By Marcus Krembs, head of sustainability at Enel North America
The Inflation Reduction Act is a big deal for businesses with sustainability commitments.
This law is designed to lower the costs of acquiring clean energy solutions while enabling accessibility and accelerating the adoption of affordable, clean energy products and services. Now is the time for businesses to move first and fast to scale their sustainability goals. With billions of financial incentives on the table, it is time to ask the right questions to make the most of the energy transition.
Here are four trends that will likely reshape your sustainability goals and questions businesses should ask to accelerate climate action.
1. Rapid decarbonization of the power sector
The Inflation Reduction Act is projected to accelerate clean energy deployment on the electric grid, with a fivefold increase in solar growth rates and a twofold increase in wind over the next several years. As the US transforms the energy sector, companies should electrify their operations and take advantage of the cleaner, cheaper, more reliable energy source.
Decarbonizing our power sector means that electricity will be a clean power source and reduce the reliance on volatile energy markets. This will allow you to take advantage of price stability across your business. Rapid decarbonization of the power sector is expected to drive down the price of renewable electricity and electric equipment. Because renewables are traditionally faster to market and cheaper to build than other forms of power generation, they create real cost-saving opportunities for you to factor into your sustainability planning.
Here are questions to ask yourself as your company electrifies its operations:
- How will the accelerated pace of decarbonization influence timelines, targets, and new investment opportunities? Are your sustainability goals enough as more accessible and affordable energy solutions become available?
- Do your decarbonization goals include broader environmental, social, and governance (ESG) factors, such as human rights commitments, biodiversity, circular economy, and environmental justice?
2. Scaling up of commercial clean energy solutions
The new law will inject $369 billion into the US clean energy economy, financing renewable power, clean energy equipment manufacturing, electric vehicles, and much more. This market momentum will make commercial clean energy solutions for businesses more cost-effective and reliable.
While accessibility and affordability help drive decisions, clean energy technologies must also be designed to work together as an integrated solution. Offerings such as solar-plus-storage systems that automatically store and use clean, low-cost electricity at times when consuming from the grid are the most expensive. Or virtual power purchase agreements, smart meters, and electric mobility systems can all deliver greater value when brought together as a suite of solutions.
The financial incentives built into the new law mean you can leverage tax credits, grants, and loans to adopt multiple clean energy solutions and reduce your emissions. For example, estimates show that electric fleet vehicles could cost businesses 15%-25% less than traditional combustion engine vehicles.
Here are questions to consider when scaling your clean energy portfolio:
- Given cost competitiveness and accessibility of clean energy, how will scaling-up clean energy solutions influence your bottom line?
- With added incentives available under the Inflation Reduction Act, what steps is your company taking to develop a well-rounded approach to fleet electrification to optimize your fleet and reach your net-zero goals?
3. Sustainable, domestic industries and supply chains
Another important feature of the Inflation Reduction Act is an infusion of billions in clean energy funding to transform domestic industries and supply chains. Companies across industries like agriculture, construction, and manufacturing have an opportunity to retool factories, ramp up production using lower-carbon materials, and install climate-smart equipment at industrial facilities. For those purchasing large amounts of agricultural and industrial products, this could go a long way to reducing corporate value chain emissions.
You can make a meaningful impact on your emission reduction goals by addressing emissions across the entire value chain. Unlike direct (Scope 1) and indirect (Scope 2) emissions, corporate value chain emissions (Scope 3) reach beyond a company’s direct control and involves emissions up and down the supply stream. Look for ways to reduce your company’s Scope 3 emissions, such as initiating clean power initiatives with suppliers.
As you look closely at your supply chain and sustainability practices across your industry, here are questions to consider:
- How are your goals supporting an equitable energy transition and a sustainable transition of your industry?
- How do your sustainability goals address Scope 3 emissions, and how will that impact the timetable to meet your emission targets?
4. Increased climate risk disclosure and ESG data
Investor and stakeholder expectations regarding climate risk reporting are already on the rise and are an expanding practice in corporate non-financial disclosure. Data reporting will become even more vital in the years and decades ahead as government programs and regulators push to incentivize companies to commit and provide evidence of their emission reduction targets. To capture the most from the incentives offered in the Inflation Reduction Act, ensure your business’ data and disclosures are current and ready to scale as you adjust climate action goals.
Disclosures and targets rest on data quality and how it informs a science-based path forward. As sustainability data becomes more prevalent, data quality will be crucial to practical analysis and actionable insights to inform business strategies and reduce climate change-related risks.
To prepare your operations to scale your sustainability goals, consider these questions when preparing your data:
- Currently, how is ESG data used to inform business operations and sustainability goals?
- Looking ahead, how will climate risk disclosure and clean energy accounting methods influence or accelerate your net-zero targets?
Reimagining your operations
As the great energy transition continues to move forward and our energy infrastructure transforms, businesses must evolve rapidly toward electrifying their operations. For decades, Enel North America has partnered with businesses to provide an effective suite of energy solutions to help them scale sustainability efforts and unlock new opportunities to maximize their clean energy investments. Now is the time to scale your long-term sustainability ambitions.
This post was created by Enel with Insider Studios.