How can we remake the energy landscape in the U.S. to embrace a robust clean energy and decarbonization trajectory within a decade, and do so in the face of significant political headwinds at the federal level?
Last year, the world’s leading climate scientists sent a clear message: we must cut greenhouse gas emissions by 50 percent in 10 years and transition to a carbon free economy by 2050 in order to avoid the most catastrophic impacts of climate change.
One of the most important steps in achieving that goal is accelerating our transition away from fossil fueled power generation and toward renewable and carbon-free sources such as wind and solar.
Despite the urgent need for action, the current U.S. federal administration is committed to pulling us in the wrong direction. President Trump has announced his intention to pull the U.S. out of the Paris Agreement, and is trying to repeal or otherwise weaken critical regulations that keep our air and water clean and position U.S. industries to lead in a low-carbon future. On top of that, the administration is attempting to skew the rules of the game to benefit uneconomic and heavily-polluting industries of the past, such as coal.
These moves make the challenge in front of us much more acute. How can we remake the energy landscape in the United States to embrace a robust clean energy and decarbonization trajectory within a decade, and do so in the face of significant political headwinds at the federal level?
There is no single answer to that question, but it is clear that we will need to further tap bold private sector leadership to scale existing solutions. Companies are the leading consumers of electricity and uniquely situated to take advantage of renewable energy benefits. They’re also the primary drivers of innovation.
When it comes to building a renewable electricity grid, we already have solutions that are technologically feasible and economically beneficial. Renewable energy is already the cheapest energy source in markets around the world, energy storage costs are falling fast, and the energy transition is creating skilled, well-paying jobs in communities across the country.
New leaders in state and local governments, businesses, technology, and many other sectors are rolling up their sleeves and getting to work on clean energy. Here in the U.S., over 3,600 leaders from all 50 states, representing over 150 million people and nearly $9.5 trillion in GDP, have joined together to announce that “We Are Still In” the Paris Climate Agreement and support its goals. Globally, over 160 leading companies have committed to powering their businesses with 100 percent renewable energy, putting some of the smartest minds and best problem solvers in private industry to work finding ways to achieve these ambitious goals. Last year, corporate buyers in the U.S. signed contracts for over 6,500 megawatts of renewable energy, more than doubling previous records.
This progress is encouraging, but it’s just the start. We must push ourselves to go further, asking how we can take the power of the clean energy revolution that has begun inside dozens of leading American companies and use it to bring the promise of cleaner, safer and cheaper power to everyone.
Here are some of the ways companies are increasing the impact of their renewable energy procurement efforts to deliver on that promise:
Aggregation: Leading companies have developed innovative deal structures—such as Virtual Power Purchase Agreements (VPPAs)—that allow them to overcome market barriers and secure access to new, large-scale, renewable energy resources. However, these deals are complex and require a scale, a level of expertise, and a risk tolerance that put them out of reach for many companies.
To overcome these barriers, innovative companies are working together. By aggregating their demands, as well as pooling their expertise and resources, companies can create bigger deals than ever before and make renewable energy available to those smaller companies previously unable to access the market.
For example, last year Etsy (an e-commerce website with relatively modest electricity demand) partnered with Apple (a global leader in renewable energy procurement) and other companies to put together a major deal. This deal allowed Etsy to access renewable energy in a way once considered out of reach for a company of its size. Apple was also able to facilitate a larger deal, and deliver great beneficial impact, than if the company had gone it alone.
Green Tariffs: In traditionally regulated states (as opposed to states that have undertaken utility “de-regulation”), utilities have monopoly control over the supply of electricity. Companies in these areas have leveraged their market power as major utility customers (often by publicly setting renewable energy goals) to get their utility to provide them with access to energy from new renewable sources via a “green tariff”. These green tariff programs not only allow the companies to achieve their goals but, by creating a mechanism for renewable energy procurement where none existed before, also have the potential to open up clean power access to other companies. Target, Walmart, Google, and Johnson & Johnson teamed up with Georgia Power to craft such a deal in April of last year.
New Product Offerings: Innovative energy suppliers are also finding ways to eliminate market barriers. By offering renewable energy deals that better meet the needs of buyers, including simpler contract terms and shorter contract lengths, electricity suppliers such as NRG are making affordable, clean power accessible to more companies.
In other sectors, real estate companies, building managers and owners of co-located server facilities, such as Iron Mountain, are finding that supplying their tenants with renewable energy is a great way to reduce their carbon footprint, increase customer loyalty and get an edge on competitors.
Greening supply chains: As more companies embrace science-based carbon reduction goals, they are focusing on the need to reduce the carbon emissions of both their upstream suppliers and their downstream customers (these are known as “scope 3” emissions). Through direct investment in renewable energy facilities, joining forces on aggregation deals, supplier education efforts, and joining voices to advance supportive policies, the most innovative energy suppliers are not merely going renewable, they’re bringing their whole supply chains with them, as Apple recently set out to do in China.
Sharing success stories: As the economic barriers to renewable energy continue to fall, we also need to tackle a still-persistent awareness gap. Not every company can run an ad in the Super Bowl like Budweiser did earlier this year, but as more companies share their clean energy stories with their employees, customers, partners, and competitors they help build awareness of successes while bringing renewable energy further into the mainstream.
While the current U.S. federal administration is creating many obstacles, companies are developing innovative ways to work around, leap over, or plow right through. As the already-robust business case for renewable energy continues to improve, the urgent need to tackle the climate crisis becomes clearer, and businesses build on one another’s successes, it is clear we have the tools and foundation we need to rise to the challenge.
Previously posted in the Ceres 3BL Media newsroom.
Image credit: Tom Fisk/Pexels
Winston Vaughan works with investors and companies to increase investment in and adoption of clean energy. Through his work with Ceres, Winston enables investors and companies to use their leadership to advocate for clean energy solutions to electric utility providers and policymakers.