By Kevin Hagen
Major corporations across the country are recognizing the benefits of wind and solar power to cut greenhouse gas (GHG) emissions, stabilize energy costs, reduce operating expenses and minimize their dependence on fossil fuels. These trends are easy to read about, but actually doing it can be challenging.
Because data backup firm Iron Mountain is a pretty typical company, we hope it’s helpful to share some of our steps and missteps as we’ve gone from testing the waters, to becoming among the top 25 corporate purchasers of renewable energy over the past two years.
Who are we, and why are we doing this?
We are the leaders in storage and protection of critical assets from business documents and data to fine art. We’re primarily a business-to-business (B2B) company, but our trucks are seen in many cities and our iconic document storage boxes and secure shred bins are seen in offices everywhere because we serve some 94 percent of the Fortune 1000. With over $3 billion in sales, we’re an S&P 500 company with 1,100 facilities comprising over 70 million square feet in 41 countries, and we have over 20,000 employees.
Our relationships with our customers and our communities are measured in decades and are built on trust. We realize that to earn and keep trust requires more than just delivering solid service. It requires us to think about all aspects of how we run our business from how we protect our customer’s assets, to how we treat our employees to how we run our operations. Incorporating environmental and social responsibility into everything we do is what stakeholders expect from a brand they trust.
Probably my most uncomfortable day at Iron Mountain was telling the CEO’s chief of staff that we missed our first GHG goal. I don’t recommend missing your first goal, but it was a great way to confirm that the CEO was committed to transparent reporting. In fact, he addressed it in his introduction to our corporate responsibility report and admitted that although missing a target was hard, without that first goal, we probably would not have learned as much.
That experience greatly impacted our methodology for rigorous metrics. When our 2015 results are published, we report progress because of what we learned -- especially about energy.
Finding our way
Like many corporations our size, energy management was one of many priorities for our operations team. GHG metrics helped us see that small impacts of electricity in many places added up to a surprising 50 percent of our global footprint. It also put a spotlight on the costs, and the cost volatility of our hidden fossil fuel dependence.
We concluded that we had a big opportunity to reduce risks, cut costs and mitigate our environmental footprint by addressing our energy use more aggressively.
We started by centralizing authority and accountability for energy within the real estate team so the total impact could be better managed. That led to a four part strategy that is now delivering year over year reductions in absolute electricity use and saving millions of dollars annually.
It also inspired us to consider the source of our electricity, which showed us that renewable energy had big advantages beyond the “green” such as long term price stability. However, from owning on-site solar systems to virtual wind Power Purchase agreements to a host of 3rd party contracting options, we discovered that there was a lot to learn.
The first thing we needed was to understand our priorities. We landed on:
- Long-term price stability
- Near-term cost reductions
- Reduced GHG footprint
- Increase energy autonomy
We also wanted to use our millions of dollars of “spend” to help make a positive impact in our communities including economic growth and reducing pollution by supporting the market shift to renewables. Finally we decided that based on other business priorities, we did not want to invest capital in asset ownership at this time. Ultimately we decided on a portfolio approach with three types of deals.
1. On-site solar power purchase agreements (PPA): Third-party solar PPAs are now the most popular way for business to use solar. They offer competitive rates, long term (20 year) stable costs and because the electricity production is on-site, can help reduce other expenses such a peak demand charges. Iron Mountain tested the waters with our first project in Windsor Connecticut in 2013. We have since completed over 2 megawatts of solar which provided about 1 percent of our North American electricity needs and saved about $150,000 in 2015 and we have a pipeline to install about 5 MW per year.
2. Off-site wind PPA (Contract for Differences): To get to even bigger scale we needed access to more power, like wind farms, but how do you deliver power to facilities hundreds of miles away? The breakthrough was to think of a wind contract like a financial instrument and use some of the tools developed in the commodities business, specifically something called a “contract for differences."
We sign a long term fixed price agreement to own power at the wind farm. Here’s the trick: as we sell that power to the grid, we are also buying power at our facilities miles away. Since we are simultaneously buying and selling, the price ups and downs cancel each other out. The result is that we’re left with a stable price. As an example, we closed a 15-year contract for two-thirds of the production of a 39 MW wind farm being built in Ringer Hill, Pennsylvania. That contract that will help cost stabilize and “green” all of our electricity use in the mid-Atlantic (PJM) region or about 33 percent of our North American usage.
3. Direct energy purchasing: Wind and solar PPAs stabilize our long-term portfolio, but we also needed shorter-term solutions such as the one- to three-year electricity contracts we commonly buy in deregulated markets. While these contracts are easy to execute, “commodity power” usually comes from fossil fuel sources. Renewable Power Direct (RPD) has introduced a breakthrough by developing a chain-of-custody process that enables certified “green” power contracts to be traded just as easily as brown power. In February Iron Mountain was a launch customer for this new mechanism when we executed a one-year contract for almost 9,000 megawatt-hours of wind power through our standard energy trading desk at a competitive market price.
Results so far
To date, Iron Mountain has secured contracts for over 90,000 Mwh per year of wind and solar electricity, which would be about a third of our electricity use in North America.
Because some of the facilities are still under construction, we expect deliveries to begin in 2016 with full benefits in 2017. All of these contracts offer stable pricing, at or below comparable grid price and together represent an estimated net present value of more than $5 million with no capital cost.
Like most sustainable business challenges the secret to success is building new personal and organizational competencies. Here are three:
1. Good environmental and social metrics are business metrics: While counting carbon didn’t seem critical to our business, it became a leading indicator of financial risk and opportunity. As a proxy for our use of fossil fuel, it helps measure our exposure to future cost volatility and is a predictor of cost and brand risks.
2. Internal collaboration: We assembled an internal team across a half dozen disciplines to help make renewable energy contracts successful. The more complex the deal the more it required team depth. From financial analysts to legal to treasury to real estate to procurement, many people had to learn to apply their expertise to a new set of circumstances.
3. External radical collaboration:We would not have been successful without the expert support of our buyer’s representative. But, while suppliers and service providers are a big help, we found that collaborating beyond our vendor relationships was important. This “radical collaboration” with NGOs, peer companies and government agencies accelerated our efforts and helped us get smarter faster. For example joining the EPA Green Power Partnership, the DOE Better Building challenge and we hired an Environmental Defense Fund Climate Corps Fellow. A good example of the resources available is the Renewable Energy Buyers Principals created by The Corporate Renewable Partnership.
Conclusion and next steps
Looking at our business through the lens of environmental and social metrics has identified blind spots and hidden opportunities, like energy. It has encouraged us to do things differently and to collaborate internally and externally for innovative solutions. We took a few missteps, but our efforts to consider renewable energy options have delivered solid financial as well as sustainability results. We’re looking forward to learning more and seeing what’s next on the journey.
Images courtesy of Iron Mountain
Kevin Hagen is Director Corporate Responsibility at Iron Mountain. He and his team serve as liaison, advisor and consultants to leaders and business units across the enterprise to develop and implement sustainable business strategy, including environmental performance, corporate philanthropy and community engagement.
He has a 25-year career with Fortune 500 companies and entrepreneurial organizations in the United States and Europe holding leadership roles in product development, marketing, sales and business strategy. Prior to joining Iron Mountain, he was Director of Corporate Social Responsibility at Recreational Equipment, Inc. (REI) where he led the co-op's highly recognized social enterprise and sustainable business program. Kevin received a BS from Clarkson University in Potsdam, NY with a background in Electrical and Mechanical Engineering and an MBA in Sustainable Business from the Bainbridge Graduate Institute (BGI), now called Pinchot.