The number of businesses seeking to generate energy of their own, for profit or environmental motives, is on the increase – and with good reason

Ecological pressure groups want you to do it. Your financial director will probably not have a problem. And it will add power to your business, in more ways than one.

Organisations with large amounts of property, such as supermarket or petrol station chains, have long been enthusiasts for renewable energy installations, particularly photovoltaic (PV) arrays.

BP, which until recently was an important player itself in the PV market, has been routinely installing solar panels on its service stations worldwide since 1999 as part of its Clean Fuels, Clean Cities programme.

And as the price of PV and other renewable energy technologies has plummeted, and that of traditional power has risen, the level of corporate microgeneration activity has steadily increased.

In the US, for example, the home furnishings giant Ikea recently switched on the 15th of a planned 37 rooftop PV installations as part of a programme to generate 30.8MW across its stores nationally.

The installation, in College Park, Maryland, is a 1.2MW system comprising 4,984 panels provided by the renewable energy installer REC Solar. It is expected to cut carbon dioxide emissions by about 1,200 tonnes a year.

Ikea’s US renewable energy installations could jointly supply enough energy to power three cross-channel Eurostar locomotives – a graphic illustration of the likely impact on the company’s electricity bill.

Incentives

Until recently, however, the main incentive for corporate microgeneration has probably been mostly reputational rather than financial – whether or not some solar panels on the roof make a great deal of difference to a large company’s power costs, they do make for great PR.

That picture has changed in countries such as the UK, with the introduction of (what had been) generous feed-in tariffs (FITs) for renewable energy production as part of moves towards a decentralised grid infrastructure. This is combined with a parallel continual improvement in the efficiency and performance the PV panels.

“Governments have set up a whole bunch of incentives,” says Yoav Zingher, director and co-founder of KiWi Power, which works with industrial and commercial clients in the UK to shrink carbon footprints with no upfront cost.

The reason? Zingher says: “When we move power to where you use it, you reduce transmission losses, and that ends up being quite a big deal when it comes to talking about efficiency.”

He adds: “By using space in which you are already living or working in, you can really cut down the cost, so it does make sense for people to do it. It makes sense for government to promote it, especially as we de-carbonise the grid.”

And the incentives are attractive. Tesco in the UK, for example, has gone from putting solar panels on its own roofs to putting them on its customers’ roofs, too, with its Tesco Home Efficiency offering.

The company claims its customers can save £678 a year on electricity, and £129 on water heating, using its microgeneration kits.

Tariff cuts

But the problem with FITs, as renewable energy developers in the UK and other European countries have found out, is that governments are liable to cut back on them – particularly in times of fiscal hardship.

In Britain, FIT support for solar energy has been cut sharply in the past year. This means the business case for microgeneration is no longer clear, in terms of gaining FIT revenue at least.

Thomas Buss, head of microgeneration for the power company E.On, says: “This market right now is very much in flux as a result of regulatory instability.

“If you asked six months ago, the majority of market activity would have been around financial incentives [and] installing primarily PV. It made a lot of sense to be installing PV. Financially, the rates of return from making those investments were very significant.”

Now, he believes, the trend towards microgeneration responds “to what is maybe a more underlying set of motivations around either the carbon reduction commitments and about how they can manage buildings more efficiently”.

There is, he adds, “an even more underlying driver, which is really a desire for independence, or a desire for reduction in consumption [and] for social responsibility”.

This is certainly the case with major corporations such as SC Johnson, the global household goods business that is home to brands such as Pledge and Mr Muscle.

Cindy Drucker, director of global sustainability at SC Johnson, says: “Renewable energy is a key part of our holistic approach to sustainability, playing a vital role in helping the company achieve its 2011 sustainability goals.

“With co-generation, wind power and more, we have achieved a 25% absolute reduction in global greenhouse gas emissions. Currently, 40.2% of our electricity for our global operations comes from renewable sources.”

The company uses what Drucker calls “innovative renewable energy sources” worldwide.

Co-generation

These include co-generation at its largest global manufacturing facility in the US; a burner and boiler system in Indonesia that burns palm shells; and a company-owned, on-site wind turbine at its largest European manufacturing facility in the Netherlands.

The turbine alone produces about 5.5m kilowatt-hours of electricity a year, saving about 3,800 tonnes of carbon dioxide annually.

“We recently announced our 2016 goals, which include reducing our greenhouse gas emissions from our operations by another 6% and increasing our use of renewable energy to 44% of total electricity use worldwide,” Drucker adds.

SC Johnson is fairly characteristic of the business that have traditionally favoured microgeneration: large companies with a deeply ingrained sense of social and environmental responsibility.

The recent reductions in the cost of renewable energy technology, however, along with FITs, no matter how reduced, are now even starting to attract smaller companies to microgeneration, according to research last year by Opus Energy.

In a survey of 500 SMEs, the business-to-business energy supplier found that 38% were expecting to be generating their own renewable energy within five years, and 42% would switch to microgeneration if they could definitely make some money from it.

“A lot of it is driven by wanting to be greener and have a better environmental story,” says Opus’s director of risk management, Louise Boland. “But still there’s a financial incentive.”

One SME sector that has latched onto this incentive is the farming industry, she says, since it has land to put towards solar or wind developments, coupled with biomass potential and a low opportunity cost given the value of traditional crops.

Such businesses can make a decent living from microgeneration even with relatively low levels of government support, since the returns are more or less guaranteed.

E.On’s Buss says: “The way a lot of these subsidies work is that the benefits to a certain extent get locked in when the installation gets done. The risk is somewhat minimised from that perspective.”

And for many other businesses, large and small, the financial incentive is not so much what they can make as what they can save. “What is good for business is actually quite ethical,” Zingher says. “That’s the good thing about renewables.”