The transition to renewable energy is happening. But are organizations moving quickly enough?
Across the globe, efforts to tackle climate change are gaining momentum. The focus is on phasing out fossil fuels and embracing clean, renewable energy. The 2015 United Nations Climate Change Conference, which led to the Paris Agreement, gave a significant push to this movement. Since then, awareness about the harmful effects of fossil fuel combustion, like carbon dioxide and greenhouse gas emissions, has increased.
Despite these efforts, the last nine years have been the warmest on record. Ongoing global warming threatens the well-being of people, animals, and ecosystems. So, the big question is: How can we slow down this warming?
In this article, we will explore the available renewable energy sources, the steps companies can take to speed up their transition to clean energy, and how they can gain support from stakeholders.
Accessible Renewable Energy Sources
Renewable energy, which emits little to no carbon, can help combat climate change and meet the growing energy demands worldwide. According to the International Renewable Energy Agency (IRENA), renewable energy capacity grew by nearly 14% (473 gigawatts) in 2023. However, access and availability vary, impacting companies’ choices on which sustainable energy to invest in.
Here are the key renewable energy sources driving the transition today:
- Hydro: Uses water movement to spin turbines and generate electricity. It remains the largest clean energy provider and is expected to do so through 2030, according to the International Energy Agency (IEA).
- Solar: Converts sunlight into electricity through solar photovoltaics and concentrating solar-thermal power. Solar power generation is expected to surpass coal and natural gas by 2027.
- Wind: Generates electricity using turbines. Offshore wind farms, which harness stronger winds, have the potential to double offshore wind power capacity.
- Other Sources: Include geothermal and biomass. China plans to invest CNY 1.2 trillion in biomass by 2025, while Kenya and Ethiopia might produce roughly 10,000 megawatts through geothermal sources. These sources currently play a smaller role compared to hydro, solar, and wind energy.
How Companies Can Procure Renewable Energy
For companies aiming to transition to renewable energy, understanding the availability of these sources is just one step. They also need to figure out how to procure and integrate renewable energy systems. Here are some strategies:
- Renewable Energy Certificates (RECs): These can be purchased from power plants to show that the bearer owns one megawatt-hour of zero-carbon electricity. For example, Intel used RECs to pledge that their new factories in Ohio will run on renewable energy within five years.
- Power Purchase Agreements (PPAs): Long-term contracts between energy buyers and suppliers that define the price and amount of renewable energy. Microsoft signed a five-year deal to double its renewable energy capacity by adding more than 10.5 GW of solar, wind, and other renewable sources across its facilities.
- Renewable Energy Asset Investments: Companies can install solar panels or wind turbines on their facilities for onsite electricity generation. Energy storage systems help store excess electricity. Target, for example, has one of the largest onsite solar footprints in the US, including a 7.5-megawatt energy system in New York state.
- Electrification: Converting systems or processes from nonelectric to electric power. Electric vehicles are a prime example. IBM aims to achieve 75% renewable electricity by 2025 through increased procurement of renewable electricity.
Benefits of Switching to Renewable Energy
While the upfront cost of renewable energy adoption is a challenge, there are significant long-term benefits for businesses and economies:
- Job Creation: Investing in clean energy leads to more job opportunities. In 2022, global employment in the energy sector rose to 13.7 million jobs, nearly doubling in the last decade.
- Cost Savings: Companies can use metrics like the levelized cost of energy (LCOE) to determine the cost-effectiveness of renewable projects. Fixed-rate PPAs offer price stability, and feed-in tariffs provide above-market prices for generated energy.
- Tax Incentives: Various countries offer subsidies and tax benefits for deploying renewables. For example, the US provides the Business Energy Investment Tax Credit, while Germany offers reduced VAT rates for solar panel installations.
- Energy Security: Diversifying energy sources provides greater stability and resilience. Even if a grid doesn’t fully run on renewable energy, having multiple energy production means ensures consistent power availability.
- Brand Reputation: Sustainability-focused stakeholders pressure organizations to be transparent about environmental factors, encouraging clean energy initiatives and enhancing brand reputation.
- Regulatory Compliance: Renewable energy helps companies meet climate goals outlined in legislations and frameworks. Compliance with regulations like the Corporate Sustainability Reporting Directive (CSRD) encourages EU companies to disclose their environmental impacts.
Moving Forward with Renewable Energy
Effective energy management is key to speeding up the renewable energy transition. Software solutions like the IBM® Environmental Intelligence Suite help companies adopt clean energy, improve energy efficiency, and reduce consumption. With custom climate apps and data models, organizations can move towards net zero emissions.
By exploring these strategies and benefits, companies can play a crucial role in the global effort to combat climate change and create a sustainable future.
