16 December 2020
Environmental Finance spoke with Patrick Horka, head of renewable energy solutions at South Pole about how the 'big moment' in renewable energy has arrived much faster than expected.
Environmental Finance: How are companies utilising renewable energy solutions to work towards net-zero commitments and hedge against global climate risks?
Patrick Horka: A straightforward way for companies to start an emission reduction pathway is to reduce Scope 2 emissions – indirect emissions from the electricity purchased and used by the organisation. Many of our clients start by compensating their Scope 2 emissions with Energy Attribute Certificates (EACs), and then blend these with other solutions such as corporate power purchase agreements (PPAs) or on-site renewables, depending on their energy demand and facilities.
There are multiple benefits for incorporating renewable energy solutions into corporate climate strategies: price hedges, cost-savings, improving financial performance, brand and climate leadership, and contributing to positive social impacts. The interest in the latter is growing, and quality labels are becoming more important in EACs.
EF: How is South Pole helping companies with their climate strategies?
PH: We offer everything from strategy to the implementation of tailored solutions – green tariffs, EACs, corporate PPA's, on-site renewables. In other words, our team is the 'one-stop-shop' for organisations looking to incorporate renewable energy into their climate strategies. When engaging with our clients, our role is to make them aware of the risks and opportunities of each solution. For example, we helped one of our clients, a global beverage company, structure one of the first corporate PPAs in Vietnam. This will supply their local facilities with renewable energy from a newly built clean power plant. We advised them throughout the entire process, from market analysis up until the signature of a terms sheet.
We also partnered with a high-tech, global engineering multinational to develop a strategy to achieve 100% renewable electricity in its key markets by 2045, all while working towards its 50% emission reduction target by 2030. This strategy is a key part of the company's overall ambition to reach net zero emissions. We analysed over 31 markets and developed three alternative pathways with a carefully planned combination of renewable energy solutions.
EF: What's driving demand for such solutions?
PH: What we are seeing today is a disruptive, exponential change taking place within the realm of renewable energy. It is getting tougher every day for a business not to consider renewables as a robust solution for containing energy costs, among other things. The 'clean supermajors', such as Enel, Iberdrola, NextEra Energy and Orsted, prioritised the building or buying of clean-power plants when those assets were still considered alternative and expensive. Now they are on the cusp of a breakthrough and their market caps have surpassed those of oil companies.
This big moment in renewable energy has come much faster than expected.
EF: What has helped the industry reach its 'big moment?'
PH: Corporate climate action pledges have been a key driver, such as the RE100 pledge, setting Science-Based targets (SBTs), and net zero commitments. RE100 signatories alone consume more than a mid-sized country, such as South Africa or Indonesia.
Stronger policy signals and regulation are also guiding the market. Much of the progress in developing and deploying renewable energy technologies has been achieved thanks to effective government policies, which overcome economic, technical, and institutional barriers. We see many markets moving towards deregulation, allowing for companies to source renewable energy directly from the generator.
The levelised cost of energy (LCOE) of wind and solar dropped well below the LCOE's of fossil fuels, strongly increasing the demand for direct procurement of renewable energy, such as via PPAs.
EF: South Pole performed well in the Australian and Chinese renewable energy certificates (REC) markets in our Market Rankings in this year. What opportunities do you see in these markets?
PH: Asia-Pacific countries are being pushed to hasten their transition to renewables, as big companies from Europe, the US, Singapore and Japan work to lower their emissions and procure renewable energy across their supply chains. We've also seen countries send positive market signals to companies: China, Japan, and South Korea have recently set net zero targets, which clearly encourages companies to start shifting towards renewables sooner rather than later – with RECs being the simplest and fastest option for companies to use immediately.
Regionally, businesses in the heavy industry, food and beverage, and the extractives sectors are wanting to secure long-term renewable energy offtakes. We also see the Asian market deregulating and giving way to alternative energy solutions.
EF: To what do you attribute to your success in these areas?
PH: We are a passionate team of renewable energy experts sitting in offices all over the world – we have our boots on the ground to ensure best possible local market insight, and work with a network of established partners. Our expert advisory capabilities paired with our award-winning EAC projects allows us to blend and customise the most innovative and impactful renewable energy solutions for our clients.