Title: Overcoming barriers in renewable energy
Format: White paper
Client: ENGIE Impact

Description: This white paper explores why renewable energy projects can struggle to move forward—even as global investment reaches record highs—and what companies can do to break through those barriers. Written for ENGIE Impact, it focuses on the real-world challenges organizations face when trying to decarbonize, including long permitting timelines, financing constraints, data gaps, and workforce limitations. It outlines five practical principles to help companies prioritize decarbonization efforts, strengthen governance, access the right financing, integrate better data, and build the capabilities needed to execute successfully.

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Introduction.

In 2023, investment in renewable energy surged to unprecedented levels, reaching $358 billion allocated into the sector during the first half of the year alone. This substantial influx of funding from governments and businesses underscores a global commitment to transitioning towards sustainable energy solutions. However, despite these capital investments, renewable energy initiatives continue to face formidable deployment challenges.

Among these challenges are prolonged lead and permitting times, which delay project execution and increase costs. Supply-chain bottlenecks further complicate matters, hindering the timely procurement of essential components and materials needed for renewable energy projects. Moreover, there is a widening skills gap in the workforce, where specialized expertise in renewable energy technologies and project management remains scarce.

In response to these pressing issues, Overcoming Barriers in Renewable Energy offers a strategic roadmap designed to assist companies in overcoming these obstacles. Authored by our experts, this comprehensive white paper outlines five essential principles for a holistic approach to decarbonization. It provides tailored strategies aimed at addressing the specific barriers encountered by renewable energy programs, thereby guiding organizations towards effective implementation and successful outcomes in their sustainability endeavors.

Section 1: Prioritizing decarbonization initiatives.

Challenges.

Decarbonization is challenged by multiple factors. Budgeting requires meticulous planning akin to buying a home, involving careful prioritization and trade-offs between achieving immediate results and making a broader impact on climate. Clarity in strategy and procurement is critical, especially when assessing the costs and benefits of solutions like Renewable Energy Power Purchase Agreements (REPPAs). These agreements often encounter approval hurdles due to their expense and long-term commitments, particularly in regions like the Asia-Pacific.

Furthermore, coordinating sustainability efforts across diverse portfolios can introduce additional complexities. For example, internally, managing multiple Energy Attribute Certificate (EAC) contracts can raise costs and extend timelines. Externally, market variability and sourcing challenges within renewable energy markets can also make matters more difficult, exacerbated by significant regional disparities in EAC costs and availability. 

But, despite these obstacles, the growing momentum towards decarbonization presents meaningful opportunities. By navigating these complexities with clarity and adaptive planning, organizations can position themselves as leaders in sustainable practices, driving positive environmental impact and long-term resilience.

Key considerations.

Organizations embarking on decarbonization journeys must carefully weigh factors such as timelines, market maturity, and cost implications to ensure effective planning and execution. ENGIE Impact recommends conducting a thorough organizational self-assessment that encompasses several key dimensions.

Firstly, assessing quality is critical. Organizations must determine their willingness to invest in high-quality Environmental Attribute Certificates (EACs), which are often essential for maintaining credibility and aligning with sustainability goals. Next, companies should define the scale of emissions reduction efforts. This entails setting targets for Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased electricity), and Scope 3 (indirect emissions across the value chain) to holistically reduce environmental impact.

Budget certainty is another pivotal consideration. Organizations should evaluate their tolerance for cost fluctuations associated with decarbonization initiatives, ensuring robust planning and budget stability. Equally important is understanding profit and loss variability—how decarbonization efforts might influence financial performance, including operational costs and potential savings from enhanced energy efficiency.

Accounting complexity also demands careful consideration. Striking the right balance between simplicity and complexity in financial accounting related to decarbonization investments and reporting is vital. This aligns closely with evaluating the level of effort required for implementing and managing decarbonization strategies.

Moreover, organizations should assess their risk tolerance for long-term contracts, market exposure, and regulatory uncertainties in renewable energy and carbon markets. Finally, understanding credit limitations is essential. If applicable, organizations need to ascertain their capacity to demonstrate creditworthiness for entering into long-term agreements for renewable energy procurement and carbon offset purchases.

