Global demand for energy is increasing every year, so is the demand for fossil fuel. As the demand increases due to increase in population size, there is a possibility that we humans may end up using all of it in another century or so. The alarming rate at which we are consuming fossil fuel is contributing to global warming. To make sure that global warming stays in control, United Nation Framework Climate Change Conference, COP 21 (Conference of Parties) had proposed to limit the temperature increase to 1.5-degree centigrade. As of 16th November 2017, 195 parties signed the agreement and 170 parties ratified it. All the parties to COP 21 have increased their contribution towards renewable energy such as solar energy wind energy, Small hydro plant, etc. There is a possibility that renewable energy may replace conventional sources of energy. The question is how soon the change will happen given the many different variables involved. Chief of them is the rate at which renewable energy grows and the rate at which global energy demand rises. If one year demand can be met by renewable energy sources then we will be able to say that renewable energy is at parity with conventional sources of energy. According to a study in the University of Oxford in 2007 if the percentage of renewable energy grows at 5 % per year and global energy demand grows at .5% every year then we may reach the tipping point in 2033 and if global energy demand grows at 2% every year the tipping point will occur in 2118. A one MWh solar power plant working at plant load factor of 21% and whose annual electricity generation estimate would be 1840 MWh can replace 979 Ton of coal and save 1783 ton of co2 emissions. The international energy agency says that renewable energy may replace conventional energy in half a century.
Production of renewable energy has boomed in recent years. Driven by improvement to solar and wind turbine, increased economies of scale and government subsidies. Because of such benefits and changes per unit cost of renewable energy is almost equivalent to power produced by conventional sources. According to a report by Lazard, the unsubsidized price of energy has already reached parity in some market and area of the United States.
In India, according to MNRE the lowest cost of renewable electricity that has been generated is at Rs2.44 per unit for wind and solar. Whereas according to NTPC lowest cost of generation of coal-powered energy is at Rs1.65. Cost of renewable energy production has almost reached the cost of conventional energy production however, cost factor is not the final deciding parameter. To say that renewable energy is at parity with the conventional source of energy, RE sector needs to overcome some of the challenges such as
The special benefits and significant incentives schemes (Tax benefits, double depreciation, research and development incentives etc).
Affordable/ Cheap storage facility
Unreliable Base-Load power generation from RE sources (base load refers to a power plant that offers electricity 24*7)
As the efficiency of RE is increasing due to incentives that are given in R&D and the push due to COP 21 there is a chance that the cost to set up an RE power plant and payback period will reduce. As stated above grid efficiency is one of the challenges. IEA (International Energy Agency) states that existing grid can accommodate up to 10% renewable sources for free. Operators will not have to modify the control to take full advantage of the new capacity, however, post 10% the grid needs to be intelligently re-optimized to build such a grid in developed nations is a challenge. Solution to this problem is “Smart Grid”.
Another major drawback for RE generator is to provide baseload power. Geothermal and hydropower plants are already being used for baseload power in some area of the United States. This depends on specific geological features that are not available across the countries. A solar thermal power plant is capable of providing baseload power however it still needs further development as it has a scaling issue. Usually, other sources of renewable energy like solar power generation from PV cells and wind energy has their own issues of uncertainty as solar power depends on the availability of sun and totally depends on weather conditions. Wind power depends on the availability of wind in an area. At times the power produced from such sources is more than the required quantity and if there is no storage facility then the generated power is lost/Wasted. To store power is one solution. Power storage can be done in many ways.
Few of them are
Compressed air energy storage.
Flywheel energy storage
Pumped- storage (hydro electricity )
Superconducting magnetic energy storage
Molten salt storage
Many of these techniques are still being developed for better efficiency and once the proper technology for storage of extra power is generated at a low cost of installation of such technology the chance of renewable power to provide electricity 24*7 will be more accepted.
Once the above issues will be addressed only then can the renewable sector come at parity with conventional sources of energy.
The blog is prepared by Mr. Niraj Raj, (student, MBA in Sustainability Management specializing in Operations at Xavier University Bhubaneshwar) during his internship at RSM GC. His profile https://www.linkedin.com/in/niraj-raj-7ba21411a
RSM GC is delighted to share results of RSM GC SURVEY 2016
‘Climate Changes – Business in India Responds’
The survey is based on research conducted at RSM GC involving analysis of about 100 sustainability reports (FY 2014-15) and other related public disclosures from Indian companies.
Please download report at link below.
The results were also discussed by our CEO, Dr. Ram Babu on a webinar held on June 15, 2016 at 3.00 pm. The recording of same can be seen at link below
Contact us for any queries and suggestions.
