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#celive #seuk @CleanEnergyLive cleanenergylive.co.uk 4-6 October 2016 The NEC, Birmingham, UK
#celive #seuk @CleanEnergyLive cleanenergylive.co.uk
4-6 October 2016 The NEC, Birmingham, UK
#celive #seuk @CleanEnergyLive cleanenergylive.co.uk
Opportunities to create value with your energy
05 October 2016
Guy Rickard
Carbon Trust Advisory
Our mission is to accelerate the move to a sustainable, low carbon economy We are independent experts on carbon reduction and resource efficiency, who reinvest surpluses from group commercial activities into our mission
About the Carbon Trust
The Carbon Trust focuses on driving bottom-line business benefits in order to deliver long-term sustainability
Accelerating the move to a sustainable, low-carbon economy
Advise businesses, the public sector and governments on their opportunities in a sustainable, low carbon world
Independent, mission-driven, not-for-dividend
Develop and deploy low carbon technologies and solutions, from energy efficiency to renewable power
Measure and certify the environmental footprint of organisations, products and services
The Carbon Trust 170+ staff working for clients across the globe
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7
?
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UK Coal demand (1860-2015)
Co
al d
em
and
(M
T/ye
ar)
Source: Bloomberg New Energy Finance Summit, Michael Liebreich, April 2016
The UK is playing its part in global carbon reduction efforts, but there’s much to do
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Greenhouse Gas Emissions, UK and Crown Dependencies 1990-2013
Gre
enh
ou
se g
as e
mis
sio
ns
(MtC
O2
e)
Source: 2013 UK Greenhouse Gas Emissions, Final Figures, DECC, 2015
Corporates need to consider the carbon, reputational and financial aspects of their energy strategy
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Reputational Carbon reduction
Financial
Corporates need to consider the carbon, reputational and financial aspects of their energy strategy
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Reputational Carbon reduction
Financial
Energy security
Agenda
› Carbon reduction drivers of renewable energy
› Reputational drivers of renewable energy
› Financial drivers of renewable energy
› Options for corporates
› How can renewables form part of low carbon strategy?
› Summary
COP 21 in Paris has raised the level of expectation for carbon reductions
› Paris Climate Agreement approved by 195 nations at COP 21 and signed by 177 parties so far (including major emitters USA, China, EU)
› Agreed to hold the increase in global average temperatures well below 2°C and pursue efforts to limit the increase to 1.5°C
› Emissions should peak as soon as possible, and rapidly reduce thereafter, reaching GHG neutrality some time in the 2nd half of the century
› Mitigation performance to be reviewed every five years and national plans (NDCs) improved
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Aims for 2030
Global Emission Pathways
› Targets adopted by companies to reduce carbon emissions are considered “science-based” if they are in line with the level of decarbonisation required to keep global temperature increase below 2°C
Science-based target-setting enable corporates to align carbon reduction targets with climate science
Source: Climate Action Tracker, 2015
Recent developments in carbon reporting mean electricity procurement is now a lever to achieving reductions
Recent developments in carbon reporting mean electricity procurement is now a lever to achieving reductions
› GHG Protocol Scope 2 Guidance published 2015
› Requires that companies complying with the corporate standard also comply with Scope 2 Guidance
› Aims to reflect global developments:
› Deregulation in many markets
› More choice provided for companies regarding the type of electricity they purchase
› Requirements for renewables introduced by many governments
GHG Protocol Scope 2 guidance requires scope 2 emissions to be reported in two ways
1. Location-based
• Employs a country-level electricity emissions factor
• Published in the UK by Defra
2. Market-based
• Must be applied by all companies operating in the UK
• Employs an emission factor specific to the electricity purchased
• Applies to all electricity products, whether based on renewables or fossil fuels
• Quality of the supplier-specific information must be assessed using a set of published criteria
Reporting using the market-based approach needs to meet specific quality criteria
All contractual instruments shall:
1. Convey the direct emissions rate for each unit of electricity
2. Be the only instrument that carries the emission rate claim for that specific MWh of electricity
3. Be tracked and redeemed, retired, or cancelled by or on behalf of the reporting company
4. Be issued and redeemed as close as possible to the period of energy consumption
5. Be sourced from the same market to the reporting companies operations
Emission factors for specific electricity tariffs shall:
6. Be calculated based on delivered electricity, incorporating certificates sourced and retired
Companies purchasing electricity directly from generators or consuming on-site generators shall:
7. Ensure all contractual instruments be transferred to the reporting entity only.
To use any contractual instrument in the market-based method requires that:
8. An adjusted, residual mix emision factor of unclaimed or publically shared electricity shall be
made available, ot its absence disclosed by the reporting company
Note 1. Definition of a contractual instrument is ‘any type of contract between two parties for the purpose of energy or conveyance of attribute claims
from that energy’
Agenda
› Carbon reduction drivers of renewable energy
› Reputational drivers of renewable energy
› Financial drivers of renewable energy
› Options for corporates
› How can renewables form part of low carbon strategy?