Next steps.

Identify and educate stakeholders: Take proactive steps to navigate decarbonization tradeoffs by conducting surveys to align departmental priorities and organizational goals effectively.

Engage experienced advisors: Harness the expertise of seasoned advisors to steer decarbonization decisions, leveraging their knowledge of regulations, technology advancements, and market dynamics.

Develop a robust business case: Build a compelling business case that addresses priorities, overcomes obstacles, and promotes collaboration across functions to accelerate decarbonization efforts.

Drive sustainability initiatives: Mobilize departments and stakeholders into unified action towards achieving net-zero goals through collaborative and concerted sustainability initiatives.

Plan renewable energy adoption: Strategize renewable energy adoption with a focus on affordability and preferences, while considering effort, cost, and risk for each solution.

Section 2: Building Effective Internal Governance for Decarbonization. 

Challenges.

Successful decarbonization efforts rely on robust internal governance that aligns targets, strategy, and resource allocation with a company’s overarching goals. Beyond establishing clear priorities, internal governance frameworks also help businesses to manage risks and sustain momentum towards sustainability objectives. 

However, several inhibitors commonly impede progress. For example, competing interests may clash with short-term financial goals, creating tension between profitability and sustainability objectives. A lack of defined pathways can lead to procrastination in implementing decarbonization measures. Inadequate stakeholder understanding of procurement solutions like Power Purchase Agreements (PPAs) can undermine confidence and slow decision-making processes. Resource constraints—involving people, time, or funds—may challenge adequate support allocation for sustainability initiatives. And lastly, profitability pressures may drive companies into emergency mode, deprioritizing long-term sustainability goals for immediate gains. These inhibitors manifest in issues of internal and external alignment, risking perception problems and unmanaged risks. 

Key considerations.

Effective internal governance for decarbonization hinges on several components. By focusing on these priority areas, organizations can effectively steer their decarbonization efforts towards success.

Firstly, leadership commitment plays a pivotal role. Demonstrating dedication through incentives for sustainable practices ensures alignment across all levels of the organization, from top management to frontline operations. This commitment sets the tone for prioritizing sustainability goals and integrating them into daily operations.

Secondly, effective change management can make a big difference. Implementing robust change management strategies fosters the cultural integration of decarbonization goals within the organization. This approach promotes widespread adoption of sustainable practices and ensures active engagement from employees.

Establishing clear accountability mechanisms should also be top-of-mind. By defining responsibilities and setting measurable metrics early, organizations hold stakeholders accountable for achieving decarbonization targets. This accountability drives progress and ensures that efforts are focused and results-oriented.

Data-driven decision-making further enhances governance effectiveness. Leveraging accurate data enables organizations to identify environmental impacts, optimize resource allocation, and refine sustainability strategies. This strategic use of data ensures that decisions are informed and aligned with broader goals.

Lastly, allocating adequate resources for education and training can make or break decarbonization efforts. Equipping employees with the knowledge and skills to support initiatives effectively enhances organizational capability and commitment. This investment in human capital strengthens the foundation for sustainable practices and fosters continuous improvement in sustainability initiatives.

Next steps.

Stakeholder education: Educate decision-makers across departments to ensure informed decisions and alignment with sustainability goals, reducing resistance and garnering support.

Create a robust business case: Develop a compelling case aligning sustainability with strategic priorities, emphasizing cost savings, risk mitigation, and improved reputation to secure resources and buy-in.

Implement effective structures: Establish dedicated committees and clear roles to enhance decision-making in operationalizing decarbonization. Monitor progress and link incentives to targets for proactive engagement.

Secure leadership commitment: Gain leadership support to sustain momentum and align efforts with decarbonization goals, fostering a culture of improvement.

Establish governance frameworks: Implement frameworks for integrated strategy development, implementation, and ongoing improvement, ensuring agility in achieving sustainability objectives.

