The way towards a renewable future

By David Frans, Vatche Kourkejian, Yvonne Ruf, Hani Tohme and Daria Koroleva

All companies rely on energy to run their operations. And almost all countries have pledged to become climate neutral and ramp up renewable energy capacity. However, progress in this endeavor is coming more slowly than needed. Learn how companies can overcome the faltering progress of governments and secure reliable access to renewable energy on their own.

Global renewable energy (RE) production must soar to more than 27,700 gigawatts (GW) in 2050 from over 2,500 GW currently to limit global warming to 1.5 °C. Yet demand for electricity is on the rise as the world’s population continues to grow and more and more countries advance into the digital age. Moreover, even just switching to the technologies needed to move toward a net zero economy – such as the electrification of industrial processes, heating systems and mobility/transportation – is expected to drive a further 27% increase in electricity demand between 2020 and 2030.

Be that as it may, RE expansion is not proceeding as fast as it should, for several reasons. First, resources are unevenly distributed, because solar and wind energy potential vary between countries and regions. Second, time is a challenge, particularly concerning the long lead times of renewable energy projects. Third, existing market structures do not necessarily leave room for enough deployment of RE. Having the opportunity to choose the energy source is a key lever to decarbonize corporate operations. In some countries and regions, however, companies’ choice of energy supplier is subject to constraints. The next two United Nations Climate Change Conferences, COP27 and COP28, will be held in Africa and the Middle East respectively. Both regions potentially harbor vast amounts of RE, especially for Europe. This article therefore explores how these regions can contribute to RE development, who can be the front runners, and what political and corporate challenges must be overcome to expand RE.

Political and economic requirements for successful clean-tech expansion

Africa and the Middle East constitute largely heterogenous landscapes in terms of their green energy potential. Most of the countries with the highest solar and wind energy potential and the largest available area are in northern Africa or the Middle East, although a few sub-Saharan countries such as Mauritania, Namibia, Niger, South Africa and Sudan also belong in this category. That said, RE expansion in Africa and the Middle East does not come without certain challenges.

In many regions – especially remote regions where RE capacity is highest – the existing grid infrastructure is inadequate. Additionally, political uncertainty, a lack of governmental commitment to RE projects, and slow land acquisition and permit processes often hamper the expansion of RE. Also, in some countries subsidies for oil and gas consumption create additional constraints. Lastly, large RE projects require a vast amount of financial resources.

There has been some recent progress in this context, however, with Namibia announcing an estimated USD 9.4 billion green hydrogen project which includes large solar and wind power investments and is scheduled to go into production in 2026. Similarly, USD 8.5 billion was promised at COP26 to support South Africa’s low-emission development path. Kenya, Morocco and various countries in the Middle East are likewise putting forward plans to ramp up renewable energy production, partly to produce green hydrogen. In the Kingdom of Saudi Arabia, the Saudi Power Procurement Company recently announced five new renewable electricity projects with a total capacity of 3.3 GW. In line with Saudi plans for a net zero economy by 2050, the government has announced its intent to invest USD 100 billion in RE projects.

Though the challenges in Europe are different, large-scale access to RE remains problematic here too. Renewable energy’s share of the overall energy mix remains at about 20%, causing fierce competition to secure access to RE. To make matters worse, cumbersome approval procedures, long project cycles, limited grid infrastructure, and a steady decline in the availability of prime sites for investment projects further hinder the expansion of RE in Europe. Just recently, 1,320 megawatts of onshore wind were put out to tender in Germany. However, a total of only 87 projects with 772 megawatts were submitted. Although all of these can now be realized, they only account for just under 60 percent of the volume put out to tender, underlining that high raw material prices, long project cycles and approval processes hinder wind energy expansion in particular. Unsurprisingly, in a letter to Commission President Ursula von der Leyen the WindEurope CEO and the CEOs of five large European wind turbine manufacturers outline that, although that expansion of wind energy in Europe is high, lengthy permitting processes limit the demand for wind turbines resulting in strong price competition and factory closures.

How can companies be enablers for renewable energy?

An unprecedented mobilization of industry players and massive investments in the trillions per year are needed to ramp up RE capacity. Based on an estimate produced by the International Renewable Energy Agency, RE capacity must be quadrupled until 2030 compared to current levels to ensure compliance with a 1.5 °C trajectory.

Every company can and must play its part in making the 1.5 °C goal possible. First and foremost, companies need to critically examine their energy supply, consumption and procurement arrangements and identify cost-effective solutions to effectively reduce their energy consumption. Wherever possible, they should switch to RE-based suppliers.

Next, companies should examine whether they have the opportunity to establish their own RE facilities. On the roofs of most office buildings, production facilities and warehouses, there should be room for well-aligned photovoltaic or solar thermal systems. Also, some companies might have access to extensive areas where wind turbines can be installed. Further, in some cases suitable applications for biogas plants and/or combined heat and power plants might be possible. In light of the current high energy prices, setting up own RE facilities presents a valuable business case and helps companies to substantially save on energy costs. Moreover, setting up own RE facilities helps to become more energy autarchic, making companies more resilient to future energy supply disruptions.

It is often a good idea to tackle these issues with other companies and examine how joint solutions can be found. Alliances between companies, governments, associations and other stakeholders are viable ways of securing access to RE – for example, with investments in African green hydrogen projects, through alliances set up at COP27, or in the form of virtual RE power plants. To find out more about how to implement a sustainability strategy, read our article about “ Mounting pressures, emerging opportunities: Unleash the potential of climate action in your business strategy – now ”. Alternatively, go to our solutions page to discover how we can support your company in securing access to RE energy and developing a future-proof energy strategy.

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