After COP21, multinationals will play a crucial role in achieving ambitious climate targets. While policymakers can provide the right legislative framework and policy priorities, Malgosia Bartosik explains why businesses are taking the lead.
Malgosia Bartosik is deputy CEO of the European Wind Energy Association.
As the COP21 negotiations on climate change progress in Paris, wind energy is gaining momentum as a key climate mitigating strategy to help countries meet their INDCs. At EU level, the November Energy Council – a meeting of the EU’s 28 energy ministers – endorsed the principle of member states climate and energy plans for the post-2020 period.
The conclusions echoed proposals by Maroš Šefčovič, Vice-President of the European Commission in charge of the Energy Union, for the plans to cover national renewable energy contributions. “Onshore wind is the cheapest form of new power generation in Europe today. Companies that embark on a road towards a low-carbon, energy efficient future are a source of inspiration. They are perfect ambassadors for our Energy Union Strategy,” Šefčovič has said.
Wind offers a scalable, clean and competitive solution to meet climate targets. But it’s not just government leaders that are looking to wind. Leaders of some of the world’s foremost blue-chip companies are making significant investments in wind energy.
With the cost of wind power decreasing, many new investors have been attracted to the sector. Institutional investments in renewables in the EU alone leapt from €300 million in 2004 to €6 billion in 2015. This goes beyond utilities and includes global business and blue-chip companies that are not traditional energy providers.
More and more major global companies are turning to wind as their primary renewable energy source as they move – or already have become – 100% renewable or carbon-neutral. Many business leaders are seeing that wind makes good business sense, and are making substantial, long-term investments in the energy. Companies such as Google, SAP, Unilever, Aveda, IKEA, Lego and more are leading from the front in making long-term investments in wind energy.
The business case for wind energy rests on three main pillars: a mature technology with a successful track-record of introducing technology evolutions, a predictable revenue stream based on regulated tariffs and prudent wind forecasts, and the increasing economic competitiveness of wind power.
There are compelling reasons why global corporations say they are investing in wind energy. It allows companies to own energy production and thereby successfully predict their energy supply. It reduces companies’ exposure to the cost volatility of hydrocarbons and affords them long-term pricing predictability. It allows companies to use their purchasing power to drive a major change in business models of energy use.
Doing this early gives them a longer-term competitive advantage. It drives down long-term business energy costs. The cost-effectiveness of the market is beneficial to growth, and investing in wind helps increase demand and thus the competitiveness of the market, which will further drive down long-term energy costs. It allows companies to respond to customer and societal demand. Lego, for example, understands that investing in renewables support a better future for its young customers and therefore also benefits its business.
Renewable energy, mostly wind, powers 35% of Google’s data centres and many other companies are following suit. Software giant SAP has heavily relied on wind energy to power its business and increase its use of renewables from 43% in 2013 to 100% in 2014. IKEA has invested €500 million in wind power. By producing its own renewable energy IKEA says it is able to reduce costs and protect itself against fluctuating energy prices.
This is something that is confirmed by the financing resources allocated to wind by major investment banks. For example, BNP Paribas recently announced that it will more than double the financing resources allocated to the renewable energy sector, from €6.9 billion in 2014 to €15 billion in 2020. Estimated new wind power installations are expected to grow to 260 GW by 2019, and to 590 GW by 2024. Global cumulative installations are now estimated at 960 GW by 2024.
The scalability of wind energy has helped it emerge as a viable alternative to fossil fuel. Wind energy’s share of renewable electricity generation has more than doubled in the previous decade achieving more than one quarter (27.4%) of all renewable generation in 2013. This trend is set to continue – the European Commission expects wind to represent at least 43-45% of all renewable energy produced by 2030.
The urgency to arrive at a cleaner, more efficient energy future to tackle global climate change has never been greater. Policymakers will need to commit to bold choices, including ending the massive subsidisation of fossil fuels. But the choice to move over to wind is an easy one – the business case for wind is clear. Policymakers should perhaps take a leaf out of business leaders’ book. Whatever the political deal that emerges from COP21 one thing is apparent: in business, the smart money is already investing in wind.