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Expert Perspectives on Energy and Sustainability
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Renewable Energy Essentials for Meeting Science-Based Targets – The Importance of a Portfolio Approach

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Businesses have long recognized the need to decarbonize operations through setting GHG emission reduction targets, but these goals are typically short-term and incremental in nature. Leading companies are beginning to employ a strategy that involves decarbonization through greenhouse gas (GHG) reductions in line with international efforts to keep global warming below 2 degrees Celsius. Goal setting along this threshold, outlined under the Paris Climate Agreement, allows companies to make a more material impact on climate change. This initiative, known as the Science-Based Target Initiative (SBTi), has garnered commitments from 320 global companies.

Achieving science-based targets (SBTs) demands far deeper carbon consumption cuts than traditional GHG emission reduction targets. Though absolutely crucial in achieving global decarbonization, relying on energy efficiency measures alone will not be enough to meet SBTs. Most companies pursuing ambitious GHG reduction will need to pursue more aggressive energy management strategies. This means implementing energy efficiency programs alongside other mechanisms such as purchasing electricity from renewable sources, engaging supply chains, and taking a more active approach to energy management.

Using Renewable Energy to Meet Science-Based Targets

Energy efficiency is enhanced by sourcing renewable electricity. The cost of renewable technology has fallen dramatically in recent years, and renewable solutions are readily available in many different regions across the world. Companies can take a global portfolio approach to renewable energy sourcing and the resulting emission reductions (reported as market-based reductions under the GHG Protocol). Many companies find that performing a global renewable energy opportunity assessment, which assess viable renewable energy technologies in any location a company has operations, is an effective way to kick start a global renewable strategy.

However, building this type of balanced portfolio can be complex. Different regulations, pricing structures, and market incentives can all impact the energy procurement process and prove challenging to navigate. A balanced portfolio will also include a variety of technologies – for example, a company may utilize a mixture of distributed onsite generation, offsite power purchase agreements (PPAs), and global EACs to meet its SBT. Companies pursuing high levels of renewable energy, even up to 100% goals, through their SBTs often find it necessary to use a ‘smart ramp to goal’ strategy. The graphic below demonstrates one such strategy using a combination of EACs, onsite, and offsite renewable energy solutions.

 

Smart Ramp_2

Distributed generation and global EACs are attractive, but they can require significant capital expenditure. In order to achieve cost-effective decarbonization at scale, many companies are finding it attractive to enter into an offsite PPA. These financial agreements typically require no upfront costs and have the added advantage of fixed energy pricing for the duration of the contract, which spans a minimum of 10 years. PPAs are not without risk, however, and the sourcing process for a high-quality project at the best price is an essential step.

Building a viable roadmap reaching your company’s GHG reduction targets, including a mixed portfolio of technologies and strategies, is the first step in a successful approach to climate leadership and meeting SBTs. To learn more about the process of setting and achieving your company’s own science-based targets, download our new white paper, A New Approach to Climate Leadership: Ensuring Success with Science Based Targets

 

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