By Dan Probst, Chairman of Energy and Sustainability Services, JLL
Don't tell Washington, but corporations are quietly spending billions on clean power. Renewable energy policy may be contentious on the floors of the U.S. Congress and the Supreme Court, but it's finding more friends than foes in corporate boardrooms. Last year was a record-breaker for corporate purchasing of large-scale wind and solar energy, reports the Rocky Mountain Institute, which reports that corporate use of renewable power in the U.S. more than doubled from 2014 to 2015--from 1.2 GW purchased in 2014 to nearly 3 GW of renewable energy purchased in 2015.
President Obama's Clean Power Plan--which calls for slashing power plant greenhouse gas emissions by 32 percent by 2030--has been encountering heated resistance from some policymakers and fossil-fuel companies. And yet, the move to cleaner power shows no signs of slowing, at least in the corporate sector.
Green energy's latest endorsement: the corporate bottom line
Blue-chip corporations are increasingly pursuing clean power sources, regardless of federal policy moves. While the trend began with companies trading carbon credits, we are seeing a shift toward onsite renewable energy generation and direct power-purchase agreements with clean energy providers.
Many first pursued these options because they've made public commitments to meet ambitious sustainability goals. Some have joined RE100, a collaborative, global initiative of influential businesses committed to 100% renewable electricity, to massively increase corporate demand for renewable energy.
Close to half (215) of Fortune 500 companies have set ambitious clean energy and GHG reduction goals, according to Ceres research, and some are aiming to achieve them by 2020. Among other blue-chip companies, for example, Marriott has made a 2020 pledge to reduce energy consumption by 20 percent, and Coca Cola plans to reduce carbon dioxide emissions by 25 percent.
These commitments drove the initial investments--but the ROI from early efforts has created real economic momentum. As a result, corporate social responsibility commitments are now being trumped by simple economics.
Even companies without defined sustainability goals are making moves toward renewable power because of the financial viability of the clean energy supply in the United States.
The 100 companies reporting on climate and energy targets to CDP (formerly the Carbon Disclosure Project) are conservatively saving $1.1 billion annually through their emission reduction and renewable energy initiatives, reports Ceres.
In addition, the use of renewable energy enables organizations to budget better for energy costs and hedge against volatile fossil fuel costs. Oil and gas prices may be very low today, but that wasn't always the case--and they won't stay extraordinarily low because the market always finds equilibrium eventually. The availability of renewable energy helps mitigate the financial risk.
It's becoming easier and more cost-effective than ever for corporations to access or invest in renewable energy. Here are five indicators that corporate use of green energy is here to stay:
1. Wind turbines in the parking lot? No big deal. Onsite power generation is becoming mainstream.
Using excess heat, wind or solar power, buildings that generate their own power onsite can become more self-sustaining and achieve more stable operating costs. Ultimately, some will even be able to sell excess power back to the grid. Walgreens' first net-zero store, for instance, draws on solar, wind and geothermal energy and was expected to consume an annual 200,000 kilowatt hours of electricity while generating 256,000 kWh.
Although that facility may not have yet achieved its ambitious goal of being a net-zero energy facility, others have. In fact, New Buildings.org maintains a significant database of net-zero buildings. Meanwhile, thousands of corporate and institutional (and residential) facilities around the United States are tapping renewable energy, whether generating it onsite or connecting with nearby wind or solar farms.
One California company is working on the largest solar carport project in the world, covering carports with solar panels in 150 sites across the state. In the category of brilliant but simple, it turned property that had very little value into significant energy savings, negotiating a 20-year power purchase agreement for 97.5 million kWh/year. The electricity from these carports is enough to power 16.2K homes, and also saves the business nearly $3 million annually in energy costs, or roughly 15 percent of its typical utility bill.
2. Wall Street is getting onboard. New clean energy investment vehicles are emerging.
With the rise of yieldcos (think wind or solar real estate investment trusts) and extension of the solar power investment tax credits, we are seeing the cost of money go down for clean energy projects, lowering the cost per kWh. Meanwhile, virtual power plan agreements, like Yahoo's renewable energy contract with solar project developers represent a new way forward for organizations seeking a closer relationship with their clean energy suppliers.
3. When shareholders speak, corporations listen. Investors are demanding clean energy use.
According to Ceres' Power Forward 2.0 report, institutional investors have been calling for companies to adopt greenhouse gas and other clean energy targets. In the past two years, institutional investors have filed more than 100 clean energy resolutions with companies in the electric power, oil and gas, insurance, manufacturing, and other sectors. Shortly before the COP21 conference on climate change in December 2015, more than 400 investors with a collective US$24 trillion in assets under management signed the Global Investor Statement on Climate Change, a call to action setting out the steps investors can and will take to address climate change.
4. The path is clear. Alternate energy matchmaking is accelerating adoption.
Determining specific clean energy goals--and the path to achieving them--is a complex undertaking for a company with dozens or hundreds of locations. Which technologies will be most effective at which sites? The feasibility of wind, solar, geothermal, biomass or renewable energy power depends upon local environment conditions, as well as state or local incentives, require lengthy investigations and cost analyses. Third-party alternative energy matchmakers are emerging to help corporate property owners navigate everything from deal structuring and vendor selection to post-implementation monitoring.
Outpacing fossil fuels
With all these trends in play, why be a 'dinosaur' when it comes to powering corporate buildings and clean energy infrastructure is evolving so rapidly? The world is currently adding more capacity for renewable energy each year than for coal, natural gas and oil combined, reported Bloomberg New Energy Finance analysts last year.
Clean power's attraction is becoming abundantly clear. By benefiting corporate sustainability goals, resource efficiency, and the bottom line, corporate demand for renewables is going strong. With or without the Clean Power Plan, companies are taking greenhouse gas emissions reduction into their own hands--and their pocketbooks.