The flexibility to manage a mix of energy sources is the key to navigating these exciting clean-energy times
Analysis presented during last week's Bloomberg New Energy Finance annual summit in New York offered more evidence that the tide is slowly turning against fossil fuels.
The world is now adding more capacity for renewable power each year than oil, coal and natural gas put together. In 2013, the installation of 143 gigawatts of renewable electricity capacity excitingly surpassed the 141 gigawatts in new plants that will burn fossil fuels. According to BNEF's figures, by 2030 more than four times as much renewable capacity will be added.
There are, of course, emerging trends that have led to this state of affairs. Generally, the cost of deploying renewable energy systems is falling, while the cost of delivering hydrocarbons is rising. Last year saw peak capex spending by the oil and gas industry, and the lowest rate of discovery of new reserves in 20 years.
And ahead of the next round of UN climate talks in Paris at the end of the year, the politics of climate abatement are slowly showing signs of alignment. More than 100 countries now have a 2050 target to reach zero net greenhouse gas emissions. Denmark is already generating almost 40% of its total electricity from wind power.
The deal struck between the US and China in Beijing last November is big news too. China has for the first time committed to cap its carbon output by 2030 while generating at least 20% of its energy needs using clean energy sources, such as solar and wind.
But as we transition to a lower-carbon future that is certain to see renewables play a bigger role in driving our economies, navigating the current political and economic landscape is not easy.
Driven by a need to beat energy-price volatility, de-risk future energy supply and improve brand reputation, companies have worked hard during the last few years to increase their portfolio of renewable energy – and there have been some fantastic success stories. Rarely a week goes by without another renewables announcement from Google, which has so far committed more than $1.8bn to clean energy projects, including wind and solar farms on three continents. Swedish flat-pack retailer IKEA has been dabbling with projects for many years, committing some €2bn to wind and solar schemes by the end of this year as it hones in on a target of running all of its buildings on renewably-sourced power by 2020.
Against a backdrop of potentially dangerous climate change, renewable energy must form part of a company’s strategy for reducing its overall carbon impact. And a balance must be struck as to the level of commitment and investment attached to large-scale projects (such as Microsoft’s) and on-site initiatives (which, depending on the site-specific characteristics, can have limited impact).
At AkzoNobel, we have tried a number of different approaches to minimizing our impact as a paints, coatings and chemicals business.
Our large-scale wind farm project, Vindin – which currently consists of three wind parks in Europe’s Nordic region – will help. As part-owner in a consortium, our Pulp and Performance Chemicals (PPC) business – 60% of which already runs on renewables – will reap the benefit of it’s share of the 1,000 gigawatt hours of clean electricity the wind consortia has targeted to deliver.
In the Netherlands, we have custom-built a two-kilometer pipeline to provide steam from a waste-to-energy plant that will help to power our salt site in Hengelo. In the Benelux region, we’ve signed a long-term power purchase agreement (PPA) with the biggest and most-efficient biomass plant locally.
In Brazil, we’re excited about our ‘chemical island’ concept which enables us to run our Imperatriz plant on 100% renewable energy. By harvesting the local eucalyptus trees every seven years, the pulp producer uses waste material to generate electricity via biomass. It’s a beautiful, cost-effective business concept, with no or limited transportation of chemicals required.
But taking what works in Brazil and replicating it in Europe or the US is not always feasible. Our goal is that by 2020, 45% of our energy needs will be met by renewable energy; that figure currently stands at 34%. So, despite these successes, there’s more to be done.
As a global energy director it is my job to manage a mix of approaches that make sense to the business. The tide may well be turning in favor of clean energy, but decisions to increase our portfolio of renewable energy have to be cost-effective and a clear focus on ensuring the economics stack up has been central to our strategy so far.
So too has the need to remain flexible in what are uncertain, challenging and exciting times – working with local political systems (and taking advantage of subsidies where available), making the most of access to raw materials (as in Brazil), engaging our energy suppliers (and looking at long-term PPAs to lower costs) and working with in consortia’s (as with Vindin and potentially in the Netherlands) will continue to be crucially important as we transition to a low-carbon model.
Anders Österlund, director of energy, AkzoNobelAkzoNobel