The Race to Net Zero
Targets have been set by the government and businesses are now having to reaffirm their commitments to deliver on the Net Zero agenda. But behind the marketing buzzwords, what will underpin a successful Net Zero journey for businesses over the next thirty years?
Business Green and E.ON have joined forces to help businesses understand their options to achieve Net Zero. Click on a chapter to get started.
Sourcing zero emissions energy
Reduce your power consumption
Generating your own clean energy
02
03
04
01
Defining your Net Zero strategy
05
The road to an integrated energy system
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Generating your own clean power
Everyone is talking about Net Zero targets, which have become the new buzzword in corporate sustainability. That’s because, to avoid the worst impacts of climate change, the world must seek to keep average temperature rises to 1.5°C. To do this, we need to halve CO₂ emissions by 2030 and reach Net Zero emissions by 2050.
That translates into commitments for national governments to implement their own Net Zero targets – the UK was the first country to make its Net Zero commitment legally binding – and a growing number of local authorities and individual companies are following suit. But what does Net Zero mean and how do you get there?
There will always be some emissions associated with business operations, which is why the target is Net Zero – but companies are expected to cut all the emissions they can, and to compensate for those that they are unable to using carbon offsets.
How do you achieve Net Zero?
Often the push to cut your emissions will come from senior management, as the board comes under increasing pressure from investors, customers and regulators to act, explains Richard Spencer, Head of Technical Services and Operations for energy solutions at E.ON. “Companies are being encouraged to disclose their climate risks by investors, and the government’s Streamlined Energy and Carbon Reporting (SECR) regulations require companies to report on their energy use and carbon emissions,” he adds.
At the same time, guidance from bodies such as the Science Based Targets initiative explains exactly how to go about it. With most Net Zero targets being set for 2050, almost 30 years away, it is vital to set interim goals that set you on the right path and make it easier to achieve your ultimate aim.
"The first step is to carry out a baseline study to establish how much energy you are currently using and how much carbon you are emitting across your business."
“This study will help you to identify your biggest centres of energy consumption – in areas such as transport, heat and electricity, as well as industrial processes for some firms – and will highlight the most promising opportunities to reduce your carbon emissions.” The baseline also creates a benchmark against which you can measure your emissions reduction efforts over time to gauge how well you are tracking against the targeted CO₂ reduction goal.
This can require the involvement of a number of departments across the business, ranging from finance to property and energy managers, to procurement and transport teams. You may also need support from a specialised consultancy or to use an energy management platform to carry out the study.
Once you have a clear picture of your energy consumption profile, you need to create a list of the available opportunities across the company. A plan can be developed to create a capital investment plan for future investment. This is the start of the Net Zero Roadmap, which builds a business case that you can take to the board of directors, to determine its aspirations and expectations around return on investment.
In the short term, many measures, particularly energy efficiency schemes, will actually save the company money – payback times for moves such as changing to LED light bulbs can be as little as six months and even the most comprehensive investments can pay back their costs within a few years.
Opportunities from falling costs
Options that were previously prohibitively expensive, such as buying clean power and electric vehicles, or generating renewable energy onsite, are now more feasible because costs have fallen significantly over the past few years and are set to continue to drop as these technologies are rolled out on a global scale.
For example, Solar power is 50% cheaper than 10 years ago, while the cost of onshore wind has fallen by 40%. This makes them much more competitive with energy from fossil fuels, which are set to become more expensive as carbon prices rise. And electric vehicles, which are already much cheaper to run than petrol or diesel cars, are set to be as cheap to buy as their internal combustion counterparts within a couple of years.
“It is important to take a holistic view of the opportunities available because technologies that are not currently viable on their own can make sense when combined with other options – one key example of this is the use of batteries for energy storage,” Richard Spencer points out.
"On their own, batteries are still relatively expensive, but when linked to existing solar PV or wind power, they allow companies to optimise their energy use and get paid for a range of energy services they can provide to network operators including entering the assets into a range of Grid Services such as Capacity Market, Balancing Market and Frequency Services, all of which provide financial benefits."