India’s climate pledge to the UNFCCC – a summary
– Pravin Jadhav, AVP, RSM GC
India has submitted its Intended Nationally Determined Contributions (INDCs) to the United Nations Framework Convention on Climate Change (UNFCCC) on 2 October 2015. These INDCs from all the member countries will form basis of the climate change agreement to be negotiated in the COP 21 meeting at Paris in Nov-Dec 2015.
India’s INDC is generally well accepted by environment groups and analysts and can be summarised as follows:
Source: Business Standard news
Reduction of carbon emissions intensity by 30-35% below 2005 levels by 2030 Effect: India will avoid 3.59 bn tonnes of CO2 equivalent emissions over business as usual2. To get around 40 % of the installed power capacity from non-fossil fuel-based energy sources by 2030. Currently, it is around 30% Effect: 175 GW of renewable power capacity by 2022 and 300 – 350 GW by 2030. A 33% jump in non-fossil fuel sources in 15 years.
3. Creation of total carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030 Effect: Addition of 680-817 million tonnes of carbon sink
4. Mobilisation of additional funds, both domestic and from developed countries, to implement adaptation and mitigation goals Effect: $2.5 trillion required for INDC implementation at 2014-2015 prices
Analysis and photo credit – Economic Times
The planned emission intensity reduction is targeted by massive renewable energy capacity addition, equivalent to 40% of total power generation installed capacity (credit – Economic Times).
In an interesting analysis, the Carbon Brief has reported 90% GHG emission increase even with this emission intensity reduction. This is due to the fact that, Indian economy will continue to grow and increasing industrialisation and power demand for providing even basic electricity lacked in many parts will add substantial GHG emissions
The same report also summarise major economies’ emission pledges.
A useful summary of nearly all INDC’s targets and commitments can be found at Climate Change News.
Developments related to international carbon markets
An analysis by Carbon Pulse, ‘Poorer nations face let-down as INDCs lack carbon market buyers’ indicates that even though 146 countries covering 87% of global emissions had submitted INDCs by 1 October 2015 and “at least 70 countries that are seeking to use, or considering using, market-based mechanisms”, there is uncertainty on whether all desired sellers from developing countries will find buyers for the carbon credits generated. This concern is further aggravated by carbon markets references being largely left out from the 20 page negotiators text for the Paris climate agreement. However, the analysts also have a positive view on the carbon markets being part of the Paris agreement due the fact that there is an estimated 2 billion ton CO2 market demand globally during 2021-2030. Thus, carbon markets can always rely on established market mechanisms like CDM to meet the developed countries’ demand for the cost effective emission reduction pledge.
The general trend with the companies across the world is that they focus climate change as the most important issue to address in their sustainability strategy. However climate change is one among the issues along with other environmental impacts such as emissions from power plants and transportation, water scarcity which threatens the food production system, water and soil pollution.
In recent times companies have started to progressively integrate wide range of issues such as water crisis, biodiversity, deforestation and land use change due to increased pressure from stakeholders, NGOs and as a part of CSR strategy of the companies. Water crisis in particular has gained momentum and tops the World Economic Forum’s Global Risk report. Water, the resource has now started to attract the much needed attention due to wider media coverage and events such as droughts have brought in awareness among the companies and communities at large. Water use stands out be an immediate environmental risk and businesses should shift their short term focus on water use while implementing climate change impact reduction plans for the long term.
Alongside climate change companies have started to explore how to quantify their impact on water resources via; water footprint. Many companies have developed a plan to address the water related issues by incorporating it in their sustainability strategy next to climate change. Climate and water issues both provide big opportunity for businesses to shift strategies towards achieving sustainability goals and reaching the triple bottom line.
With this background, the questions that arise include: Between water use and climate change which is an immediate environmental risk? When making a decision on where to invest your environmental assets, where should businesses concentrate their efforts — on climate change or on water? The answer to these questions is being explained from a case study of Steelcase. Steelcase is a the global leader in office furniture which uses wide range of materials linked to a complex supply chain with worldwide customers and recognized for producing Environmental Product Declarations (EPDs) for a large range of products. Steelcase here has come out with an innovative approach by using the latest developments in Life Cycle Assessment methodology.
Life Cycle Assessment (LCA)
LCA aims at measuring the environmental impact along the life cycle of products and companies, from raw materials, including the entire supply chain, as well as direct operations and production plants, distribution, use and end of life stages. LCA covers more than fifteen environmental issues with specific metrics to quantify their impact. These environmental impacts are linked to what we aim to protect – human health, ecosystem, climate and resources. Climate change is often considered separately from human health, ecosystem quality and resources although it has a definite impact on human health, ecosystems and resources. Here a comparison can be drawn on impact of climate change on human health and ecosystems, with potential impact arising from water related issues.
