How manufacturers can transition to 100% renewable electricity
Manufacturing and other industrial users account for around a third of the world’s energy consumption, according to the International Energy Agency(1). Electricity is a central element of that. If all the power consumed by factories and industrial plants came from renewable sources, it would make a sizeable contribution to tackling climate change.
It is a tough target, but one that companies are increasingly signing up to. The RE100 initiative, for example, has seen more than 400 corporations commit to 100% renewable electricity use across their operations. How they reach that goal will depend on many factors, including what they are making and where.
Switching to renewable electricity
“Organisations with lighter electricity needs and stable finances will be best positioned to transition to renewables. Companies with high electricity demand, like furnaces for glass, smelting or other large-scale heating applications and companies with very large footprints – such as expansive warehouses and assembly operations – may have more difficulty,” says Paul Holdredge, Director for Industrials and Transport at consultancy Business for Social Responsibility (BSR).
COP28 president-designate Dr Sultan Al-Jaber told the Adipec conference in Abu Dhabi in early October(2) that heavy industries may be hard to decarbonise but added “We know that solutions exist, and all industries can and must respond.”
The prospect of switching to renewable electricity has become far easier due to recent dramatic cost reductions. According to the International Renewable Energy Agency (IRENA), the price of solar photovoltaic power in 2010 was typically 710% higher than the cheapest fossil fuel, but by 2022 it was 29% cheaper(3). Currently electricity accounts for around 20% of final energy use in manufacturing, according to the International Renewable Energy Agency, and this is only expected to increase.
The manufacturing challenge
But it is not just the price of renewable energy, low as it is, that dictates a manufacturer’s ability to move to 100% renewable energy. Both the required initial capital investment and first-mover disadvantage—where it costs pioneers more than those that follow them to deploy new technologies—can significantly slow down a fully renewable transition. Not to mention the lack of availability of certain renewables in certain geographies and the fact that the appropriate infrastructure must be in place for this energy to be delivered—something no one company can do on its own.
Manufacturing requires an enormous amount of electricity in comparison to offices. In some countries or regions where the supply of renewable electricity is limited, like Japan, Taiwan, and Singapore, it is much more expensive than electricity produced by traditional means, placing a significant future cost burden on companies that purchase renewable electricity.
Epson is working to popularize the use of renewable electricity, despite the certainty of short-term cost increases. The company is advancing investment in sustainability to enrich communities and invest in future generations to create social value.
Wherever they are in the world, with whatever types of renewable energy available to them, companies need to adapt to local, national, and global circumstances. Seiko Epson, based in Japan, has done just that. Having switched to 100% renewable electricity for all its sites in Japan in 2021, it will complete the transition to 100% renewable electricity globally by the end of 2023(4). This goal has been made achievable through steady implementation of decarbonization targets and the use of renewable electricity since 2018.
In Nagano Prefecture, Japan, for example, where water sources are abundant, it relies on hydroelectric power. But in the Tohoku area, where it has a semiconductor fabrication plant, it uses hydropower and geothermal heat from the Ou mountains.
It is taking a similar approach outside Japan. In the Philippines, it taps into local geothermal and hydroelectric sources. While in Indonesia, it uses yet another renewable source—biomass power.
“We have used locally produced energy wherever possible,” says Junichi Watanabe, Managing Executive Officer General Administrative Manager, Production Planning Division, whose role encompasses the promotion of Epson’s procurement strategies in the supply chain, including the use of renewable electricity. “Rather than using energy generated in faraway countries, using a particular region’s abundant renewable resources brings many benefits, such as improving energy self-sufficiency and creating jobs.”
In addition to purchasing renewable electricity, Epson co-creates and develops other power sources through continuous renewable electricity purchases. In partnership with Nagano Prefecture and Chubu Electric Power Miraiz Company, Inc., the company began support of hydroelectric power plants in Nagano Prefecture. Two are already in operation (totalling 5,770 kilowatts) and another is scheduled to begin operation in 2024. That number is expected to increase to five by 2025.
Such targets can help a company stand out from the crowd. “Based on our research, setting a near-term goal for 100% renewable electricity use is an example of leadership and a differentiator. Some companies also have roadmaps to transition over longer time periods,” says Holdredge.
Among the practical methods companies should consider are:
• Sourcing renewable electricity from local suppliers via contracts with electricity suppliers – the ability to do this will depend on the rules in a particular country but, if it is possible, a company can be confident its electricity is only coming from renewable sources.
• Generating electricity on-site, via rooftop solar panels or, if space allows, wind turbines. Even if they do not generate all the power needed, they can still make a useful contribution.
• Develop battery storage facilities. A common concern about renewable electricity is the risk of supply being interrupted when the wind isn’t blowing or the sun isn’t shining, but storage technology offers a viable way to address that.
When it comes to solar power generation systems, Epson’s sites also decide whether to adopt self-investment or power purchase agreement (PPA) based on the individual circumstances of each country or region. The solution will vary from company to company. But most manufacturers are likely to find a combination of these elements will go a long way to reaching their renewable electricity goals.
What’s more, many manufacturers like Epson realize that their indirect GHG emissions from their entire value chain (Scope 3) are much greater than the GHG emissions from their own electricity use (Scope 2). As such, by reducing the sector’s Scope 2 emissions using renewable energy—something the sector can do independently—is likely to have a far greater impact on society. Setting goals early and demonstrating a company’s stance toward solving climate change is the key to co-prosperity with suppliers and a sustainable society.
“For large companies the return on investment is there to make the case for investment in renewables. For smaller companies this can also be true, but it depends on the geography. Government incentives can only speed up transition which is sorely needed,” says Christy Slay, Chief Executive Officer of The Sustainability Consortium.
The future for greener manufacturing
There are big gains for humanity if climate change can be addressed, but for manufacturing companies and their shareholders the best approach could also deliver commercial gains.
Consumers and investors are increasingly likely to reward companies with greener credentials, making it an essential part of long-term market positioning. In addition, greater use of renewables and greater self-generation can make a company more resilient to volatile electricity prices on the open market.
“Reaching 100% renewable is tough but pushing to get as close as possible, as soon as possible should be every company’s focus right now,” says Slay. “Epson has managed to stay one step ahead of the industry and is setting an example not only to Japan but to the world.”
Source ReutersJanuary 3, 2024