This executive summary comes from a report by Bloomberg New energy Finance.
Companies are becoming increasingly important drivers of demand for renewable energy worldwide. In addition to government-mandated renewable energy purchases, which are usually well-tracked for legal compliance reasons, the voluntary demand for renewable energy results in significant investments in green energy worldwide. Now in its third year, the Corporate Renewable Energy Index (CREX) brings transparency to these voluntary markets.
Global investment in new renewable capacity continues to rise. In 2011 net investment in renewable power capacity outpaced that of fossil fuel generation ($237 billion for renewables versus $223 billion for additional fossil fuel generation).
For the CREX, Bloomberg New Energy Finance collects information on the amount and type of renewable energy used by the world’s largest organizations for their own use, and includes a few innovative smaller companies. The CREX ranking is based on the amount of renewable energy procured by the respondents in 2011 (in MWh) as a percentage of their total electricity procurement in the same period.
The 2011 results contain over 300 companies from an initial contact list of nearly 1800. Whereas in previous years the CREX was heavily weighted towards developed countries and particularly the US, this year there was a more global distribution of participants. This global CREX report is being released at the same time as six regional focus papers on the US, Brazil, India, Australia, the UK and Germany.
The CREX companies tend to fall into two extremes, with most meeting only a small proportion of their power needs from renewable energy but some relying on renewable energy 100%.
Most companies use only a small amount of renewable energy (almost 30% of companies use less than 5% renewables). However the 2011 results show that at the other extreme, 35 companies source all their electricity from renewable sources and take equal first place in our rankings. These companies tend to be in consumer-facing sectors such as financials, consumer services and consumer goods, purchasing Renewable Energy Certificates (RECs) to cover all their power usage, thereby providing a strong positive marketing message. The absolute MWh procurement level is generally a function of the size of the company. However there are other ‘non-discretionary’ factors which can prompt companies to use a greater amount of renewable energy such as the requirement of aluminum smelters to have a plentiful, reliable and cheap supply of electricity, which favors siting near hydroelectric dams, and the ability of sugar and pulp and paper producers to generate energy by burning their biomass waste.
Companies obtain renewable electricity a number of ways, with direct investment being the most popular at 40% of renewable electricity purchases in 2011, closely followed by RECs at 38%.
However, companies often find the market confusing and lacking in transparency. The 2011 CREX includes more Brazilian and Indian companies than in previous years, so that, while in Europe and North America buying RECs or similar guarantees of origin continues as a widely used way of procuring renewable energy, the global balance is tipped towards onsite investment and power purchase agreements. European companies tend to favor renewable energy procurement more than companies in the US.
The European CREX respondents purchased a large amount of their renewable energy by RECs or green-pricing programs, which are available throughout most of Europe, where consumers typically have high expectations of companies’ sustainability and renewable-energy practices. In the US, however, the compliance REC markets only operate in 32 states and the District of Columbia. RECs can be purchased voluntarily anywhere in the US, but the lack of policy targets in certain states indicates the patchiness of political support and consumer sentiment across the country.
Many companies are making a significant commitment to renewable energy through direct investment in on-site generation (40% of renewable electricity purchases in 2011).
For companies with a large electricity demand, security of power supply is critical. Direct investments are particularly popular in countries where the grid supply is at times restricted (e.g. India) or where local renewable energy sources such as biomass and hydro power are readily available (e.g. Brazil). In addition, revenue can be generated by selling surplus power and the associated RECs when available.
Hydroelectric power is the most popular form of renewable energy (47% of the total share when the technology source is known), followed by wind (with 29%), and biomass and waste-to-energy (with a combined 23%).
These results are significantly influenced by the big electricity users in Brazil that use high levels of biomass and hydro power. Wind is favored by companies looking for a cost-effective addition to a renewable energy portfolio where hydro power may not be available or where the company is concerned about additionality (sic). In addition, wind turbines are a particularly visible sign to customers of a company’s commitment to renewable energy. Solar is a small proportion (<1%) of total renewable energy generation because costs have been relatively high until recently, power output is dependent on geography and weather, and the technology is less easily scaled up to large capacities than some other technologies. However, with the recent plummeting of photovoltaic cells prices, we can expect solar energy’s share to grow in future.
The decision to procure renewable energy is generally taken at board-level, as part of the company’s corporate sustainability efforts.
This was highlighted by the responses to the more qualitative questions that were added to this year’s CREX survey. Companies use renewable energy to enhance the “greenness” of their brand with customers, helping them to differentiate from competitors and drive sales. The survey responses also showed that a focus on renewable energy and sustainability is important in maintaining support from shareholders and improving employee retention and motivation.
The voluntary procurement of renewable energy has grown in recent years, and this is set to continue, but the pace of growth will depend on political and regulatory support.
Three years of CREX data shows that global renewable energy as a percentage of the total electricity procurement increased from 14% in 2009 to 16% in 2011. In addition, over half of this year’s respondents state that they will procure more renewable energy in future. Companies are increasingly shifting focus of their sustainability strategy from energy efficiency to renewable energy. However, there are CREX companies in all key countries calling for an expansion in regulatory support for renewable energy, through mechanisms such as liberalizing power markets, supporting incentive schemes, or taxes on carbon-dioxide emissions. Therefore governments and policy makers have an important role to play in the growth of this market.
Corporate Renewable Energy Index
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