Water use is a relatively new issue within LCA and sustainability although it has been considered as basic performance indicator in plant operations in earlier times. With the advent of new development and ISO 14046 standard addressing water footprint, it is now possible to measure the environmental impact on human health and ecosystems using water. Steelcase lounge-seating product “B-free” was used as the case study, because different component materials — wool, metals, plastics — provided a good example of an industrial product. Steelcase focused on climate change and water use related indicators although other additional environmental indicators were also considered for calculation. Results indicated that climate change remains the main priority for Steelcase as compared to water use. They assessed minimum and maximum scenario for water use impacts by selecting extreme locations where ecosystems and human health might be strongly affected by water use. However in the case of Steelcase extreme scenario is quite unlikely considering their own production and supplier locations. Most of the water used in the world (>70%) is linked to agricultural production and Steelcase products are not based on agriculture apart from wool and wood which does not require high water use rates. Wool is an agriculture derived product and wood is also processed and dyed using water, so these contributions are accounted as a part of water use related indicator.
Importance of Water Use Compared to Climate in Time Perspective Scenario
Water used during production, at 0 year reflects the dominant impact for the first 2-10 years. From 10 -100+ years climate change has a greater impact than water use because the green house gases emitted at 0 year progresses heating up the atmosphere over the years.
Sensitivity to Material Choices
The influence of the choice of the textile material as the base scenario of the products was assessed with wool coming from New Zealand. Polyester, virgin as well as recycled as well different origin of wool from USA was assessed. Results showed that material types do influence significantly both indicators; however climate change dominated the results.
Water Footprint Methodologies
Water footprint methodologies are still evolving and in early stages of development, Steelcase explored sensitivity analysis and different water use impact assessment methods and observed that results are not altered by the choice of method.
Other Environmental Issues
The advantage of LCA methodology is that it can compare not only climate change and water use, but also other relevant environmental issues. These issues are assessed for human health and ecosystems. In the context of ecosystem impact in Steelcase case land use showed greater importance than climate change in long term as wool and wood contributes significantly to land use indicator. Depending upon the environmental issue relevance to human health and ecosystems differs, example: particulate matter emissions are more relevant to human health than ecosystem quality, contrary eutrophication; acidification and land use are more relevant to ecosystem quality.
Insights of the Steelcase Case Study
The results of Steelcase case study shows that most of the environmental impacts occur in supply chain, production and transformation of materials used for the furniture. Steelcase operations have limited contribution to overall environmental impact. The LCA approach allowed them to breakdown the product’s environmental impact per life cycle stage. LCA plays an essential role in managing company’s environmental impact by progressing as a key sustainability metrics. Though water related issues has emerged as a top sustainability agenda in recent times by many companies however in some cases the issues are driven by stakeholders concerns rather than based on concrete environmental impact bench mark.
Based on the findings of the case study four essential concepts to consider for a successful sustainability strategy includes:
Consider how environmental impact happens over time
Use LCA metrics to prioritize and complement your materiality assessment.
Plan to include other environmental issues.
Consider water pollution as being a much more important issue than water use.
– RSM GC, Mumbai
Climate change is a reality
The Intergovernmental Panel on Climate Change (IPCC) is the leading international body for the assessment of climate change. It was established by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988 to provide the world with a clear scientific view on the current state of knowledge in climate change and its potential environmental and socio-economic impacts. It reviews and assesses the most recent scientific, technical and socio-economic information produced worldwide relevant to the understanding of climate change. Thousands of scientists from all over the world contribute to the work of the IPCC on a voluntary basis.
IPCC released its latest report ‘Climate Change 2014: Impacts, Adaptation, and Vulnerability’ in March 2014. The report starts with restating the conclusion from its earlier editions ‘Human interference with the climate system is occurring and climate change poses risks for human and natural systems’.
The observed impacts of climate change include
changing precipitation or melting snow and ice are altering hydrological systems, affecting water resources
impact on many terrestrial, freshwater, and marine species
reduced yields on of crops across regions
impact on human health – increased deaths due to heat; local changes in temperature and rainfall have altered the distribution of some water-borne illnesses and disease vectors
increase in the frequency and severity of climate-related extremes, such as heat waves, droughts, floods, cyclones, and wildfires
Climate-related hazards affect lives of most vulnerable people directly through impacts on livelihoods, reductions in crop yields, or destruction of homes and indirectly through, for example, increased food prices and food insecurity
Possible large scale violent conflicts due to large scale displacements/ relocation etc. for access to infrastructure, institutions, natural resources, social capital, and livelihood opportunities.
India’s response to climate change
Indian Government acknowledges climate change as global challenge and has formed a ‘Climate Change Division’ in The Ministry of Environment, Forests and Climate Change to deal with this issue. Also, in 2008, Dr. Manmohan Singh (then Prime Minister) released ‘India’s National Action Plan on Climate Change’. Through this, India has identified specific sectors for the GHG emission mitigation. In 2014, the ‘Expert Group on Low Carbon Strategies for Inclusive Growth’ under the Planning Commission has also published pathway to reduce the emission intensity of country’s GDP by 20 to 25 percent, over 2005 levels, by 2020.
