For companies looking to go climate-neutral, one of the key steps is to ensure their electricity supply comes from renewable sources. In this expert interview for EM-Power Europe, Dr. Sebastian Bolay explains the different options available and what companies need to take into account when purchasing green electricity. Dr. Bolay is head of energy policy, renewable energies and the electricity market at the Association of German Chambers of Commerce and Industry (DIHK).
Why is it crucial that companies look into the options for obtaining green electricity?
Both the EU and the German government have adopted targets to achieve climate neutrality by 2050 and 2045 respectively. That doesn’t mean the end of all CO2 emissions, but the new targets are considerably lower – less than a tenth of current emissions levels. To achieve this, the vast majority of companies must become climate-neutral. We know from the DIHK’s Energiewende-Barometer (Energy Transition Barometer) that half of all businesses in Germany have already set their own targets to achieve climate neutrality. But in order to meet these targets, they need an electricity supply generated using renewables. Green electricity has been available on the market for many years, so this is one of the simplest steps companies can take towards climate neutrality.
What are the general electricity supply options for companies looking to reduce their carbon footprint?
The best place to start is always with your own premises. Ask yourself what changes you could make at your own site. Could you perhaps install photovoltaics on the roof? Generating your own green electricity will usually make financial sense as well. That said, very few companies will be able to generate enough electricity on site to power all their operations.
It’s therefore also important to look at how companies can purchase green electricity from external producers using guarantees of origin. Guarantees of origin confirm that the electricity in question is sourced from renewable generation. They can be purchased in addition to your electricity supply or incorporated directly into existing supply contracts. Today we are seeing increasing numbers of German guarantees of origin available on the market, since older plants are no longer subsidized under the German Renewable Energy Sources Act (EEG) after 20 years, meaning they are now eligible. Some new plants, in particular free-standing PV installations, are also being built without EEG subsidies. As a result, companies now have the option to enter into power purchase agreements (PPAs) with certain plants, either directly or via a service provider. This also opens up new opportunities to source green electricity from regional producers, since only plants that are not EEG subsidized are eligible for guarantees of origin.
What factors should companies take into account when selecting a green electricity option for their business? Which types of company could benefit from green PPAs?
The best option for obtaining electricity largely depends on the size of the company and its energy demand. If you look at the companies that have signed PPAs to date, you’ll see they’re all big names in the German business world. That’s understandable, because PPAs are complicated and require companies to have the necessary expertise in-house. There are also transaction costs involved, which for a medium-sized enterprise can quickly add up to a five-figure sum.
That’s why, as part of our “Marktoffensive Erneuerbare Energien” (Campaign for Renewable Energies, marktoffensive-ee.de), we are working together with Dena and the German Association of Climate Protection Companies to reduce these costs. As a first step, we have already published guidance for companies on financing PPA projects and we will soon be publishing guidance on how to set up these agreements. We are also planning to introduce PPA consultation hours.
For the majority of German companies PPAs are currently still not an option. They should therefore investigate the possibility of incorporating guarantees of origin into their electricity supply contract with their existing or new supplier. In the past, guarantees of origin were sometimes discredited as a form of greenwashing. We do not believe this is the case, since there is EU-wide regulation in place stipulating that each guarantee can only be sold once.
Are there “good” and “bad” forms of green electricity? What are the main advantages and disadvantages of the different options?
In terms of achieving your company’s climate protection targets, it doesn’t matter what form of green electricity you choose. However, there are differences when it comes to quality. They all fall somewhere on a quality spectrum between these two extremes: At the bottom end are the old Norwegian hydropower plants, whose guarantees of origin can be purchased at any time regardless of when the electricity was generated or consumed. At the top end are the new photovoltaic and wind power plants that are local to the organizations they supply, meaning there is synchronicity between the electricity generated and consumed. These plants are the gold standard. Between these two extremes there are many different options. Ultimately, it’s up to companies to decide which green electricity criteria are important for them and then find an option that fits.
Companies that want to become climate-neutral can talk to exhibitors and experts at EM-Power Europe and its three accompanying exhibitions from May 11–13, 2022 in Munich for in-depth advice on how to calculate and reduce emissions.
You can find an overview of the wide range of information available on our topic page "Climate-neutral companies".