› Summary
Science-based Target Initiative enables targets to be reviewed and recognised
› Joint initiative between the CDP, the UN Global Compact (UNGC), the World Resources Institute (WRI), and the WWF
› Reviews science-based target methodologies and validity of individual company’s science-based targets and gives recognition on the
› 174 companies have committed to set a science-based target to date
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Aims for 2030
RE 100 enable companies to commit to purchasing 100% of their power from renewables
› Global initiative of businesses, managed by The Climate Group in partnership with CDP
› Commit to procure 100% of electricity from renewable sources by a specified year
› Consumption and production of renewable electricity need to be verified by a third party
› 69 companies have signed up to date
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We Mean Business is an umbrella campaign that gives further recognition for science-based targets and renewables
› Coalition of organisations that work with businesses to accelerate the transition to a low carbon economy
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Aims for 2030
Low-carbon energy has potential to boost CDP scoring as part of a wider low-carbon strategy
› Purchasing low-carbon energy would scores highly as an emissions reduction initiative
› Having a Science Based Target counts significantly in getting top Leadership awarded
› CDP is eventually expecting to reward businesses that set a target for 100% renewable energy
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Agenda
› Carbon reduction drivers of renewable energy
› Reputational drivers of renewable energy
› Financial drivers of renewable energy
› Options for corporates
› How can renewables form part of low carbon strategy?
› Summary
Energy costs predicted to rise significantly in the next decade
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-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2000 2005 2010 2015 2020 2025 2030 2035
% c
han
ge in
pri
ce
Year
Projected Retail Energy Prices for Services (UK)
Electricity
Natural Gas
Source: Annex M: Growth Assumptions and Prices, DECC, November 2015
The cost of electricity from solar has reduced by 80% since 2008 and wind 50% since 2009
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Solar PV Onshore Wind
Source: Bloomberg New Energy Finance Summit, Michael Liebreich, April 2016 LCOE - Levelised cost of electricity
Mo
du
le C
ost
($
/W)
LCO
E ($
/MW
h)
Cumulative capacity (MW)
Rooftop solar is predicted to reach grid parity before 2020 in the UK
27 Source: Adapted from KPMG, UK solar beyond subsidy: the transition, July 2015
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
p/k
Wh
Non-domestic PV LCOE versus retail electricity tariff (industrial and services)
Services retail price Industrial retail price PV Non-domestic roofs
We are seeing growth in clean energy investment, creating additional capacity for corporates
28 Source: Bloomberg New Energy Finance Summit, Michael Liebreich, April 2016
UK Clean Energy Investment
Global Clean Energy Investment
Agenda
› Carbon reduction drivers of renewable energy
› Reputational drivers of renewable energy
› Financial drivers of renewable energy
› Options for corporates
› How can renewables form part of low carbon strategy?
› Summary
Renewable energy options for corporates
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Purchase low-carbon
electricity
Off-site renewables using PPA
Purchase renewable
energy certificates
On-site renewables
Renewable energy options for corporates
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› Purchase certificates from a broker to cover the total MWh of power over a 12 month reporting period
› UK - REGO (Renewable Energy Guarantee of Origin)
› Europe - GOOs (Guarantee of Origin)
› USA – RECs (Renewable Energy Certificates)
› Certificates are ‘unbundled’ from power and need to be sourced from same geographical energy market
› Carbon emissions of actual power purchased are not considered in carbon reporting as they are offset by the carbon certificates
Purchase low-carbon
electricity
Off-site renewables using PPA
Purchase renewable
energy certificates
On-site renewables
Renewable energy options for corporates
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› Purchase electricity that is 100% backed by renewable energy certificates
› Many electricity suppliers have more than one electricity product - need to ensure that certificates have been allocated to each product without double counting
› Certificate serial numbers or third party assurance
Purchase low-carbon
electricity
Off-site renewables using PPA
Purchase renewable
energy certificates
On-site renewables
Renewable energy options for corporates
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› Make agreement with renewables developer and or asset owner
› Developer commits to provide power over a determined time period (e.g. 20 years)
› Developer transfers renewable energy certificates to end user as well as providing power
Purchase low-carbon
electricity
Off-site renewables using PPA
Purchase renewable
energy certificates
On-site renewables
Renewable energy options for corporates
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› Use reporting company’s own land or buildings to install renewables
› Can either take form of a PPA similar to off-site renewables or can be owned an operated by the reporting company
› If owned by reporting company, takes on responsibility and risks associated with technology, although greater cost savings
› Option to export surplus electricity
Purchase low-carbon
electricity
Off-site renewables using PPA
Purchase renewable
energy certificates
On-site renewables
Renewable energy options for corporates
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Purchase low-carbon electricity
Off-site renewables using PPA
Purchase renewable
energy certificates
On-site renewables (Owned)
Flexible and immediate
Vulnerable to energy price
changes
Reduce future energy price
risks
Clear transparency of
supply
Long-term commitment
required
Contractually complex
Flexible and immediate
Minimises impact on
energy procurement
Variable level of quality assurance
Harder to
communicate to stakeholders
Delivers energy cost savings
Reputational
benefit
Long-term commitment
Requires
capital & taking on
development & asset risk
Advantage
Disadvantage
Case study: Renewable energy certificates
› In 2014 H&M committed to source all of the electricity for its own operations from renewable sources
› H&M purchases REC certificates in North America and GOO certificates in Europe where available
› In some regions, the lack of legislation to prevent double counting of renewable power mean it hasn’t yet achieved 100% renewable – using the RE100 campaign to address this
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Case study: Purchase low carbon electricity
› Since April 2016 Land Securities has had a contract with Smartest Energy to provide them with 100% renewable energy backed by REGOs
› The Carbon Trust has worked with SmartestEnergy to develop a REGO certificate allocation model, which origin certificates to be allocated to products without double-counting
37 *This model has been certified by the Carbon Trust to be compliant with the GHG Product Standard Protocol. Model outputs do not constitute a certified product footprint.