Help is available
In addition, grants are available to boost the business case, including the government’s Industrial Energy Transformation Fund, which “supports the development of technologies that enable businesses with high energy use to transition to a low carbon future” by investing in energy efficiency and low-carbon technologies. The fund is administered by Department for Business, Energy and Industrial Strategy (BEIS), as is the Public Sector Decarbonisation Scheme, which allows local authorities, schools and colleges, NHS Trusts, emergency services and government departments to apply for funding for low-carbon projects.
There are also financing options such as power purchase agreements (PPAs) that can support the investment case for upgrading equipment, improving energy efficiency and introducing new technologies in order to decarbonise. Taking the first steps on the path to Net Zero helps your organisation align itself with the coming transition to a low-carbon economy, get ahead of regulation and align with the desires of your customers, employees and investors.
1.5°C
Achieving the Paris Agreement goal of limiting warming to 1.5°C and delivering Net Zero will now require a five fold increase in the rate of global decarbonisation every year, and must start now.
Global decarbonisation was only 2.4% in 2019.
Unchecked emissions growth would lead to widespread climate change at 4°C or more by 2100
Global decarbonisation in numbers
Global decarbonisation
The government is currently committed to reducing greenhouse gas emissions to Net Zero by 2050. But the global economy is still heavily dependent on fossil fuels today. The largest contributor to emissions is carbon dioxide (CO₂), which is emitted when fossil fuels are burnt to meet our energy demands.
The journey away from fossil fuels has already begun: electric cars, charging stations and solar panels are becoming a more and more familiar sight on our roads, streets and in our daily lives.
electric cars
charging stations
solar panels
50%
Solar power is 50% cheaper
40%
Cost of onshore wind has fallen by 40%
Source: PwC
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Reduce your power consumption, now
Generating your clean own energy
2.4%
4°C
- Richard Spencer, E.ON
Starting point to Net Zero
Defining your Net Zero Strategy
Sourcing zero emmissions energy
Reducing your power consumption
Generating your own energy
If you want to decarbonise your business, the quickest, easiest and cheapest way for your business to become more environmentally friendly could be to make sure that the electricity that you buy is renewable – that is, that your power comes from sources that do not deplete the Earth’s resources. Key renewable energy sources include solar photovoltaic (PV) panels, wind turbines, hydro-electric plants and biomass power plants that use material such as wood and agricultural waste to generate power.
The number of customers wanting to use renewable electricity has steadily increased over the past decade as businesses have become more aware of the climate impacts of using fossil fuels and pressures have grown to become more sustainable from customers, investors and employees. More recently, demand has picked up as growing numbers of companies have committed to Net Zero targets or their own sustainability targets.
To meet stakeholder expectations, you need to know what you are getting. Make sure that you are buying sufficient renewable electricity to cover 100% of your supply and that you know the actual sources. You also need to be able to communicate what you are doing, says Mike Scott, Head of Products and Propositions at npower Business Services. “Make sure any deal you sign up for has been independently audited and assured so you can be confident that all of your Scope 2 emissions are covered as part of your emissions reporting mandate.”
“Our customers have become much more aware of the impacts of fossil fuels. There has been a great movement towards renewables and suppliers including E.ON and npower Business Solutions have responded to that,” says Jay Chauhan, I&C Propositions Manager at E.ON. “Most large business customers are going straight for 100% renewable. They want to demonstrate to their stakeholders their CSR credentials and commitment to the environment.”
How companies are tackling climate change
At the same time, technological developments and the increasing scale of the industry have made renewable energy much more accessible.
E.ON's biomass power plants in Lockerbie and Sheffield can power 100,000 homes.
E.ON generate enough electricity to power 100,000 homes from their own biomass power plants in Lockerbie and Sheffield, which use domestically sourced waste materials, such as wood offcuts. They also work with wind farms from the Scottish Highlands to the Yorkshire Moors and the Sussex coast. These sites can power up to 170,000 homes and offices.
For many customers, a renewable electricity supply will be enough for them to take the first step on their decarbonisation journey. But many manufacturing and industrial companies also use a lot of heat in their operations and want to switch to renewable gas as well, which can help businesses to reduce their emissions while they plan to upgrade their heating and cooling infrastructure.
