Energy Report 2019 - Preview

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see legal frameworks as favourable70 %

The evolving role of European corporationsThe use of renewables in the EU increased significantly in recent years. Their share in energy consumption doubled from around 8.5 percent in 2004 to 17 percent in 2016.2 An important factor in this trend has been the political will in Europe to set and pursue important EU climate targets.

As a result, most of this past growth was driven by politically determined subsidy schemes, which provided investment opportunities for financial investors and, to a lesser extent, the final consumer. Only in more recent years has the energy consuming industry contributed a small, but growing, share to the shift to cleaner power by directly obtaining increasing amounts of their energy from renewable sources.

In some countries, renewables have already become an attractive form of power supply or investment in self-consumption for corporations, making it possible to reduce energy costs, hedge against the risk of increasing energy prices and meet sustainability objectives.

However, to reach the next level and truly drive the decarbonisation of our economy, companies must take an even more active role by leading the investment in renewable energy and increasingly replacing subsidy driven schemes with market-based contracts and solutions.

To support this evolution, the RE100 network was launched at Climate Week NYC 2014. The global initiative aims to accelerate the transformation of the global energy market and aid the transition to a low carbon economy. Just over 150 RE100 companies have committed to source 100 percent of their global electricity from renewable sources by a specified year.

But this is just the start and there is much work ahead if the worst predictions of the IPCC are to be avoided. It is at this crossroads for the renewable energy transition that the Energy Report surveys the corporations across key European markets who are central to its success.

In October this year, the Intergovernmental Panel on Climate Change (IPCC) released its most stark warning yet on the global impact of failing to limit global warming to 1.5°C.

At the same time, the renewable energy transition in Europe is at a crossroads as it moves from being subsidy driven, to market driven. A world where corporations would then, naturally, take up more of the market. However, corporates must first be convinced of the benefits. With the commercial and industrial sector accounting for two-thirds of the world’s end-of-use electricity1, their adoption of renewable energy is now fundamental to the transition.

Are corporations convinced? Do they recognise their fundamental role in driving the renewable transition?What progress has been made and what factors are holding corporations back? Do they see an opportunity or a challenge?

The latest BayWa r.e. Energy Report provides answers to these questions by analysing the views of corporations across six key European countries on how they view renewable energy. The full report will be released early in 2019 and is the first, systematic, quantitative opinion survey that has been carried out among 1,200 decision-makers in medium-sized and large companies in the UK, Germany, Italy, Spain, France and Poland. This preview report provides first insights into some of the initial findings.

Can corporations truly become the driving force of the renewable transition?

1 http://www.irena.org/newsroom/pressreleases/2018/May/Corpora-te-Sourcing-of-Renewables-Growing-Taking-Place-in-75-Countries

2 Eurostat: https://ec.europa.eu/eurostat/statisticsexplained/index.php?tit-le=Renewable_energy_statistics/de#Wichtigste_statistische_Ergebnisse

89 %

75 %55 %

agree corporations have leading role to play

are frustrated by bureaucracy have set targets

89 percent of companies across all surveyed countries, company sizes and industries universally agree on the leading role they have in driving the renewable energy transition.

92 %are sourcing renewables to reduce energy costs

In deciding whether to invest in renewable energy, costs are the main factor. The most frequently mentioned reason for corporate sourcing of renewable energy was the reduction of energy costs (92 percent), while the main barriers for investing in renewable energy were the long time for payback (44 percent) and high investment costs (38 percent) – investment costs were seen as a barrier by 47 percent in Poland and 46 percent in the UK, while in Germany this dropped to 30 percent.

In Poland, Italy and Spain, 40 percent of respondents were unsatisfied with the work of their governments and legal framework. Moreover, 75 percent of all companies across all countries felt bureaucracy is hindering additional investments. At 78 percent, frustration was highest for companies in Spain and the UK, while Germany and France recorded 73 percent, and Poland and Italy ranged in between.

70 percent of companies in Germany, the UK and France felt satisfied with the work of their governments and perceived the legal framework for the use of renewable energy as favourable. But the picture becomes less positive when looking closer.

More than half of the surveyed companies (55 percent) have targets regarding the reduction of greenhouse gas emissions, energy efficiency or the use of renewable energy. The main objective of the surveyed companies was to increase the use of renewable energy (66 percent). While companies in Germany, the UK and France mainly focus on greenhouse gas emission targets, companies in Poland, Italy and Spain aim to increase the use of renewable energy.

1 2

Corporations feel responsible for driving the renewable transitionEncouragingly, the first results of the Energy Report 2019 provide a relatively consistent picture of all surveyed countries, company sizes and industries in Europe. A clear majority of decision-makers agree on the important role corporations have in driving the energy transition, with approval ratings ranging from 95 percent in France to 83 percent in Poland.

