4-6 October 2016 The NEC, Birmingham, UK. cleanenergylive.co.uk

Transcription

1 4-6 October 2016 The NEC, Birmingham, UK cleanenergylive.co.uk #celive

2 cleanenergylive.co.uk #celive

3 Opportunities to create value with your energy 05 October 2016 Guy Rickard Carbon Trust Advisory

4 About the Carbon Trust 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

5 Accelerating the move to a sustainable, low-carbon economy The Carbon Trust focuses on driving bottom-line business benefits in order to deliver long-term sustainability Advise businesses, the public sector and governments on their opportunities in a sustainable, low carbon world Measure and certify the environmental footprint of organisations, products and services Develop and deploy low carbon technologies and solutions, from energy efficiency to renewable power Independent, mission-driven, not-for-dividend

6 The Carbon Trust 170+ staff working for clients across the globe 4

7 ? 7

8 Coal demand (MT/year) UK Coal demand ( ) Source: Bloomberg New Energy Finance Summit, Michael Liebreich, April

9 Greenhouse gas emissions (MtCO2e) The UK is playing its part in global carbon reduction efforts, but there s much to do Greenhouse Gas Emissions, UK and Crown Dependencies Source: 2013 UK Greenhouse Gas Emissions, Final Figures, DECC,

10 Corporates need to consider the carbon, reputational and financial aspects of their energy strategy Financial Carbon reduction Reputational 10

11 Corporates need to consider the carbon, reputational and financial aspects of their energy strategy Energy security Financial Carbon reduction Reputational 11

12 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

13 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 2 nd half of the century Mitigation performance to be reviewed every five years and national plans (NDCs) improved 13

14 Science-based target-setting enable corporates to align carbon reduction targets with climate science Global Emission Pathways Aims for 2030 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 Source: Climate Action Tracker,

15 Recent developments in carbon reporting mean electricity procurement is now a lever to achieving reductions

16 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

17 GHG Protocol Scope 2 guidance requires scope 2 emissions to be reported in two ways 1. Location-based 2. Market-based Employs a country-level electricity emissions factor Published in the UK by Defra 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

18 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

19 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

20 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 Aims for

21 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 21

22 We Mean Business is an umbrella campaign that gives further recognition for sciencebased targets and renewables Coalition of organisations that work with businesses to accelerate the transition to a low carbon economy Aims for

23 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 23

24 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

25 % change in price Energy costs predicted to rise significantly in the next decade Projected Retail Energy Prices for Services (UK) Year Electricity Natural Gas Source: Annex M: Growth Assumptions and Prices, DECC, November

26 Module Cost ($/W) LCOE ($/MWh) The cost of electricity from solar has reduced by 80% since 2008 and wind 50% since 2009 Solar PV Onshore Wind Cumulative capacity (MW) Source: Bloomberg New Energy Finance Summit, Michael Liebreich, April 2016 LCOE - Levelised cost of electricity 26

27 p/kwh Rooftop solar is predicted to reach grid parity before 2020 in the UK Non-domestic PV LCOE versus retail electricity tariff (industrial and services) Services retail price Industrial retail price PV Non-domestic roofs Source: Adapted from KPMG, UK solar beyond subsidy: the transition, July

28 We are seeing growth in clean energy investment, creating additional capacity for corporates UK Clean Energy Investment Global Clean Energy Investment Source: Bloomberg New Energy Finance Summit, Michael Liebreich, April

29 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

30 Renewable energy options for corporates Purchase renewable energy certificates Purchase lowcarbon electricity Off-site renewables using PPA On-site renewables 30

31 Renewable energy options for corporates Purchase renewable energy certificates Purchase lowcarbon electricity Off-site renewables using PPA On-site renewables 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 31

32 Renewable energy options for corporates Purchase renewable energy certificates Purchase lowcarbon electricity Off-site renewables using PPA On-site renewables 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 32

33 Renewable energy options for corporates Purchase renewable energy certificates Purchase lowcarbon electricity Off-site renewables using PPA On-site renewables 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 33

34 Renewable energy options for corporates Purchase renewable energy certificates Purchase lowcarbon electricity Off-site renewables using PPA On-site renewables 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 34

35 Renewable energy options for corporates Purchase renewable energy certificates Purchase low-carbon electricity Off-site renewables using PPA On-site renewables (Owned) Advantage Flexible and immediate Minimises impact on energy procurement Flexible and immediate Reduce future energy price risks Clear transparency of supply Delivers energy cost savings Reputational benefit Disadvantage Variable level of quality assurance Harder to communicate to stakeholders Vulnerable to energy price changes Long-term commitment required Contractually complex Long-term commitment Requires capital & taking on development & asset risk 35

36 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 36

37 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 *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. 37

38 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 Fallago Rig Mynydd Bwllfa Heysham South 72 MW 20 year PPA enough to supply all Scottish operations 22.5 MW 15 year PPA enough to supply 50% Welsh operations 7.5 MW 15 year PPA 38

39 Case study: On-site renewables M&S East Midlands Distribution Centre - 20 year PPA project between M&S and the owner of the panels 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 39

40 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

41 How do I include renewables in my low carbon strategy? Overall approach for carbon strategy Overall renewables strategy Business as usual modelling Opportunity identification and prioritisation Business case development Implementation plan Include sciencebased targets? Use market based approach for targets? 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 41

42 ENERGY EFFICIENCY RENEWABLES Opportunity identification and prioritisation can now include energy efficiency & renewables COMPARISON CRITERIA Purchase Renewable Energy Certificates Purchase low carbon electricity AVOIDING CAPITAL INVESTMENT SHORT TERM COST REDUCTION LONG TERM COST REDUCTION CARBON EMISSIONS REDUCTION SPEED TO IMPLEMENT IMPLEMENTATION CONSIDERATIONS No CapEx, potentially higher OpEx, reduces CO2 emissions & quick to implement No CapEx, marginal increase in energy costs, reduces CO2 emissions & quick to implement COMPARISON KEY RELATIVE HIGHER BENEFIT 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 Increase energy efficiency of operations Minimise energy demand & wastage Low CapEx, reduces energy costs & CO2 emissions, some time required for implementation of energy efficient plant & equipment Minimal or no CapEx, reduces energy costs & CO2 emissions, quick to implement through enhanced policies, processes & procedures RELATIVE LOWER BENEFIT 42

43 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

44 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 44

45 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 with its registered office at 4th Floor Dorset House, Stamford Street, London SE1 9NT. Published in the UK: The Carbon Trust All rights reserved.