A publication from SustainableLifeMedia.com
Why Companies Keep Investing in Renewable Energy
One of the big misperceptions about going green is that is always costs money. In reality, seeing your business through an environmental lens will greatly lower costs and risk. But of course, beyond the quick payback of eco-efficiency projects, managers face choices about more expensive investments that may take longer to pay off. At the top of that list is buying renewable energy, which is what many execs think of first when they think “green”(thus the misunderstanding that “green equals cost”).
~ Andrew Winston, Founder, Winston Eco-Strategies
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Yet many large companies seem to be accelerating their renewables investments, both for onsite generation and through buying renewable energy certificates (RECs) to “offset” their carbon emissions. Just peruse two lists from the EPA, the Top 50 Green Power buyers (mostly RECs) and the Top 20 for on-site generation. It’s a fascinating mix of companies, municipalities, and the government/military. By my calculation, the total green power generation of the top 25 is up 14% since last year and has tripled over the last 5 years.
I hear frequently that companies do the analysis on generating their own energy and the payback period is too long. So what do the companies on these EPA lists know that others don’t? To be blunt, it’s not always clear and the reasons are varied. Even when you ask some of these companies, which I’ve done, it’s not a simple story. But here are some of the reasons I see.
1) For some categories of onsite generation, the economics do makes sense. Look at Kimberly Clark (a client of mine), currently the #1 for on-site generation. The company produces 176 million kWh from biomass at its paper mills (for scale, imagine a wind farm with over fifty 1.5 MW turbines, at 25% capacity – see conversions here). Or Hanes Brands, the 2010 Energy Star Partner of the Year, which has saved tens of millions through onsite generation using biomass and geothermal.
2) The genius of the power purchasing agreement (PPA). Under a PPA, solar providers install panels and do not charge the upfront capital costs, but require a long-term contract to buy the power (this is “servicizing” renewables). When that price is around “grid parity” the economics for companies are easy.
3) Zero variable cost. At the risk of being over-obvious, if you do own the generation, once you get past upfront capital costs, ongoing costs look pretty good. The feedstock is free.
4) Brand benefits. Companies can publicly demonstrate green leadership by putting solar or wind up on their facilities. Ford is using solar to help manufacture Focus electric vehicles, a clear brand connection (see below). The goals that P&G, Wal-Mart, and others have announced to power their businesses with 100% renewable energy are long-range ambitions, but they clearly position the brands as leaders.