Companies are increasingly aware of the major advantages that renewables offer, such as long-term lower energy costs. This result is crucial, as for a long time corporations and industry associations were concerned about the costs of the energy transition, sceptical of the benefits renewables offer, and feared a risk to their supply security. The survey shows that the attitude of corporations has changed in this regard thanks to the dramatic decrease in green energy costs and the increase in public awareness regarding climate change.

At the same time, the findings also highlight that there is huge potential for corporations to enter the next phase of the energy transition if key barriers and obstacles preventing further investment and adoption of renewables can be overcome.

More potential that energy providers can unlockOn the part of energy providers, there is more homework to be done. From their perspective, the results regarding the long amortization time and high investment costs, which were perceived as barriers to new investments by 44 and 38 percent of the respondents

respectively, are quite surprising. Either the significant price drops in recent years have not yet been fully reflected in the solutions offered, or the investment hurdles by corporations are still too high for energy infrastructure. In such cases, leasing and Power Purchase Agreement (PPA) structures3 should be able to overcome the barriers but are not common enough yet.

For large companies, and for those in the wholesale and retail sector, the long-term payback period was a particular issue, for 54 and 52 percent of the respondents respectively. For these parts of the market, energy suppliers will need to look more closely and determine whether more work is required to better convey the range of renewable energy sourcing options that are available or if new solutions are needed.

The market already offers a wide range of onsite and offsite sourcing options together with different financing and investment models. While prices for renewable energy systems continue to fall. The same is true for Guarantees of Origin4, which are currently experiencing a significant increase in value. If the corporate consumer agrees to a PPA with a renewable energy generator, the transfer of the certificates is mostly part of the contract, and the certificates do not need to be purchased separately.

Renewable energy providers thus need to be prepared to enter into detailed discussions with corporations in order to better understand their specific needs and internal requirements, and to then propose the optimum solution.

3 A Power Purchase Agreement is a long-term contract under which the developer sells the electricity to a off-taker for a fixed price.4 A Guarantee of Origin (GO or GoO) guarantees that one MWh of electricity has been produced from renewable energy sources. It is a form of

tracking defined in article 15 of the European Directive 2009/28/EC.[1]

Reaction to initial resultsInitial results of the BayWa r.e. Energy Report 2019 highlight both the desire from corporations to source more renewables, and the barriers to realising the huge potential that exists.

Many corporations see the benefits of renewables but are held back by bureaucracy or barriers relating to investment costs and payback. As an industry, we must ensure that a range of renewable supply options, from PPAs to own installations, are available and meet the needs of corporations. We must also work with governments to help pave the way for an improved regulatory framework.

Matthias Taft, Member of the Board with responsibility for the energy business, BayWa AG

Growth in Corporate Renewable PPAs observed over the past years is the result of collaboration across the renewable supply chain. Corporate buyers, developers and lenders have come together outside of deal negotiations to find common positions within WBCSD’s Forum. This report shows when governments are providing a stable and favorable legal framework, corporate demand will drive further renewable deployment in Europe.

Mariana Heinrich, Manager – Climate & Energy, World Business Council for Sustainable Development (WBCSD)

At Microsoft, we believe in a future powered by clean energy. The initial results of the BayWa r.e. Energy Report highlight the willingness from corporations to source renewables.

By investing in new renewable projects, creating new deal structures to open up markets, and introducing new technology solutions to storage and grid management, we see it as our role to lead by example and show how corporations can drive the renewable transition.

Vanessa Miler-Fels, Renewable Energy Strategist, Energy & Sustainability, Microsoft Cloud Operations & Innovation

43

UK GER FR IT ESP POL

46

3032

34

39

4749

3942 43

45 45

27

20 1922

25 25

Which are/have been the most limiting decision criteria for investing in renewable energy for your company?*

Investment costs too high/limited investment budget

Payback time too long

Unpredictable supply security/risk of failure

UK GER FR IT ESP POL

7873 73 74

7974

2227 27 26

2126

Bureaucracy and complex regulations are currently hindering additional investment in renewable energy for my company.

Agree

Disagree

6

UK GER FR IT ESP POL

6874 73

61 62

54

6468

58

7076

63

52

66

5460

53

44

Reduction of greenhouse gas emissions

Raise the use of renewable energy

Raise energy efficiency

Which particular targets does your company have?

UK GER FR IT ESP POL

77 74 77

61 60 60

23 26 23

39 40 40

I feel the government is providing a favourable framework to corporates who want to use renewable energy.

Agree

Disagree

5 * top three responses shown

For more information please contact:BayWa r.e. renewable energy GmbHMark CooperHead of Global Communications Tel: +49 89 383932 3611E-Mail: Mark.Cooper@baywa-re.com

The full results of the Energy Report will be available in early 2019.