Section 3: financing options.

Challenges.

Financial challenges in renewable energy (RE) initiatives often revolve around the delicate balance between operational budgets and capital expenditures (CapEx). Despite the availability of RE funding, allocation struggles frequently hinder strategic ambitions. Overcoming these challenges demands a combination of tactical budgeting, prioritization, and innovative financing approaches.

For instance, implementing on-site photovoltaic (PV) systems typically involves CapEx when purchased outright. However, alternatives such as Power Purchase Agreements (PPAs) provide greater flexibility by spreading costs over time.

Tax equity investments and credit transfers offer immediate tax benefits but require upfront cash, posing initial financial hurdles. Conversely, community solar projects lower operational costs with predictable returns, making them an attractive option despite their initial setup costs.

Operational expenses associated with Renewable Energy Certificates (RECs), virtual PPAs (vPPAs), and traditional PPAs are often constrained by budget priorities rather than capital accessibility or uncertainty in return on investment (ROI).

Key considerations.

Organizations exploring renewable energy investments have a range of financing options at their disposal. Green bonds, specifically allocated to sustainability-promoting activities, provide robust funding for renewable energy projects. Sustainability-linked debt instruments offer variable rates tied to achieving Environmental, Social, and Governance (ESG) metrics, thereby incentivizing sustainable practices.

Government incentives, such as funding from the Department of Energy and initiatives like the Inflation Reduction Act, further bolster industrial decarbonization efforts. Private sector investments from sustainability-focused entities also play a significant role in financing renewable energy projects.

Strategic planning and expertise in leveraging diverse financing options are crucial to effectively support decarbonization initiatives. This approach enhances transparency, mitigates risks, optimizes financial performance, and advances environmental stewardship.

Assessing financial risks and opportunities.

Organizations must meticulously assess the risks associated with adopting and investing in renewable energy technologies, including regulatory changes, supply chain disruptions, and market fluctuations. While risks can be managed through strategic planning and mitigation measures, complete elimination is often impossible.

Deciding whether to pursue decarbonization involves weighing the risks of action against the risks of inaction. Implementing decarbonization strategies may incur upfront costs and operational adjustments but can mitigate long-term risks such as regulatory non-compliance and volatile energy prices. Conversely, neglecting decarbonization efforts exposes organizations to reputational risks and regulatory penalties. By aligning strategies with their risk tolerance levels, organizations can ensure that investments are strategically sound.

Next steps.

Create dedicated budgets: Allocate resources for renewable energy (RE) initiatives using green bonds, government grants, tax credits, and private investments to diversify funding and support sustainable projects.

Ensure financial and strategic integration: Develop financial plans that integrate decarbonization with broader business objectives. Optimize resource allocation, mitigate risks, and engage financial advisors.

Promote cross-functional collaboration: Integrate decarbonization goals into financial strategies by involving stakeholders from finance, operations, sustainability, and procurement.

Section 4: Measuring and integrating decarbonization data. 

Challenges.

Data integration and analytics are pivotal for decarbonization initiatives, providing critical insights to manage risks, drive informed decision-making, and ensure effective execution of sustainability goals. With them, companies can accurately track progress, enhance transparency, and identify opportunities for further growth.

It is important to note that reaching achievable targets hinges on the availability of high-quality data. Organizations must rely on accurate information to establish benchmarks, measure performance, and adjust strategies to meet objectives. Both internal data sources, such as emissions data and energy consumption metrics, and external sources like energy market trends, are integral to shaping effective decarbonization strategies. 

Challenges in managing and measuring data for decarbonization initiatives include ensuring transparency and maintaining data quality across operational sites, standardizing data collection practices to support rigorous progress evaluation, and making data available to teams responsible for responding to energy opportunities.

Key considerations.

Barriers to effective data integration pose significant challenges for decarbonization. Isolated data and the lack of standardized metrics hinder comprehensive analysis and decision-making. Poor data quality and collection methods further undermine efforts, compromising the reliability of insights and affecting progress tracking.