Renewable gas challenges
REGO certificates offer certainty for power consumers
On top of that, they supply renewable electricity backed by REGOs (Renewable Energy Guarantees of Origin) so customers can be confident that they are getting what they are paying for. Renewable energy generators earn certificates for all the renewable power they send to the grid and E.ON buys REGO certificates that they match to customers’ consumption over the course of their contract. At the same time, the certificates allow renewable energy developers to build more capacity.
Companies looking for greater certainty about where their power is coming from can even source it from a specific generator through their supply contract – establishing a mutually-beneficial relationship. Such contracts give businesses price certainty and protection from cost volatility on both sides of the equation, both supply and generation. This also allows developers to fund new renewable electricity projects on the back of the customers’ commitment to buy power from them.
This is more challenging than sourcing renewable electricity because there is not as much renewable gas on the market. At the moment, most biogas is produced using a process known as anaerobic digestion – where organic waste such as farm manure, wastewater and food waste is ‘digested’ by bacteria in the absence of oxygen to produce methane, which can be fed into the gas network.
In future, these limited supplies may be supplemented by a process known as ‘power-to-gas’, which would use renewable electricity to make methane from CO₂ and hydrogen. However, this is a long way from being a commercial option.
While renewable gas supplies remain limited, E.ON offers its gas customers the option of buying carbon offsets that support renewable infrastructure projects to reduce emissions in India, China and other developing countries. These reductions balance out the emissions generated by burning gas in the UK.
Renewable energy should only get cheaper
+ 11%
In 2020, renewable generation increased by 11% to a record 134.3 TWh
40.5%
Renewables’ share of total generation was 40.5% in 2020 Q4, higher than in quarters two and three but below the record achieved in Q1 (47.1%), when wind generation was unusually high with the effects of storms Ciara and Dennis.
For now, customers wanting to use renewable energy can still pay a premium over traditional sources. However, the price differential should reduce as more renewable power comes online, boosted by smart technologies and energy storage that help companies use energy more intelligently and efficiently. The last year has also seen REGO prices fall significantly, as the pandemic depressed demand.
"For many firms, the renewable energy premium is a price worth paying. This feels like the starting point of a long journey."
“Sourcing renewable electricity is a quick win on the road to becoming more sustainable and it can be combined with other measures to make your own operations more efficient.”
“Today’s consumers and employees want to be involved with companies that have a purpose. Switching to renewable energy helps companies reassure investors, suppliers and customers that they are playing their part in the Net Zero transition and to get ahead of the regulatory changes set to be introduced in coming years,” he adds.
Source - Department for Business, Energy & Industrial Strategy
Renewable electricity sourced from businesses’ own renewable generation assets can power:
- Mike Scott, E.ON
At the same time as switching to a low carbon power supply, you can also take steps to reduce the amount of energy you use in your operations.
While the increasing focus on cutting carbon emissions is the key driver for action, this has been reinforced by the lockdowns caused by the Covid-19 pandemic, says Richard Spencer, Head of Technical Services and Operations for energy solutions at E.ON. “People seem to be more energised now. There was a visible impact on air pollution during the Covid lockdowns. Now is a key time to make changes as businesses have gained valuable insight into different ways that they could operate.”
Again, the first step is to is to understand where your energy is being consumed, when and why, by carrying out an energy audit and understanding your data. This will enable you to work out if you are consuming energy only when you need it and whether there are better ways to reduce waste energy.
What can Net Zero deliver for your business?
Five things going Net Zero can do for your business
Improve profitability
Cost savings, process improvements, energy and carbon price mitigation - and new revenue streams
Increase sustainability
Supports the future direction and success of your business, and benefits your local community
Enhance your reputation and customer perception
Customers prefer environmentally responsible companies, and show it through their buying behaviour
Investment & innovation
Green investment is growing: funding will reduce CapEx demands, and focus your business on innovation
Security & resilience
Reduced reliance on the wider energy grid and associated risks of failures upon the business
For many businesses, there will be opportunities to make improvements that have an instant effect, says Richard Spencer. “It’s really important to gather good data. A lot of companies leave their lights on when no-one is in the building, for example, or manufacturers leave production lines running even if they’re not producing anything.”
