Companies drive transition from coal to clean

Companies can push the energy industry towards the shift to a greener production.

Last year global coal consumption grew by 1% for the first time since 2013. However, there are two trends in the world. In Asia consumption and production of coal increased driven by a soaring demand for energy. In Europe several countries are on the path towards the phase-out or at least the decline in consumption. Take, for example, the UK. Carbon emissions lowered for the sixth consecutive year driven by the falling coal use in power generation. There is more. The UK is aiming at reducing by 80 percent emissions on 1990 levels by 2050. As part of this effort, Britain targets to close all coal-fired power stations by 2025. 

Coal production by region (million tonnes oil equivalent)- © bp.com

However, the International Energy Agency states that in 2017 coal had a 38 per cent share in the power mix. Even if you include climate policy goals in some countries, the total consumption of coal is expected to grow worldwide this year.
But how can such phenomenon be avoided, how can the use of coal decrease? Lately, the quest for a solution has focused only on one side of the economy: regulators. State and organizations have signed different agreements to offset the rise in coal consumption, to construct laws and policies that guided the market towards a greener production. Yet more and more companies around the world are actively procuring or investing in renewable energy. Driven by the last decade’s reduction of costs in combination with a growing demand for corporate sustainability, renewables have become an attractive source of energy. The result is that energy suppliers are switching from coal to other cleaner sources of power.


IRENA Report

The International Renewable Energy Agency highlighted that corporate sourcing of renewables has the potential to drive significant investment in green energy and accelerate the process towards sustainability. In a report published in 2018, the agency analyzed how corporate sourcing of renewable electricity is a growing trend in 70 countries around the world with the majority of companies located in Europe and North America. Yet demand for renewable energy has raised even in Asia and Latin America. Corporations sourcing renewable electricity do not simply supply green electricity to the headquarters but to all production sites located globally. The diversification does not limit to the geographical area. Indeed, companies come from diverse sectors, ranging from Finance to Information Technology. 

Corporate renewable electricity sourcing globally- © IRENA, “Corporate Sourcing of Renewables: Market and Industry Trends”, p. 9

In terms of data, active corporate sourcing of renewable electricity reached 465 terawatt-hours in 2017, representing approximately 3.5% of total electricity demand in the commercial and industrial sector, according to the report. Moreover, companies in the aforementioned areas account for two thirds of the world’s end-use of electricity, IRENA data. This means that they have the potential to drive investment in renewables and contribute to global energy transformation. However, just few companies set targets for energy consumptions and not many more have committed to switch to renewable energy sources. 
From a technical perspective, IRENA states that corporations follow two approaches in the consumption of renewable electricity: passive and active approach. In the passive approach consumption is based on renewable electricity available in the grids. Corporations can either select unbundled energy attribute agreements or power purchase agreements. In the former, the corporation purchases renewable energy separately from its electricity and certifies it through guarantees of origin or renewable energy certificates; in the latter, the corporation agrees to purchase a specific amount of renewable electricity from a supplier. In the active approach consumption is based on actions companies take to procure or produce renewable electricity. Even in this case corporations can select two models: renewable energy offerings or production for self-consumption. The first model is based on a tailored renewable electricity contract, whereas the second lies on the company investments, i.e. the company creates its own energy system to produce electricity primarily for self-consumption. Take, for example, IKEA. The company is independent in the Nordic area, producing more energy than it consumes, and the same will occur in the US shortly. Another example is Swiss Re. The company is financing its own solar power production in Armonk, New York, where a solar power plant has the capacity to generate more than 60% of the headquarters’ requirement and a fifth of the total energy consumption in the US for the company.


The IKEA Case


Worldwide IKEA has invested around €1.5 billion in renewable energy projects ranging from wind to solar power in order to support the shift to a low-carbon economy. “Electricity and energy are essentially just costs to your business, until you start generating your own when you can turn a cost into a profit centre”- says Steve Howard, chief sustainability officer. For this reason, IKEA operates 327 turbines and almost 700,000 solar panels on stores and distribution centres that allow the company to produce renewable energy at low costs. However, IKEA’s engagement does not limit to the core business, but it expands to its customers. Indeed, it sells exclusively LED lights in its furniture and it offers solar panels in several countries to enable clients to reduce energy costs. Furthermore, the IKEA Foundation funds programmes for families and communities impacted by climate change. For example, it awarded a grant to SunFunder to help 6 million people across east and west Africa and India to have access to renewable energy. In detail, SunFunder funds energy producers to serve rural areas and help the reduction of fossil-fuels hence having a double positive effect: protecting the planet and improving everyday life in underdeveloped countries.


RE100 Initiative

RE100 logo- © there100.org
Just over 4 years ago, a handful of companies launched the RE100 collaboration to push energy producers into providing sustainable energy. The idea behind the initiative is that influential businesses worldwide commit to use 100% of renewable electricity in order to increase demand and therefore supply of green energy. “By committing to 100% renewable electricity” - says Sam Kimmins head of RE100, The Climate Group - “members are making it clear: this isn’t about easy wins, this is about building renewable energy portfolios throughout the world, through [companies’] global operations and creating real world-scale change in energy system”. Furthermore, higher demand for renewable energy will produce positive secondary effects such as attracting investments to the sector and increasing corporate responsibility. “Businesses have a vital role to play in unlocking the finance required to bring about a clean economy – with corporate innovation and investment we can decarbonize the power sector within a very short amount of time. Actions speak louder than words and well-known names can demonstrate the strong business case for going 100% renewable”, Steve Howard, Chief Sustainability Officer at IKEA.


Conclusion

The shift from coal to a greener production does not depend only on institutions, organizations, international treaties. Indeed, companies play an important role in the energy transformation our world needs to respect the commitment taken with the Paris Agreement: to limit the rise in global temperature to less than 2 degrees Celsius above pre-industrial levels.

Written by Riccardo Casarin


Find out more: