Scaling up renewable energy is crucial for limiting the rise in global average temperature to well below 2 degrees Celsius above pre-industrial levels, in line with the Paris Agreement. To increase renewables on such a scale, annual investment in the renewable energy sector through 2050 would need to be roughly triple that of 2017.1 The bulk of the needed investment is expected to come from private finance.2
Corporate entitiesi account for around two-thirds of the world’s final energy consumption and will continue to account for more than half by 2050, as estimated by the International Renewable Energy Agencyʼs REmade Index under the Clean Energy Ministerial’s Corporate Sourcing of Renewables campaignii. As companiesʼ demand for renewable energy increases, they have the potential to play an important role in driving investment in renewables and in helping to meet the global climate target.3
Corporate entities account for around
of the world’s final energy consumption
Since the mid-2000s, more and more companies in a variety of industries across different sectors have committed to ambitious renewable energy targets and have begun to source renewables to run their operations. As of early 2017, 48% of the US-based Fortune 500 companies and 63% of the Fortune 100 companies had at least one climate or clean energy target, and 10% of the Fortune 500 companies had set a specific renewable energy target.4 By early 2018, more than 130 leading global corporations with operations across 122 countries had joined the RE100 initiative, a network of corporations committed to using 100% renewable energy.5
Although US and European markets continue to account for the bulk of corporate renewable energy sourcing, this practice is now spreading to regions around the world; countries such as Burkina Faso, Chile, China, Egypt, Ghana, India, Japan, Mexico, Namibia, Thailand and others have experienced growth in corporate sourcing.6
Initially, many companies considered the adoption of renewable energy solutions to be mainly an act of corporate social responsibility. Meeting internal environmental and social objectives such as greenhouse gas emission reduction targets, and addressing the growing demand for corporate sustainability from investors and consumers, continue to be key drivers for corporate sourcing.7 In recent years, however, significant reductions in renewable energy costs, as well as maturing market and policy environments, have made renewables cost-competitive and attractive sources of energy in their own right.8 For corporations, the economic benefits of sourcing renewables may also include long-term price stability, security of supply, reduction of energy-related expenses and the possibility of new business opportunities.9
From a developer’s perspective, having in place a long-term power purchase agreement (PPA) with a large, creditworthy corporate end-user has become a way to address off-takeri risk and decrease overall financing costs.10 Other drivers for developers to sell directly to corporations may relate to the advantages of diversifying customer portfolios and revenue streams.
For governments, some of the drivers to encourage and facilitate corporate sourcing of renewable energy include compliance with national and international climate targets, job creation and economic growth through new investment, as well as other socio-economic benefits.
Although many companies are sourcing renewables to meet their thermal and transport energy needs, comprehensive global tracking of sourcing activity in these areas is still lacking or incomplete, and more efforts will need to be undertaken globally to assess this trend. This chapter focuses primarily on corporate sourcing of renewable electricity.
As of end-2017, corporate entities worldwide had actively sourced 465 TWh of renewable electricity.11 The additionalityii of some corporate sourcing options and initiatives is difficult to measure and is not a given. Yet renewables projects with corporate off-takers or direct investors generally begin to generate renewable energy more rapidly than otherwise would be the case.12
i Corporate entities in this chapter refers to companies, both publicly and privately owned.
ii This chapter is based in part on International Renewable Energy Agency (IRENA), "Corporate Sourcing of Renewables: Market and Industry Trends (REmade Index 2018)" (Abu Dhabi: May 2018), http://www.irena.org/publications. The REmade Index was developed under the Clean Energy Ministerial’s Corporate Sourcing of Renewables campaign, for which IRENA is the operating agent, with support from an international network of non-state renewable energy actors including industry associations, private sector entities, and civil society and research organisations. See endnote 3 for this chapter.
i Off-taker refers to the purchaser of the energy from a renewable energy project or installation (e.g., a utility company) following an off-take agreement.Off-taker risk is the risk of non-payment or delayed payment of the agreed tariff by the off-taker. (See Glossary.)
ii Additionality here refers to the net incremental capacity deployed or renewable energy generated as a direct result of corporate sourcing, beyond what would occur in its absence.