Committing to Renewables: Indian Corporates Riding the RE100 Initiative Wave

The energy transition from fossil fuels to renewables has been gaining significant traction over the past few years, with India emerging as a front runner in renewable energy deployment globally. The country has been actively introducing policy measures and attracting investments in this space. While central and state governments create regulations and strategies to drive renewable energy adoption, and utilities continue to be the bulk offtakers of renewable energy, Indian businesses are also playing a crucial role in this energy transition.

Indian corporates are taking significant measures to increase the share of green power in their energy mix, committing to assist in the transition to low-carbon energy systems. Commercial and industrial (C&I) consumers have high power demand due to their energy-intensive operations, and their decision to go green can significantly impact the country’s future energy mix, making it more sustainable and greener. Renewable energy has become more affordable for many C&I consumers than conventional power from utilities, especially with the declining solar power tariffs.

Environmentally conscious consumers and investors are increasingly opting for companies that prioritize cleaner and greener practices. Moreover, the current geopolitical climate, with concerns surrounding energy security, is prompting both corporates and nations to plan better and increasingly rely on renewables over fossil fuels. Some companies are installing on-premises rooftop solar systems or setting up bioenergy and solar thermal units, while others procure large volumes of renewable energy through open access and group captive routes. Many have announced targets for renewable energy procurement through the RE100 initiative.

The RE100 Initiative

RE100 is a global corporate renewable energy commitment that brings together hundreds of large and ambitious firms dedicated to using renewable energy as their only power source. This initiative, led by the Climate Group in partnership with CDP Global, aims to accelerate the transition to zero-carbon grids at scale. In 2022, RE100 members reported operations in 189 countries, and over 401 companies globally have pledged to make their operations 100% renewable.

Corporate power demand accounts for over half of the total electricity consumption in India and around the world. Businesses can thus become a significant market force driving the decarbonization of the power industry. The CDP database reveals a consistent increase in climate commitments and actions by Indian businesses.

The RE100 initiative can benefit businesses in several ways:

Cost Savings:?Over the long term, businesses can drastically lower their total energy costs. Renewable energy prices have steadily declined, and renewable electricity is now cheaper than fossil fuel power in some instances. Companies can lock in long-term energy pricing and decrease their exposure to volatile fossil fuel markets by committing to 100% renewable electricity.

Risk Mitigation: Businesses face enormous risks from climate change, including physical risks from extreme weather and regulatory risks from climate legislation. Using renewable electricity can help companies cut their greenhouse gas emissions and fight against climate change.

Innovation: Committing to 100% renewable electricity can drive innovation in clean energy technologies and infrastructure, contributing to the growth of a clean energy economy.

Enhanced Goodwill and Brand Image: By committing to 100% renewable electricity, companies can demonstrate their commitment to sustainability and environmental stewardship, attracting customers, investors, and other stakeholders.

The Indian Context

In 2019, 50 Indian companies reported their greenhouse gas emission reduction targets. Additionally, 23 companies reported their renewable energy targets, and 32 companies identified energy-related opportunities in their direct operations and supply chain, worth Rs 285 billion in low-carbon energy sources. As of April 2023, ten Indian-origin companies have joined the global RE100 initiative.

C&I firms in India consume around 53% of power, of which only 6% is met through direct acquisition of renewable energy. This includes traditional procurement methods such as open access and rooftop solar. However, operational and regulatory constraints, coupled with the intermittent nature of renewable power supply, prevent these methods from guaranteeing 100% renewable electricity supply. Renewable energy certificates (RECs) are often used as a compliance tool to help entities meet their renewable power obligations (RPOs).

A company’s target year for achieving RE100 is determined by its preferred method of attaining this goal. Some companies require renewable electricity through direct procurement methods, while others invest in emerging technologies and models. Despite the challenges, many Indian corporates are willing to switch to renewables but face limited bankable business models, lack of awareness, and bureaucratic hurdles.

To make 100% renewable energy procurement successful in India, a range of attractive options needs to be available, customized according to the energy profiles of different companies. Mechanisms such as RECs, although not preferred as they do not cover the physical supply of renewable energy, can still be useful in making consumers switch to renewables. Direct power purchase agreements (PPAs) are a favorable mechanism for C&I consumers, with India presenting fewer barriers to direct PPAs in Asia.

Corporate Commitments and Sectoral Impact

Businesses are not stepping back in their commitment to accelerate the transition to clean energy systems and meet their sustainability goals, especially in the power sector. Corporate electricity demand accounts for about 50% of total electricity consumption in India and globally, making businesses a major market force to drive decarbonization.

Globally, businesses are showing greater ambition in driving transformative changes for a clean energy system. Indian-headquartered companies like Infosys, Dalmia Cement, Mahindra Holidays & Resorts, and Tata Motors have voluntarily adopted 100% renewable electricity consumption targets by joining the RE100 initiative. Additionally, over 40 international RE100 companies have operations in India and are moving towards renewable energy.

Data disclosed through CDP shows a steady rise in climate commitments and actions by Indian businesses. In 2019, companies committed to RE100 grew by over a third, bringing the total count to 232 companies, with three in every four targeting 2030 to achieve 100% renewable electricity. Even in difficult economic times, businesses are stepping ahead on climate action, with companies like Coty, Refinitiv, and Mastercard joining RE100.

RE100 companies consume 236 TWh of electricity cumulatively, making them the 20th largest electricity consumer in the world if they were a country, approximately the size of Indonesia. Interestingly, 44% of new joiners to RE100 in 2019 came from the Asia Pacific, with Indian members like Infosys and Tata Motors sourcing considerable amounts of renewable energy.

Future Prospects and Recommendations

Renewable energy is the future and needs to be deployed across all sectors soon. Switching to green power offers multiple benefits for corporates, and there has been a visible increase in corporate procurement of renewable energy. Going forward, there needs to be adequate focus on creating simpler regulatory procedures to promote this growing market. Additionally, greater awareness among smaller companies about implementing modern technologies in this space is crucial. So far, ten Indian companies have signed the pact to join the RE100 initiative, and more are expected to join in the coming months, contributing to the fight against climate change.

India is committed to having a national grid with 40% installed electric capacity from non-fossil fuels by 2030, under the Paris Agreement. As of March 2020, the country already had 24% (87GW) of renewable energy installed capacity, excluding large hydro projects. Businesses are making strong commitments to help transition to low-carbon energy systems, setting the strategic direction and preparedness of power systems that can challenge future crises.

In conclusion, the commitment of Indian corporates to the RE100 initiative reflects a significant step towards a sustainable future, demonstrating the potential for businesses to drive the decarbonization of the power sector and contribute to global climate goals.

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