Case study: Off-site renewables using PPA
› In 2014 BT purchased over 100MW of wind energy across three wind projects in Scotland, Wales and England
› Assets owned by a range of developers /asset owners
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Fallago Rig
› 72 MW
› 20 year PPA
› enough to supply all Scottish operations
Mynydd Bwllfa
› 22.5 MW
› 15 year PPA
› enough to supply 50% Welsh operations
Heysham South
› 7.5 MW
› 15 year PPA
Case study: On-site renewables
› M&S East Midlands Distribution Centre - 20 year PPA project between M&S and the owner of the panels
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› Pioneering scheme that allows public to invest in solar panels on M&S branches’ roofs
› M&S will buy electricity from the investors to power their stores
Agenda
› Carbon reduction drivers of renewable energy
› Reputational drivers of renewable energy
› Financial drivers of renewable energy
› Options for corporates
› How can renewables form part of low carbon strategy?
› Summary
How do I include renewables in my low carbon strategy?
› Include science-based targets?
› Use market based approach for targets?
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Imple-mentation
plan
Business case development
Opportunity identification
and prioritisation
Business as usual
modelling
Overall approach for
carbon strategy
Overall renewables
strategy
› Identify options for on-site renewables
› Identify level and certainty of future energy demand
› Consider future business growth by geography and business area
› Financial and carbon assessment
› Energy efficiency measures
› Renewables options
› Overall payback, NPV, IRR
› Overall carbon target
› Phased capex
› Finance Director sign-off
› Operational-ise
COMPARISON CRITERIA AVOIDING CAPITAL
INVESTMENT
SHORT TERM COST
REDUCTION
LONG TERM COST REDUCTION
CARBON EMISSIONS REDUCTION
SPEED TO IMPLEMENT
IMPLEMENTATION CONSIDERATIONS
RE
NE
WA
BL
ES
Purchase Renewable
Energy Certificates
No CapEx, potentially higher OpEx, reduces CO2 emissions & quick to implement
Purchase low carbon
electricity
No CapEx, marginal increase in energy costs, reduces CO2 emissions & quick to implement
Off-site Renewables
using PPA
No CapEx, could reduce energy costs in longer term, reduces CO2 emissions & quick to implement
On-site Renewables
(owned)
May require CapEx (3rd party financing may be available), reduces energy costs in the near & longer term, reduces CO2 emissions, implementation can take time
EN
ER
GY
EF
FIC
IEN
CY
Increase energy
efficiency of operations
Low CapEx, reduces energy costs & CO2 emissions, some time required for implementation of energy efficient plant & equipment
Minimise energy
demand & wastage
Minimal or no CapEx, reduces energy costs & CO2 emissions, quick to implement through enhanced policies, processes & procedures
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Opportunity identification and prioritisation can now include energy efficiency & renewables
COMPARISON KEY
RELATIVE HIGHER BENEFIT
RELATIVE LOWER BENEFIT
Agenda
› Carbon reduction drivers of renewable energy
› Reputational drivers of renewable energy
› Financial drivers of renewable energy
› Options for corporates
› How can renewables form part of low carbon strategy?
› Summary
Summary
› Corporates need to consider the carbon, reputational and financial aspects of their energy strategy
› International climate agreements and science-based targets are raising the level of expectation and extending the time horizon for corporate carbon reductions
› Recent developments in carbon reporting mean electricity procurement is now a lever to achieving reductions
› The right choice of renewable power purchase will depend on the circumstances and objectives of a company
› Including renewables in opportunity identification and prioritisation will enable corporates to achieve the optimum strategy
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Whilst reasonable steps have been taken to ensure that the information contained within this publication is correct, the authors, the Carbon Trust, its agents, contractors and sub-contractors give no warranty and make no representation as to its accuracy and accept no liability for any errors or omissions. All trademarks, service marks and logos in this publication, and copyright in it, are the property of the Carbon Trust (or its licensors). Nothing in this publication shall be construed as granting any licence or right to use or reproduce any of the trademarks, services marks, logos, copyright or any proprietary information in any way without the Carbon Trust’s prior written permission. The Carbon Trust enforces infringements of its intellectual property rights to the full extent permitted by law. The Carbon Trust is a company limited by guarantee and registered in England and Wales under company number 4190230 with its registered office at 4th Floor Dorset House, Stamford Street, London SE1 9NT. Published in the UK: 2016. © The Carbon Trust 2016. All rights reserved.