To register for a copy, visit www.baywa-re.com/energy-report

#EnergyReport19 #RESource2018

i

The energy transition becomes a success when business and

politics work togetherThe primary objective of governments should therefore be to, firstly, reduce bureaucracy and red tape to create additional incentives for investments. And secondly, to establish a sustainable legal and regulatory basis for business models, such as PPAs and self-consumption, in countries where this is not the case yet.

Concurrently, the renewable energy industry needs to be more ‘customer-focused’. It must ensure it offers a broader range of tailored solutions that meet the specific needs of corporations, from different markets and of different sizes. Together with governments, the industry must then help pave the way for improved policy and regulations, and work hard to ensure all these messages get through to decision-makers and influencers within corporations.

Corporations then have their own challenge to bring all internal stakeholders together so that a decision for more complex renewable products and options can be made.

The will and the desire from corporations is there, as is evident from the 55 percent of surveyed companies that have set their own targets regarding emissions, energy efficiency or use of renewables. But if those targets are to be realised, and the 45 percent who are yet to set any targets are to be convinced, there is still much work ahead.

Reaction to initial resultsCorporate sourcing is a matter for politicsHowever, while the industry has work to do, so do European and national governments. While most respondents were satisfied with the broad policy framework in their countries, many were frustrated by strict and complex bureaucratic regulations that they felt were preventing further investment in renewables.

While broad policy may be favourable, it is in the detail where frustration is being caused and the greatest risk exists for complexity and bureaucracy to mean potential goes unrealised.

Dissatisfaction was highest in Spain, Italy and Poland, but was clearly evident across all countries surveyed.

This report shows European corporate buyers are increasingly aware of the strengthening business case for renewables.

By pioneering innovative approaches and helping to shape regulatory frameworks, RE100 members have been instrumental in making corporate renewable energy use more mainstream. We expect more and more companies to step up their ambition and work with policy makers, regulators and energy suppliers to drastically accelerate clean power deployment.

Sam Kimmins, Head of RE100, The Climate Group

Individuals and companies want to take climate action by investing in renewable energy generation and sourcing renewable energy. A simple and inclusive legal framework is needed to accelerate the transition to an affordable and clean energy market. We need ‘the many’ people to join the movement, after all climate action starts at home!

Karol Gobczynski, Climate & Energy Manager, IKEA Group

The growing momentum and impact of corporations working to scale renewable energy is clear. Yet despite the progress made to date, more must be done to maximise Europe’s full potential for corporate investment in new sources of renewable energy and associated environmental and economic benefits.

The RE-Source Platform aims to increase the number of active corporates from 100 to 100,000. The massive potential can be realised by increased awareness of the opportunity and removal of policy and market barriers that constrain the growth of renewables in many markets in Europe.

Bruce Douglas, Coordinator, RE-Source Platform / Deputy CEO, SolarPower Europe

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Published byBayWa r.e. renewable energy GmbHArabellastraße 481925 MünchenTel: +49 89 383932 0Fax: +49 89 383932 32E-Mail: info@baywa-re.com

Published on behalf ofRE-Source Platform E-Mail: info@resource-platform.eu

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Management BoardMatthias Taft (CEO), Günter Haug, Harald Wilbert

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ImprintAbout

The Energy Report 2019 surveyed a total of 1,200 companies with more than 500 employees based in the UK, Germany, Italy, Spain, France and Poland. The study was carried out amongst corporate decision-makers operating in one of the following areas: energy providers, factory or company equipment, property and buildings, technical equipment and machinery or raw and fuel materials.

The Energy Report 2019 is the first, systematic, quantitative opinion survey providing meaningful and comparable insights into the attitudes of European medium-sized and large companies towards the energy transition, current energy policy issues, sustainability targets and plans to source renewable energy.

The Energy Report series was launched in 2015 by BayWa r.e. in order to find out more about European consumer’s support for the energy transition. The first edition focused on private households in Germany and provided a comprehensive picture on the attitudes of Germans towards the energy transition. The second edition, published in 2017, focused on German companies: a total of 1,000 decision-makers from small, medium-sized and large companies were interviewed. The survey provided meaningful insights into the energy supply of German companies, the prevailing attitude of companies towards German energy policy and the question on whether they are willing to invest in green energy. Find out more at: www.baywa-re.com/energy-report

The RE-Source Platform is a European alliance of stakeholders representing clean energy buyers and suppliers for corporate renewable energy sourcing. This platform pools resources and coordinates activities to promote a better framework for corporate renewable energy sourcing at EU and national level.

The multi-stakeholder platform brings together the interests of both buyers and sellers, to unlock the potential for a new and promising financing stream for renewable energy. Learn more at www.resource-platform.eu

The BayWa r.e. Energy Report series

The RE-Source Platform