Corporate Renewable Energy Buyers Can Support National Climate Plans
The international climate talks in Paris kicked off with a major move from the private sector. Microsoft co-founder Bill Gates, Facebook co-founder Mark Zuckerberg, Alibaba CEO Jack Ma, Virgin Group Founder Richard Branson and a number of other major international entrepreneurs announced they would form the Breakthrough Energy Coalition, a research fund to spur investment in clean energy innovation. The announcement has brought international attention to private sector actors whose companies are already taking action to increase their use of renewable energy. This progress not only reduces their energy footprint, but subsequently boosts countries’ ability to make good on their climate commitments post-Paris.
More than 100 countries’ national climate action plans, known as intended nationally determined contributions (INDCs), include goals to scale up clean energy supply between 2020 and 2030. Large, private sector energy customers wanting to buy more renewable energy are already driving change in electricity markets by scaling up renewable power delivered through the grid. More clean energy in countries’ power grids will accelerate progress toward emissions-reduction targets put forth in Paris.
Here’s how the private sector is already mobilizing to increase access to clean power at the utility scale.
Leveraging Corporate Clean Energy Demand
The costs of clean energy sources and technologies have fallen dramatically in recent years. From India to the United States, many companies and utilities are now finding it cheaper to source renewable energy than fossil fuel. Increasingly, large, corporate energy buyers want to power their operations with cost-effective, clean energy sources. Still, utility business models, regulation and electric sector planning can get in the way of these goals by adding unnecessary transaction costs.
WRI has been working with some of the world’s largest companies to make their demand for renewable energy more visible to the market. This sends a clear signal to utilities and suppliers that if attractive renewable energy solutions are offered, there is a large and growing market for them. It also provides an opportunity to work with regulators to ensure the regulatory framework supports these new services in a way that benefits the larger system.
Progress in India
Large corporations in some countries are making progress in purchasing renewable energy, which can support achievement of the targets set out in their INDCs.
Take, for example, India. The country committed to reducing the emissions intensity of its GDP by 33 to 35 percent from 2005 levels and increasing the share of non-fossil-based power capacity to about 40 percent by 2030. They’ll accomplish this in part through a previously announced target to install 175 gigawatts (GW) of renewable power capacity by 2022. At the same time, India has 400 million people who lack access to electricity. To achieve its emissions goal while also closing the energy access gap, India must identify and address the challenges that hinder the uptake of affordable, renewable energy at scale.
The Green Power Market Development Group (GPMDG) in India mobilizes the private sector in support of these commitments. An industry-led initiative, the GPMDG demonstrates that renewable energy is both feasible and affordable, and can contribute significantly to meeting the demand for power in energy-intensive industrial and commercial sectors. The GPMDG, a partnership between WRI, the Confederation of India Industry, and major companies like Infosys, Cognizant, and Coca Cola, works to scale up affordable green energy use through innovative approaches, such direct power purchase agreements between project developers and large customers. Since its launch in India in 2013, companies are negotiating contracts for more than 200 megawatts (MW) of renewable energy, and that number is climbing fast.
Working with Utilities in the United States to Drive the Shift
Nearly one-third of U.S. emissions come from the electricity sector. The country announced earlier this year ahead of the Paris negotiations that it would cut emissions 26 to 28 percent below 2005 levels by 2025. A central part of this commitment is the Obama administration’s Clean Power Plan (CPP), which will reduce power sector emissions by 32 percent from 2005 levels by 2030. States can meet CPP compliance by increasing the amount of renewable energy in their region’s grid.
Many U.S. companies are already spearheading action to boost clean energy at the utility scale. As of December, more than 50 major companies have signed on to the Corporate Renewable Energy Buyers’ Principles, an industry-led initiative that helps large energy buyers work with utilities to develop new approaches for sourcing large amounts of cost-effective renewable energy. These large-scale energy buyers are helping to revolutionize the utility business model and regulatory framework to bring large amounts of affordable clean power onto the grid earlier than the CPP would require them.
Together, signatories to the Buyers’ Principles represent more than 42 million MWh of renewable energy demand. Corporations like Google, McDonalds, Kellogg, Nestle, Avery Dennison and Adidas have recently signed on, signaling that they want to work with utilities to get the renewable energy they want at the scale they need to power their operations.
Large energy consumers play a critical role in accelerating a shift to a clean energy future. These partnerships with the private sector can support implementation of the political commitments made in Paris—as well as those that come in the future.