Business case for going green is ‘stronger than ever’

The business case for decarbonising energy use is now seen as an “imperative” and “non-negotiable” by large companies, a recent report has found.

Last week the Sustainable Market Initiative’s (SMI) Energy Transition Taskforce, which was led by Octopus Energy’s director of regulation and economics, Rachel Fletcher, published a new report which looks into solutions to fight climate change.

Launched by the Prince of Wales in 2020, the taskforce seeks to develop solutions for how the energy and finance sectors can speed up the energy transition across the world.

Among the report’s findings was the impact of the energy transition on decision-making within businesses as they strive to decarbonise.

Large businesses, the report said, are in a “pivotal position” as significant energy users, producers of consumer products and as buyers of products and services through their supply chains to “drive forward a customer-centric energy transition”.

“With the costs of renewables falling against a backdrop of unstable global gas prices, the conventional business case is looking stronger than ever – and it is clear that things are only going in one direction,” the report said.

Speaking to Utility Week, Fletcher explained: “Obviously the cost of renewables is coming down very, very substantially. But also in order to get access to capital and access to good rates for capital, big businesses increasingly need to be able to show to their lenders and investors that they are taking net zero seriously and that they’re looking to decarbonise their processes.

“For a lot of the big businesses we talked to it was pretty much seen as an imperative; it was non-negotiable that they decarbonise their energy use.”

Fletcher said adopting more flexible use of energy also makes sense for businesses.

She continued: “The business case now is not just around the fact that the cost of renewable power is coming down and therefore the cost of entering into power purchase agreement (PPA), for example, or investing in your own renewables, as we’re seeing in the water sector, is becoming a good, rational thing to do from a business sense.

“But also, when you combine that with the ability to control and flex your energy consumption, to sell energy back to the grid to provide flexibility, then you are further improving the investment case, the business case, for a renewable flexible solution.”

The report includes a case study involving Schneider Electric which is using its expertise to help pharmaceutical companies such as AstraZeneca support their supply chains’ decarbonisation efforts.

Schneider is developing aggregated PPAs which sees small suppliers pool together to aggregate demand and benefit from arrangements usually only accessible to larger energy users.

Fletcher added: “As big businesses we can bring our supply chain together, we can aggregate their demand, and we can actually help them with the contracting and other measures needed to decarbonise their energy use.

“That’s an interesting point for water companies. They have big supply chains so is there anything to learn from what is happening in the healthcare industry in terms of aggregating supply chain demand and helping them get access to renewables?”