How can on-site generation help with the path to Net Zero?
As we head towards the UN Climate Change Conference (COP26) in November, the focus on reducing emissions from both the public and private sector is growing. Many businesses have announced ambitious plans to reduce their environmental impact, recognising how a more sustainable approach gives them greater long-term resiliency.
However, for many, the impact of the challenging commercial environment has resulted in even greater scrutiny on spending, particularly when it comes to larger scale sustainability projects. Decarbonising the heat from buildings is one of the biggest challenges to overcome, and while ‘small’ changes - such as replacing lighting, heating and cooling - can make a big difference and should absolutely be in a business’ carbon reduction plan, making the case for larger investments, such as on-site generation, can prove to be more difficult.
To help building managers make the business case for the investment on-site generation, we took a closer look at the important role it can play in helping organisations plot their path to net zero in our recent report - ‘Plot Your Path to Net Zero: A Focus on Sustainable On-Site Generation’.
Encouragingly, the research showed that, despite the challenging economic environment, over 50% of our respondents said they had already invested - or were planning to invest - in ways to generate their own supply.
That said, despite the positivity around plans to invest in on-site generation, businesses also raised some of the issues they face when it comes to building a case for the investment. The primary barrier is proving the return on investment (ROI) of an on-site asset, closely followed by access to funding. A quarter (24%) also questioned the suitability of on-site generation for their organisation.
So, how can you make the business case for an on-site generation asset?
For us, there are five clear reasons why on-site generation should be a key part of a business’s net zero strategy:
1. It reduces carbon emissions
As we know, the UK government has set some very ambitious targets for the reduction of carbon emissions. As well as committing to net zero emissions by 2050, it recently announced a mid-point commitment of a Greenhouse Gas (GHG) emissions reduction of 78% by 2035 compared to 1990 levels.
The most effective way to reduce emissions is by switching to a zero-carbon supply. On-site generation options that use 100% renewable sources - such as solar PV or wind - will help a business significantly reduce its carbon footprint.
2. It lowers energy costs
Installing on-site generation technology can make a real impact on the bottom line through a reduction in energy costs. As a site will only generate the energy the business needs to use, it will naturally operate in a more efficient way.
There is also the opportunity to avoid non-commodity costs, such as the third-party costs required to maintain and balance the grid, if a business is generating its own electricity.
If a business can demonstrate clear savings through installing an on-site asset, then it will make the case for investment much stronger.
3. It protects against price fluctuations
Linked to a reduction in energy costs, on-site generation helps to mitigate against price fluctuations in the market. As well as avoiding non-commodity costs, having an on-site supply helps to protect businesses against wholesale price volatility, meaning it can plan ahead with greater certainty.
In short, it puts the business in control of its energy usage, and allows it to unlock flexibility in terms of demand.
4. It provides an increased stability of supply
Hitting net zero emissions by 2050 relies heavily on mass-electrification, putting increased pressure on the central grid. Any loss of energy - no matter how brief - can be costly, particularly to those mission-critical businesses that rely on 24/7 supply.
Installing on-site generation - particularly if combined with battery storage - helps to protect businesses from any downtime by increasing self-sufficiency and minimising the reliance on the grid.
5. It improves reputation and sustainability credibility
As more and more businesses announce their sustainability plans, there has been a greater focus on so-called ‘greenwashing’ - where a company’s zero-carbon commitments do not stand up to scrutiny - particularly as the public become more climate aware.
Installing on-site generation is a clear signal that your business is serious about sustainability, particularly in the eyes of customers and throughout your supply chain.
Plotting your path to net zero with on-site generation
When it comes to making ambitious, yet robust, carbon reduction plans, on-site generation needs to be a key consideration. However, where on-site generation is not an option due to cost barriers, one route to consider is a power purchase agreement (PPA). These can be arranged via a third party funder, who can install and manage the on-site asset - the organisation then buys the energy from the funder over the course of the agreement, negating the need for up-front investment. Encouragingly, this was a route that the majority of our respondents (73%) were either already taking, or were considering.
From solar PV to CHP, there is now a great deal of on-site generation choice for businesses, with more innovative technologies on the horizon. The time to act is now - as well as reducing emissions, it makes businesses less reliant on the grid, mitigates against price changes, enables greater control of energy consumption, and provides future revenue opportunities by becoming a flexible asset. That is why investing in on-site generation really does make financial, environmental and reputational sense.
Anthony Ainsworth is COO, I&C Energy Sales & Solutions, at nPower Business Solutions