This article was first published by Environment Finance


Environmental Finance spoke with Patrick Horka, our Head of Renewable Energy Solutions, about how the 'big moment' in renewable energy has arrived much faster than expected

Renewable energy (RE) and energy efficiency (EE) are key pillars for achieving a Net Zero world. Together, RE and EE can provide over 90% of the energy-related CO2 emission reductions that are required, using safe and reliable technologies that are already affordable and widely available. For companies, renewable energy solutions are especially important for reducing emissions, achieving cost savings and assuring electricity price hedge. Thanks to the RE100 initiative over 270 companies have set time-specific goals to reach 100% renewable energy. Together, they consume more than a mid-sized country, such as South Africa or Indonesia

Environmental Finance (EF): How are companies using various renewable energy solutions to work towards Net Zero commitments & hedge against global climate risks?

Patrick Horka (PH):

A straightforward way for companies to start an emission reduction pathway is to reduce Scope 2 emissions – indirect emissions from the electricity purchased and used by the organisation.

Many of our clients start by compensating their Scope 2 emissions with Energy Attribute Certificates (EACs), and then blend these with other solutions such as corporate power purchase agreements (PPAs) or on-site renewables, depending on their energy demand and facilities.

There are multiple benefits of incorporating renewable energy solutions into corporate climate strategies: price hedges, cost-savings, improving financial performance, brand & climate leadership, and contributing to positive social impacts. The interest in the latter is growing, and quality labels are becoming more important in EACs.

EF: How is South Pole helping companies to progress in their renewable energy journey?

PH:

Our vision is to see all of our clients go 100% renewable today, while simultaneously developing and pursuing a long-term strategy that helps to achieve cost savings and helps to add new renewable energy to the grid. More advanced companies will then focus on sourcing 24/7 'carbon free energy' (like Google) and further increase their impact by sourcing from projects that contribute significantly to SDGs.

We offer everything from the strategy to the implementation of tailored solutions – green tariffs, EACs, corporate PPA's, on-site renewables. In other words, our team is the 'one-stop-shop' for organisations looking to incorporate renewable energy into their climate strategies.

When engaging with our clients, our role is to make them aware of the risks and opportunities of each solution. For example, we helped one of our clients, a global beverage company, structure one of the first corporate PPAs in Vietnam. This will supply their local facilities with renewable energy from a newly built clean power plant. We advised them throughout the entire process, from market analysis up until the signature of a terms sheet.

We also partnered with a high-tech, global engineering multinational to develop a strategy to achieve 100% renewable electricity in its key markets by 2045, all while working towards its 50% emission reduction target by 2030. This strategy is a key part of the company's overall ambition to reach net zero emissions.We analysed over 31 markets and developed three alternative pathways with a carefully planned combination of renewable energy solutions.

EF: What is driving the increased demand for such solutions?

PH:

What we are seeing today is a disruptive, exponential change taking place within the realm of renewables. It is getting tougher every day for a business not to consider renewables as a robust solution for containing energy costs, among other things.

Within just a few years, the installed and levelized costs of renewable energy systems have de-coupled from fossil fuel prices. In simple terms, coal is not going to get cheaper - but solar, wind, and storage will. Coal is a finite fuel, but renewables, such as solar, is a technology that can scale. For instance, replacing the costliest 500 gigawatts of coal capacity with solar and wind would cut annual system costs by up to USD 23 billion per year.

The new 'clean supermajors', such as Enel, Iberdrola, NextEra Energy and Orsted, prioritized the building or buying of clean-power plants when those assets were still considered alternative and expensive. Now they're on the cusp of a breakthrough and their market caps have surpassed those of oil companies. This big moment in RE has come much faster than expected.

EF: What has helped the industry reach its 'big moment?'

PH:

Corporate climate action pledges have been a key driver; such as the RE100 pledge, setting Science-Based targets (SBTs), and net zero commitments. RE100 signatories alone consume more than a mid-sized country, such as South Africa or Indonesia

Stronger policy signals and regulation are also guiding the market. Much of the progress in developing and deploying renewable energy technologies has been achieved thanks to effective government policies, which overcome economic, technical, and institutional barriers. We see many markets moving towards deregulation, allowing for companies to source renewable energy directly from the generator. The levelised cost of energy (LCOE) of wind and solar dropped well below the LCOE's of fossil fuels, strongly increasing the demand for direct procurement of renewable energy, such as via PPAs. Thanks to our global local presence, we are on top of energy market developments (as per example of our involvement in the first corporate PPAs under Viet Nam's pilot scheme!

EF: South Pole has performed well in our Market Rankings in this year, with winning spots in the Australian and Chinese REC markets. What opportunities do you see in these markets specifically?

PH:

  • Asia-Pacific countries are being pushed to hasten their transition to renewables, as big companies from Europe, the US, Singapore and Japan work to lower their emissions and procure renewable energy across their supply chains.
  • We've also seen countries send positive market signals to companies: China, Japan, and South Korea have recently set net zero targets, which clearly encourages companies to start shifting towards renewables sooner rather than later – with RECs being the simplest and fastest option for companies to use immediately. Regionally, businesses in the heavy industry, food and beverage, and the extractives sectors are wanting to secure long-term renewable energy offtakes. We also see the Asian market deregulating and giving way to alternative energy solutions.

EF: And to what do you attribute your success in these areas?

PH:

We are a passionate team of renewable energy experts sitting in offices all over the world – we have our boots on the ground to ensure best possible local market insight, and work with a network of established partners. Our expert advisory capabilities paired with our award-winning EAC projects allows us to blend and customise the most innovative and impactful renewable energy solutions for our clients.


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