“That can be optimised quite quickly by changing people’s behaviour, automating buildings and having alerts when machinery or devices are left on. There is often a culture of taking energy for granted because it is not a business’s biggest expense,” he adds.
It may be, with some older premises with poor insulation – e.g. single skin metal sheds, that the best thing to do is to knock the building down and construct a new, more efficient facility but equally, something as simple as replacing the windows with new high thermal efficiency products can make a dramatic difference to energy consumptions. Similar gains can be made just by ensuring your insulation is up to standard.
Business carbon output
1/3
The commercial and public sectors account for around a third of the UK's buildings-related emissions.
19%
Around 19% of all emissions in the UK come from heating our buildings, with nearly a quarter of this from commercial and public buildings.
Beyond quick fixes, there are a number of technology solutions that can help cut a company’s energy profile, ranging from LED lighting and more efficient heating through to sophisticated building energy management systems (BEMS), which monitor and control facilities such as ventilation, heating and air-conditioning to ensure buildings operate at maximum efficiency and minimum cost.
There are a number of areas for potential improvement with heating, ventilation and cooling (HVAC) systems – not just updating to more modern equipment, which is often significantly more efficient, but also exploring the possibility of capturing waste heat and reusing it.
"One of our customers had multiple sites and discovered during lockdown that boilers and lighting systems were left on, even though there was no-one in the buildings."
“You can automate almost everything,” Richard Spencer says, “but it’s amazing how many firms have building management systems that have never been maintained since the day they were installed. Yet they can make a real difference. One of our customers had multiple sites and discovered during lockdown that boilers and lighting systems were left on, even though there was no-one in the buildings.”
Rapid return on investment
The UK is already achieving a rapid return on sustainable power investment:
reduced emissions by 42%
grown its economy by 72%
Obviously, implementing energy efficiency measures will have a cost, but the payback periods are often extremely short – some measures can start providing a return in just six months, although for others, the return on investment can be a number of years. “The great thing about efficiency schemes,” says Richard Spencer, “is that many of the technologies are proven and well-established, meaning that companies can invest with a good idea of when the returns will kick in.”
And in future, new technologies promise even better results. These include a range of digital technologies such as artificial intelligence, big data techniques and the Internet of Things (IoT). This suite of tools can provide a much better understanding of your energy consumption patterns and how you can optimise them, or even make money from them if you combine them with battery storage. It can also enable you to provide a range of Grid Services such as Capacity and Balancing Market and Frequency Services.
Ensuring your renewable investment lasts
Most solar panel installations should last between 20 and 25 years and over with the right maintenance, and the initial cost can normally be off-set within the first 12-18 years – although there can be a lot of factors to consider
And while for many businesses – particularly those that are cash-rich – paying for efficiency measures up front will make sense, it is not the only option. Energy efficiency options often lend themselves to “as-a-service” models where you pay for the service that is provided – lighting, for example – rather than the actual hardware, lightbulbs in this case.
Choosing the right energy payment options
Not only can these services be provided on a “pay as you go” basis, they can also be part of energy performance contracts (EPCs), where the provider owns, installs and operates the equipment in return for a fixed payment and often guaranteed energy savings. This gives the provider an incentive to make the equipment as efficient as possible, and gives the customer an improved service.
When you are considering energy efficiency measures, it is great to have support from the board, but it will be the energy management, environmental management and sometimes procurement teams that will be most involved in the decisions, along with others such as building and facilities managers and heads of engineering. However, this is an area where everyone can get involved in suggesting where savings can be made.
While companies have been searching for energy efficiencies for decades, in this era of energy transition it is more important than ever to root energy saving programmes in a wider context such as a Net Zero roadmap, with rigorous KPIs so you can monitor and report on your progress.
12-18 years
20-25 years
solar panel Lifespan in years
Decarbonising your business
Source - The Renewable Energy Hub
Source - Gov.uk
Source - E.ON
- 42%
+ 72%
Once you have signed up for a renewable energy supply and maximised your energy efficiency, the next step is to look at generating your own clean renewable energy, something a growing number of companies are exploring.
