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Location Matters to Your Carbon Goals

More than 40 percent of Fortune Global 500 companies have either announced their intention to reach net-zero emissions by 2030 or have already achieved it, according to Forbes. As businesses navigate the complex array of alternative approaches, they need their location strategy to be aligned with their net-zero strategy.

Virtually all companies, regardless of location, are being pushed to join the renewable energy movement, whether through consumer expectations, employee/stakeholder pressure, direct regulation (particularly in the European Union), indirect regulation by virtue of a threshold presence in a regulated market, or value-chain mandates from customers who themselves are pursuing net-zero.

Companies like Airbus Group, PepsiCo Inc., American Airlines Group Inc., Caterpillar Inc., Canadian Natural Resources Ltd., and Siemens AG are adopting strategic solutions that include carbon-offsetting initiatives, reducing emissions, minimizing transportation’s carbon footprint, collaborating with supply chain partners, and using renewable power sources.

In our work advising companies on location strategy and site selection, we have witnessed a dramatic increase in clients prioritizing location-based variables that affect a company’s ability to achieve net-zero targets, particularly regarding renewable energy options. Each company has its own unique targets, definitions, and priorities and the site selection process must be designed to identify locations well-positioned to help the company meet its objectives.

What renewable energy options are available, and how can they integrate into the site selection process? The answer largely depends on your current location or the prospective expansion area.

A Dynamic U.S. Environment for Renewables

In December 2021, the Biden Administration set a target for federal operations to achieve net-zero emissions by 2050, a goal many American corporations are also embracing, with some even aiming to surpass it. In the U.S., companies are pursuing their renewable energy goals through a variety of on-site generation, off-site generation, power purchase agreements, and renewable energy credits.

This activity has been further fueled by the U.S. Inflation Reduction Act (IRA), which has generated a surge in investment by creating federal funding opportunities for a range of clean energy initiatives, including new and expanded tax credits and grant programs, fuel tax credits, carbon management credits, energy innovation, and more.

The pace of activity has, however, led to challenges with capacity on the electric grid, with utilities struggling to absorb the new generation sources. This has been compounded by the rapid expansion of manufacturing industries in the U.S., leading to multi-year wait times when new interconnections are required.

The push for renewable energy has transformed the role of U.S. power providers from vendor to key strategic partner. U.S. utility providers range in size from small publicly held municipal providers to large investor-owned, multi-state providers, and regulatory structures are not uniform across the states, which means each utility partner is unique in its renewable offerings and capabilities. Finding the right site means finding the right utility partner.

Breaking Down Europe’s Priorities

The European Union (EU) also aims to achieve carbon neutrality by 2050, with an intermediate target of reducing net greenhouse gas emissions by at least 55 percent by 2030. Each of the EU’s 27 member states has committed to its own emissions reduction targets by 2030, ranging from a 10 percent reduction in Bulgaria to a 50 percent reduction in Germany, Sweden, Finland, and Luxembourg.

One of the primary initiatives for achieving these goals is the EU Emissions Trading System (EU ETS), which allows large carbon emitters (including energy-intensive industries) to purchase carbon credits. As a “cap and trade” mechanism, the ETS establishes a cap on how much CO2 can be emitted annually. Companies then must buy or trade allowances for every ton of CO2 they emit.

The ETS is designed to encourage companies to adopt renewable energy since purchasing allowances for carbon emissions from fossil fuels costs more than purchasing renewable energy. Recent reforms are raising the price of CO2 allowances, which is expected to further spur demand for renewables. In 2023, the EU introduced an ambitious goal of increasing the share of renewables in energy consumption to 42.5 percent by 2030 (compared to 22 percent in 2021).

The combination of stringent regulations and steeply rising energy prices in Europe — not to mention the shock of the war in Ukraine — has resulted in calls for action. In response, efforts are being made to reduce the bureaucracy holding back investment in renewables. Further, the EU allows governments to compensate companies in specific industries for high energy costs, and several governments have implemented programs.

For example, Italy introduced a tax credit to “energy-intensive” companies, which was increased from 25 percent to 40 percent of expenditures for energy purchased and used at the end of 2022. Spain and Portugal have introduced several packages designed to subsidize the energy consumption of certain sectors. Germany launched a new “climate and transformation fund” in August 2023, which includes €2.6 billion to compensate companies for high energy costs between 2024 and 2027. These incentives and a careful analysis of utility price differentials among potential sites are valuable in site selection decisions.

Asia’s Renewables Integrations Lead to Higher Environmental Sustainability ConsiderationsSimilar to what’s occurring in other parts of the world, an increasing number of companies operating in Asia are either including environmental sustainability in their initial site selection decisions or restructuring current investments to make them more sustainable.

Asia’s integration of renewables and country commitments for net-zero emissions varies throughout the region. This poses diverse scenarios for location strategy and site selection for multinational corporations with operations and expansion initiatives across Asia and how to address energy needs while reaching internal sustainability goals. From the two mammoth economies and populations of China and India to the more developed countries of Japan, South Korea, and Taiwan and the divergent economies across ASEAN, it’s a complex environment.

That said, the trend toward adopting renewable energy is well established, and companies are pursuing a wide range of strategies to meet their environmental objectives.

Key Takeaways for Site Selection Projects

Confirm Timelines: No matter the location, as energy demand continues to rise, meeting the needs of regions and companies will depend on continued advancements in grid infrastructure. Backlogs of key infrastructure components have been common in recent years, but so have delays in the required engineering studies and approvals, significantly delaying project timelines.

Articulate Expectations and Priorities Around Renewables: Articulating a company’s renewable energy and net-zero expectations early in the site selection process allows for the broadest range of strategies possible while ensuring efficient dismissal of locations that don’t align well. Establishing an evaluation/selection process that captures the trade-offs between price (net of incentives), reliability, and suitability is equally important.

Timothy R. Comerford

Senior Vice President

Tim Comerford leads a specially-designed interdisciplinary practice focused on assisting companies, developers, municipalities, and real estate advisors with issues that pertain to energy procurement, renewable installation, infrastructure assessments, and utility relocation, with a special focus on mission-critical facilities.

Tracey Hyatt Bosman, CEcD

Managing Director

Tracey Hyatt Bosman develops and executes incentives and location selection strategies for BLS & Co.'s corporate and institutional clients. She is a certified economic developer with twenty years of professional experience across a wide range of sectors, including data centers, manufacturing, headquarters, back office and contact center operations, and logistics.

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