Clean and green: The new energy of choice - JLL Real Views
Article by Jim McClelland
Hardly a week goes by without news of another record being broken for renewable energy generation.
Take the REN21 global status report showing the largest-ever annual increase in power capacity for 2015; or the US Energy Information Administration (EIA) announcing electricity up year-on-year for every single month in 2016. Portugal even ran on nothing but renewables for four days back in May.
Furthermore, despite clean energy investment in 2016 lagging behind last year's runaway success, recent International Renewable Energy Agency (IRENA) analysis still forecasts an ongoing upward curve, particularly for solar photovoltaics (PV). Dramatic expansion of the solar PV market could see it provide 13 percent of the world's electricity alone by 2030 – up from 2 percent now.
In this context, companies are fast realizing the benefits of renewable energy technologies, according to Kyle Goehring, leader of the Alternative Energy Services group for JLL U.S.
"At present the most prominent clean or green energy being developed in the States is solar PV," he says. "When you look at the commercial and industrial (C&I) space, one sees a transition from utility-scale renewables to more localized energy generation.
"Outside of solar, we are seeing an increase in interest in storage, because of the utility rising costs and demand charges. Loads fluctuate during the day – partly due to the intermittent nature of renewable energy coming online – so battery storage to round out those curves is making more and more financial and operational sense," he adds.
Such load-shift practices on the part of companies are helping offset peak demand, as well as responding to the roll-out of smart and time-of-use meters by utilities. As a result, clean power generation is increasingly becoming 'business as usual'.
A global focus area
Renewable energy sector growth has long been in evidence around the world, with Germany and the UK market-leaders in Western Europe, plus technology innovators such as Japan and lately Korea pioneering in the East.
Add to this mix the emerging capabilities and capacities of both China – described by Tesla CEO Elon Musk as 'easily' capable of supporting itself on homegrown solar– and India, and the clean and green megatrend can be seen gathering global momentum.
According to Roberto Zanchi, Technical Manager, Renewable Energy at CDP, increasingly hard-headed attitudes towards uptake suggest a maturing and mainstreaming of the market.
"For business, renewable energy has become a matter of corporate strategy and finance, as much as about sustainability," he says. "Until recently, the renewable energy market offered limited choice, but that is changing. From investments in own projects, to Power Purchase Agreements, to renewable energy certificates, there are more procurement options than ever before for companies switching to clean energy."
Overcoming challenges
The contract side of things has proved a stumbling block, says Goehring, not least for the C&I sector, where demand for short lease periods is high, with flexibility a post-recession priority:
"Typically, if you are buying on a Power Purchase Agreement, you are looking at 10 years or more – that is a long-term commitment for many institutions, rather than just simply buying energy on the spot market."
The tide, however, might just be turning. In the U.S., longer-term deals are starting to be struck, with the likes of General Motors signing up for windpower over 14 years and Lockheed committing to 17 on solar. The trick is that they are not necessarily using the energy direct, explains Goehring.
"We are seeing more procurement of offsite resources for energy, where companies are taking a financial stake in say a wind farm and receiving the environmental attributes and green credits, but maybe not the energy itself."
Tech leads the way
The tech giants have featured strongly among the early adopters, with Facebook and Microsoft buying into clean energy to fuel their power-hungry data centers. The biggest of the bunch is Google, the largest corporate purchaser of clean energy on the planet, which made its first foray into wind farms in 2010 and continues to accumulate dozens of renewable power investments.
All three corporations are among the 60 multinational participating in a new network, the Renewable Energy Buyers Alliance (REBA), which aims to help corporations purchase 60GW of additional renewable energy in the U.S. by 2025.
Taking matters one step further, the world's most profitable company Apple will even be selling-off excess solar energy generated on its new Cupertino campus in California.
The tech giants are far from being alone. The latest report from the We Mean Business RE100 campaign suggests up to 3,000 companies could go 100 percent renewable by 2030, with potential for 4.5-5.7 billion tonnes of greenhouse gas emission reductions.
And the more traditionally risk-averse sectors are now getting involved. Recent converts include banking groups, pension funds and real estate investment trusts (REITs), under pressure from fossil-fuel divestment campaigns and concerned about stranded assets. This new spirit of climate awareness and responsibility in the financial sector is epitomised by the open letter issued to G20 leaders in August, asking them to ratify the Paris agreement, signed on behalf of 130 institutions, together controlling some US$13 trillion of investments.
A convincing business case
More companies are making green part of their long-term strategy, investing in clean and green power to insure themselves against oil and gas market volatility, as well as cutting CO2 and scoring well on prudence and principles. Such benefits help companies hurdle the economic price barrier, says Goehring.
"Clean and green power is moving up the corporate agenda partly because organizations issued public statements and set goals that laid out markers for energy from renewable sources or carbon footprint reduction by 2020," he explains.
"The challenge for companies voting simply on the basis of lowest cost is that green energy, although it has come down significantly (more than 80 percent for solar in the past six years), can still be priced equal to or possibly higher than non-renewable energy. So, a company has to value the extra value that it brings – such as low-carbon footprint, marketing advantages and attracting and retaining talent, particularly in the values-led Millennials market."
Inspired by investor clean-up of power portfolios, pushed and pulled by politicians, prompted by conscious consumers and a purpose-driven talent pool, corporate color choice is clear: the future of energy is green.
About JLL
For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500® company with annual revenue of $20.8 billion and operations in over 80 countries around the world, our more than 111,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
