SAP’s shift to 100% renewable power will help the firm reduce its carbon footprint as it makes the transition to a cloud business model. It will also help to eliminate carbon emissions caused by its customers’ systems by moving them into a green cloud.
The software maker joins other large corporations like Google, Apple and Walmart, in setting a 100% renewable energy goal.
In our article Big Name Data Centers and Project Could Instigate Change in the EU, we discuss why renewable energy is an obvious solution for data centres.
Data centres to blame for rising carbon emissions
This news was included in the recently released 2013 SAP Integrated Report, which noted that the company’s overall energy efficiency remained steady while greenhouse gas emissions increased from 30.0 grams CO2 per euro of total revenue in 2012 to 32.4 grams CO2 per euro in 2013.
At the same time, absolute carbon emissions increased by 12% in 2013. As customers increasingly leverage SAP software in the cloud, systems that previously ran at customers’ sites are increasingly running in SAP data centres and are now contributing to SAP’s total emissions.
“Committing to 100% renewable electricity in our data centres and facilities is a natural consequence of our business model shift into the cloud,” says Peter Graf, chief sustainability officer, SAP. He continues, “By delivering our industry-leading cloud solutions in an environmentally friendly fashion, we expand our competitiveness in the cloud software market while further enhancing our sustainability leadership.”
The company plans to buy renewable energy credits to achieve this goal which is arguably the easiest and cheapest way to do it. This isn't the first time SAP has bought credits: it has been doing so since 2009, when it announced a plan to lower its carbon footprint to the 2000 levels by 2020.
Strategies to gain a clean power profile
Buying credits is one way of boosting a company’s clean power profile. Other strategies include signing power purchase agreements and installing renewables onsite.
When a company buys renewable energy credits, it is merely buying a project's green attributes instead of the actual energy. However, the purchase helps support the project financially, and is cheaper than power purchase agreements and onsite renewables installations. However, the quality of projects can vary and often, these credits generally don't reduce the fossil-fuel power the company is consuming.
With power purchase agreements, companies, like Google, buy power from the owner of a renewable-energy project. The power is either delivered directly to companies' facilities or it is most likely to be injected into the local thereby increasing the level of clean electricity in the power supply. By buying clean power directly, a company can be sure that it is helping to displace fossil fuels with renewable energy in its local grid. This strategy also helps to further develop –local clean energy projects. A power purchase agreement runs for around 20 years on average. This calls for increased commitment and finance from the buyer.
Onsite renewable energy generation can be costly and it takes time to set up, depending on the project’s size. Companies are forced to secure permits and financing, and they have to oversee the completion of the project. However, this option means that the company can be sure it's using clean power. This also means that the company will become more power independent as reliance on the centralized grid dips. This, in turn, puts pressure on utilities to invest in renewable energy. Apple has followed this route by building two solar farms close to its data center. The electricity from these farms now flow into the local grid.
Why SAP opts for renewable energy credits
The company has chosen to buy renewable energy credits as its aim is not to become an electricity producer. This is according to Jonas Dennler, SAP's global environmental manager, who adds that the company may consider onsite generation in the future. The company’s aim is to partner with customers in order to buy certificates from them.
SAP plans to buy credits from projects that are less than 10-years-old and are built without government subsidies. The company is looking at buying a reasonable amount of credits from wind farms since they are subject to government incentives.
Pushing beyond credits
An increase in power purchase agreements and onsite renewables generation by large companies could persuade utilities to produce or buy more renewable energy in order to attract big customers.
Google pushed Duke Energy to do just that in North Carolina-the power provider asked the state utility regulators for permission to sell clean power to corporate customers.
While it’s great that SAP has good intentions with regards to its renewables goals, the company also needs to have a more sustainable strategy than to simply say that they are carbon neutral due to the purchase of renewable credits.