We are witnessing a shift in the energy buying landscape. In the beginning, the corporate renewables revolution was confined to the most environmentally progressive companies looking to meet sustainability goals. The increasingly competitive price of renewable energy is now inviting new industries to explore opportunities in the market. Today, we are seeing an interest in clean energy procurement pop up in industries ranging from mining to manufacturing, as a result of a variety of motivators.
One of the most intriguing participants in the long-term renewable energy marketplace is the automotive industry. Both General Motors and Volkswagen have engaged in renewable power purchase agreements (PPAs), placing them at the forefront of a trend that – based on our conversations with clients and prospects – is almost certain to continue. There are several factors unique to this industry that position automotive OEMs and their suppliers as prime candidates for long-term PPAs.
PPAs are an ideal energy solution for the automotive industry because these companies:
1. Have high electricity load
Automobile assembly and parts manufacturing are energy-intensive processes that rely on energy supplied mostly in the form of electricity. This large electricity load is responsible for considerable CO2 emissions which, combined with rising market prices for electricity, results in significant economic and environmental burdens. A renewable energy PPA allows companies in this industry to alleviate the weight of their electricity load, by locking in prices for zero emissions energy sources.
2. Have decentralized operations
Manufacturing facilities for most large automotive companies are distributed throughout the United States (and across the world in many cases). Having widely dispersed facilities, across multiple electricity grid regions, can make it difficult to plan for future energy expenditures. This decentralization also constrains a company’s ability to reduce emissions on a local scale. A financial, or virtual, PPA is an instrument that organizations use to reduce operational emissions across multiple load centers.
3. Operate in a carbon-intensive industry
The nature of the automotive industry itself makes renewable PPAs an attractive solution. These companies produce a consumer product that generally requires a carbon-based fuel. While the carbon emissions of their product leave their control after its sale, a PPA gives companies the optimal chance to reduce emissions, leave a smaller overall carbon footprint, and decrease their impact on climate change. When taking the supply chain into consideration, the climate impact of a single automotive company multiplies. Unlike other emissions-reducing instruments – such as energy attribute certificates (EACs) and energy efficiency improvements – PPAs give companies the opportunity to engage suppliers on clean energy efforts and make an even greater impact.
4. Have a reputation that depends on consumers
Customers are the most important stakeholders for companies in the automotive industry. Because it is a consumer-facing industry, sustainability efforts do not go unnoticed and, likewise, unsustainable practices are accentuated. According to PwC’s 2016 Global CEO Survey, 58% of automotive CEOs are concerned that lack of trust could jeopardize their growth prospects. Renewable energy PPAs are a transparent and effective way for automotive companies to gain a positive customer reputation and serve as a proactive leader for climate action.
PPAs are a rare opportunity for companies in the automotive industry to hit goals for sustainability and renewable energy procurement, serve as a leader in the space, improve customer reputation, and mitigate risk Large energy demand is an issue that automotive OEMs and their suppliers cannot escape, but there are options available to them that diminish its impact on the bottom line. Signing a long-term renewable PPA is a strategic, all-in-one solution for proactive players in the automotive industry.