face challenges that can prohibit the integration of renewable resources. These barriers can be rooted in financial causes, lack of assets or data, geographic limitations, or contract and regulatory restrictions. When thinking of financial barriers, companies may need to consider if they can afford the upfront cost of a capital expenditure agreement in order to realize the benefits renewable energy, or if some other renewable solution that is not capital intensive makes the most sense for their business. Procurement teams must also have in-depth knowledge of their region’s regulations around renewable energy, and how the policies will affect the process. While certain states have adopted innovative policies, many still work to implement the infrastructure, programs or regulatory support needed to ensure successful results.
Once these limitations are known, teams must highlight them within their renewable sourcing plans, alongside potential solutions to help overcome the barriers. Identifying potential challenges, both internal and external, from the onset will limit potential crises and make the overall procurement process more efficient and cost-effective.
Step Four: Run the Long Race, Not the Sprint
Today’s prevailing narrative includes frequent and urgent calls for action on clean energy solutions and sustainable practices. With CO2 emissions reaching a historic high, rising 1.7 percent in 2018 alone, the market has increasingly taken note of which corporations are making renewable energy solutions part of their strategy, those that don’t, and the impact of not incorporating renewable energy. While the heightened scrutiny of global business practices may be warranted, businesses will need to be strategic and methodical with their renewable energy procurement process to ensure they are sourcing solutions that optimize their renewable and business goals rather than take action now that causes inefficiency later – for example fixing the majority of their load now at current rates and terms available for renewable solutions now that may not be optimal relative to future offerings given changing technologies, cost structures and regulatory conditions. Factors like contract term, marketability, price and volume risks, budget certainty and contract simplicity, among others can have an impact on the decision-making process and need to be considered alongside renewable goals.
In order to ensure that their renewable resources will make a real difference, businesses must thoroughly research several components – including their financial baselines, tariff increases and resourcing location options. While it may seem like an easy process, it can take a significant amount of time to ensure the business is prepared to integrate renewable resources.
Step Five: Incremental Diversification Rather than Replacing Portfolio Procurement Strategies
While 182 global companies have committed to 100 percent renewable energy, the vast majority of companies may not be in a position to implement renewable energy into their business model. As a company shifts its energy supply from traditional resources to renewables, it must ensure that its energy mix can keep up with the energy demands.The shift from traditional to renewable energy takes time and can expose operational issues.
In order to identify a picture of the greatest, most cost-effective and impactful opportunities in renewables, procurement teams must develop an understanding of renewable energy solutions, market conditions and tariff options available in each market across your sites.For multi-site businesses managing hundreds – if not thousands – of sites, this can be a challenge.
With this in mind, a mix of power across renewable energy solutions, can be implemented in order to meet goals.
The Big Picture
Corporate procurement of renewable energy sources has grown by 60 percent over the past decade. Still, this is not enough to have a positive impact on science-based climate targets. These five steps are a roadmap for companies to follow in order to successfully explore and implement renewable energy into their business models.