It is a process that has become much more feasible in recent years, as the price of renewable energy has fallen and financiers, regulators and companies have become more comfortable with the idea of distributed generation.
Onsite clean power generation can use a number of different technologies, depending on the individual situation of your facilities. These include solar, wind, hydro-electric and biomass. The most common is solar panels, which can be easily installed utilising a modular approach, says E.ON product manager John Martin. “If you have spare roof space or land nearby, or even a car park with carports, they are easy to install. The business case for installing solar panels is really strong now because prices have come down so much and will continue to fall,” he says. “While the price of generated energy is not quite currently competitive with the grid, you get price certainty and avoid future price fluctuations.”
"If you have spare roof space or land nearby, or even a car park with carports, they are easy to install. The business case for installing solar panels is really strong now because prices have come down so much and will continue to fall."
Easy options
Energy solutions providers like E.ON offer packages where they design, install, operate and maintain the solar panels under a power purchase agreement, with the customer only paying for the power that they use.
Wind and hydro are both excellent options that offer relatively low-cost power, but they both require specific, location-dependent conditions and can involve substantial up-front capital expenditure. It can also take a long time to get planning permission, although the situation has improved recently as the government has become more amenable to onshore wind projects. Even so, firms wanting to build wind projects have to consider noise and visual impacts for neighbours, as well as understanding local wind conditions to establish whether installing turbines is a viable option.
"When wind projects are combined with battery installations, battery systems create the opportunity to store the excess power."
Likewise, hydro can be a great option if the location is right, but both wind and hydro projects are long-term investments – so companies need to be confident that they will remain on site for the next 10-15 years in order to obtain a return on their investment.
As prices have fallen, a growing number of companies are installing solar panels linked to battery storage systems that enable them to store power for use later in the day or to export to the grid. When wind projects are combined with battery installations, on the nights when power is generated by the turbines and demand is low, battery systems create the opportunity to store the excess power and use it during the following working day – or get paid to deliver an energy aggregation service to the network operator, such as reducing your demand at peak times. “It makes your site more efficient and supports the achievement of Net Zero strategies,” John Martin points out.
The heat is on
Pressure is also growing on businesses to decarbonise their heating and cooling, so many firms will be looking at installing heat pumps, which are much more energy efficient than gas heating or electric air conditioners – they use less electric energy than the heat energy they produce and they can also provide cooling in summer. Another bonus currently is that they can qualify for payments under the government’s Renewable Heat Incentive programme.
Some customers are taking a staged approach to onsite generation, he adds. “They install solar, then wind, then heat pumps. The technologies can integrate quite well. However, you have to think about the processes you have on the premises and how they will develop in future. It’s key to work with the onsite engineering team to optimise the system so it is as productive as possible today but also able to meet future energy requirements.”
Another option is to use biomass to provide heating, generate power or as a replacement for diesel back-up generators, but it is important to know where your biomass fuel is coming from and to have the right certification to prove that it is sustainable.
The need for action – and research
Hover to reveal
Current progress will not achieve a 2° (or less) increase
Human-influenced climate change impacts are being felt across the Earth
Greenhouse gas emissions continue to rise
Climate change protests in 139 countries
Investors taking action against companies
People saw a cleaner environment during lockdown
It pays to be thorough in your preparations for installing onsite energy solutions, John Martin points out. “As well as your own energy profile, you need to understand the costs associated with network reinforcements on your local energy network, what permitting and planning will be necessary and the optimal technology options. You need to research the market because the costs of technologies are falling all the time but different options have different capabilities.”
You also need to think about how you’re going to pay for it. Do you want to fund it out of cashflow or do you need to look at the finance options available?
One of the key challenges to getting your company to generate its own power is getting buy-in from senior management. “They often say it’s a good idea environmentally, but it’s too expensive,” John Martin says. “However, clean energy options are getting closer to economic parity all the time, and clean energy can give you greater certainty over your costs, allowing you to reduce risk and cut your emissions at the same time. The pressure to go Net Zero is only going to increase. It makes sense to start now when there is more carrot – than to have to do it later when there is more stick.”