Further, India has started many policies and programs to reduce the GHG emissions including renewable energy promotion, energy efficiency rating and market mechanism scheme like PAT for energy intensive sectors such as Thermal Power plants, Iron & Steel, Cement, Fertilizer, Aluminum, Textile, Pulp & Paper, Chlor-alkali. Many Indian companies have also started voluntary GHG emission reduction plans under corporate pledges to CDP and India GHG Program.
The link between greenhouse emissions and global warming is scientifically established. The global warming contributes to and accelerates, aggravates the climate change impacts. Thus, as responsible businesses, it is desirable to monitor and take efforts to reduce the GHG emissions from business operations.
Ministry of Corporate Affairs, Government of India has notified the “National Voluntary Guidelines for Business Responsibility” and expects the businesses to follow these guidelines. National Voluntary Guidelines (NVG) for Business Responsibility are based on nine principles covering Business ethics, Product responsibility, Well being of employees, Stakeholder engagement, Human rights, Environment, Public policy, Inclusive development and Customer relations.
Keeping with the NVGs, demands of transparency and accountability of business by the investor community in general and calls by UN Principles for Responsible Investment and Rio+20, Securities and Exchange Board of India (SEBI) has amended the listing agreement and made Business Responsibility practice and disclosure mandatory for top 100 companies listed on the security exchanges. Business Responsibility Reporting is applicable to all types of companies including manufacturing, services etc.
A survey published in 2012 concluded that 64% of the top affected companies were not prepared to submit their reports in line with the requirements of this SEBI circular. The survey further analysed reporting by companies on their climate change initiatives (a principle 6 requirement as per NVG guidelines). Only 36% of affected companies had disclosed their baseline carbon footprint and 20% of the companies had stated their carbon emission reduction targets. Non compliance with such regulatory requirements can affect business adversely.
The international community is negotiating an international climate change agreement for post 2020 world. Here, developing countries including India are under pressure from developed countries to take active role and reduce their GHG emissions. Some of the international experts believe that developed countries will have to take emission reduction targets in some or other form under this deal.
The emission reduction targets / plans of any country will percolate to individual emission intensive industries and those businesses with capacity (financial or otherwise). Thus, businesses that start early with the GHG emission measurement and identifying pathways to move ahead in the carbon constrained economies will be at an advantage.
The likely impacts of carbon constrained economy (in case of carbon tax or voluntary GHG emission reduction plans are taken by Governments), on businesses include
Emission intensive fuels like coal, oil will go up and future energy mix will favour cleaner and renewable fuels
Transportation modes will be regulated and choice of modes will shift to greener and sustainable ones
Impact of potential national / international carbon tax and emission trading plans on production and export
This, in turn, will affect the business advantages and costs significantly. Also, if the predicted impacts of climate change come into reality in future, it will also affect businesses including
increase in the energy cost (fuel and electricity)
access to and cost of some raw materials
potential physical impacts on operation (manufacturing plant/s, raw material suppliers and export infrastructure like port)
availability of water for process / plant operations
as impacts of climate change increase, the demand for some products will increase (e.g. those related to adaptation, micro irrigation, climate control, renewable and hybrid energy generation, storage etc.). Similarly, with increasing global temperature, demand for some products may decrease e.g. infrastructure projects in low lying coastal areas
Thus, businesses will have to prepare in advance for regulations addressing mitigation and adaptation preparedness (including accessing international funds available for mitigation and adaptation).
Increasing stakeholder awareness and pressure from NGOs
There is increasing awareness among the stakeholders and company shareholders about climate change. The consumers demand green, environment friendly products. The rise of electric and hybrid cars; demand for environmentally / socially certified products from local / sustainable sourcing are a testimony of this fact. From 2010, Walmart requires all its suppliers to measure their carbon footprint and publish / communicate that to Carbon Disclosure Project (CDP). About 30 companies including L’Oréal, Sodexo and Unilever have committed, through CDP, to set emissions reduction targets. Many companies have started encouraging internal carbon pricing / trading to prepare for future regulated carbon tax. Some pension funds are divesting from fossil fuel based projects due to uncertainty over their operations in carbon constrained world. This trend will continue with increasing media coverage on products and environmental education in colleges.
Similar trend is observed in the shareholders and major lenders preferring sustainable product lines. The likely impact of carbon taxes in developed countries is already included in the project appraisals. Few examples of such cases are recent campaigns against lending to coal mines in Australia and international funding to coal based supercritical power plants in India, China.