Why businesses must act to decarbonise
Who is demanding action?
- John Martin, E.ON
The previous chapters deal with measures that can be implemented to kickstart the journey to becoming a low-carbon company. This final chapter looks at a more fundamental transformation of the energy system that brings together several different elements to create the infrastructure that can bring about a Net Zero future.
“It’s not just about energy efficiency, it’s about trying to cut every kWh that you can. The cheapest kWh is the one you don’t use,” says Michael Moggeridge, Senior Solutions Developer at E.ON. One technology with huge potential in this regard is heat pumps, which can provide both heating and cooling in the right conditions and can therefore help use up excess heat or cooling that would otherwise be wasted.
Linking different types of building with different demand profiles offers huge efficiencies. “Data centres are always throwing away heat, for example, while homes always want heat. The average data centre produces enough excess heat for 2,000 homes.”
A reactive network
E.ON has developed an system called ectogrid, which can help cities use energy more efficiently. It is named after ectothermic animals, which match their temperature to their surrounding environment. The technology, which is being trialled in Sweden, seeks to harness the fact that the human activity in modern cities generates enough thermal energy flows to heat and cool the entire city. “By connecting buildings with different needs and balancing the energy between them, ectogrid effectively uses all available energy flows and makes it possible to decrease both pollution and the energy consumption in a city,” the company says.
The building blocks of the ectogrid are heat pumps and distribution grids for electricity, heat, and gas. “On top of this is an ‘ectocloud’ – a layer of connected smart controls that bring it all to life,” Michael Moggeridge says. These smart controls help to match energy demand and supply between different parts of a facility or different users so that less energy leaves the system and is wasted. The system considers demand patterns for different times of day, days of the week, times of the year, weather conditions and a host of other variables. It aggregates huge amounts of data to provide a picture of how much energy – and what type – will be needed at any given time and react accordingly.
"Smart controls help to match energy demand and supply between different parts of a facility or different users so that less energy leaves the system and is wasted."
“It’s about collecting enough data to understand demand profiles and therefore how much energy will be needed,” he adds. “For example, if the system knows that a particular customer does not work on a Friday, it knows that they don’t need to charge their electric car that day. When you understand that at a macro level across thousands of customers, that level of intelligence provides a good service for the national grid. Grid operators like that predictability because it enables them to line up generating assets in advance.”
Connected cities
“If you have a smart energy system, you can have a battery storage system, solar PV and a heat pump, all integrated so that over time, you have cheaper, low-carbon energy. New heat infrastructure and smart controls go hand in hand. That’s where you get the maximum benefit.”
“Sites themselves can act as batteries, storing heat in the thermal mass of the building,” Michael Moggeridge points out. Using a combination of renewable technologies and smart controls instead of gas allows consumers much more control over their energy consumption, he adds. “They can choose to run their premises based on when energy is cheapest, or when it is low-carbon. And if they generate their own energy, they can choose whether to use it, sell it to the grid or store it for use later.”
"New heat infrastructure and smart controls go hand in hand. That’s where you get the maximum benefit. If you know where the demands are, you can shift usage to when demand is low and sell to the grid when demands (and prices) are higher. The key thing with a more electric, smarter energy system will be choice. Gas is a very 'dumb' fuel."
New skills required
The key to creating a smart, low-carbon energy system is to get installation right, Michael Moggeridge adds. “At the moment, about 10,000 heat pumps are installed a year in the UK. The aim is to get up to 600,000 a year – we’re basically looking at 100% growth a year by 2028.” While this is a challenge, the UK currently sees 1.4 million gas boilers installed every year, so there are a lot of people with most of the skills required.
growth a year
100%
600,000 heat pumps a year by 2028
There are a number of incentives available to help businesses install low-carbon technology, including the Renewable Heat Incentive and the Industrial Energy Transformation Fund and the Green Heat Networks Fund. “As the rollout expands, these pots of money are unlikely to get any bigger,” Michael Moggeridge points out. “Now is the time to make any changes, because there is money available to support you.”
- Michael Moggeridge, E.ON