To overcome these obstacles, organizations must foster a data-driven culture, break down information barriers, standardize metrics, and improve data quality. By addressing these challenges, companies can better implement and optimize decarbonization strategies, improving environmental outcomes and business goals.

Building data infrastructure for decarbonization.

To overcome data challenges in decarbonization strategies, organizations can implement a range of strategies.

Firstly, fostering a data-driven culture is essential. Centralizing data collection across departments facilitates streamlined management and ensures consistent reporting. Standardizing processes mitigates inconsistencies, enabling organizations to make informed decisions through uniform standards for meaningful comparisons.

Implementing advanced technologies such as AI, IoT, and smart meters can further enhance data practices  by automating collection processes, providing real-time insights, and enabling predictive analytics. When handling large datasets and performing sophisticated analytics, engaging specialized service providers is a prudent option.

Lastly, leveraging government sources can also provide valuable insights into energy markets, regulatory changes, and benchmarks, enhancing the accuracy and relevance of environmental reporting. This can further support the transparent comparison of metrics against industry standards, ensuring accountability and compliance.

Next Steps.

Establish robust data practices: Centralize data collection for streamlined management, integrity, transparency, and accountability. Secure stakeholder buy-in to foster a culture of data-driven decision-making.

Integrate data into strategic decisions: Standardize metrics for consistent performance evaluation and strategic alignment. Utilize technologies for actionable insights and improved sustainability performance.

Continuous improvement: Monitor and refine data practices for accuracy and relevance. Adapt strategies based on insights to seize opportunities and foster innovation.

Section 5: Developing resources to execute decarbonization

Challenges.

Effectively tackling decarbonization challenges demands thoughtful resource allocation across key areas.

Leaders knowledgeable in energy, carbon accounting, and disclosure frameworks should work closely with finance teams to ensure robust planning and execution. Active engagement with accounting stakeholders is also crucial for financial planning and compliance, particularly concerning region-specific nuances and incentives.

Technological capabilities are equally essential, leveraging advanced technologies for robust data collection and integrating renewable energy solutions to achieve sustainability targets. Strategic partnerships with solution providers can facilitate access to software and training in legal, accounting, energy, and carbon accounting. These collaborations enhance organizational capacity and ensure comprehensive decarbonization efforts.

Identifying inhibitors related to resource constraints.

Common inhibitors to effective decarbonization include misaligned compensation and incentive plans, budget constraints due to inadequate planning for sustainability initiatives, and challenges in allocating resources effectively without a tailored workforce plan for decarbonization needs. Addressing these issues requires strategic planning, investment in technology, and cultivating a corporate culture that prioritizes sustainability.

Strategies for overcoming resource constraints.

Aligning executive compensation with decarbonization progress is one way to empower leadership to champion sustainability goals effectively, fostering a culture of commitment throughout the organization. Concurrently, implementing internal carbon pricing streamlines budgeting processes, ensuring that financial resources are effectively allocated to support decarbonization initiatives. This dual approach not only enhances financial transparency but also reinforces the organization's dedication to achieving environmental objectives.

When it comes to incentives, organizations in the US can also maximize returns on investment by utilizing strategies such as tax equity investments and credit transfers, which capitalize on renewable energy tax benefits. Seeking government funding from initiatives like the Department of Energy and the IRA further bolsters efforts to achieve ambitious decarbonization targets, addressing barriers and accelerating progress towards goals.

Building organizational capacity and capability.

Effective decarbonization demands robust capacity and capability development across key areas. Stakeholder engagement is pivotal, fostering buy-in through initiatives like community solar subscriptions for employees, which cultivates a culture of sustainability and enhances organizational participation.

Purposeful human capital management must also be prioritized. Hiring specialists in decarbonization ensures skills are optimized for implementing impactful initiatives. Educational partnerships integrate sustainability coursework into recruitment, equipping new talent with essential technical and regulatory knowledge.

Internally, tailored training programs on sustainability and decarbonization empower employees to manage environmental projects adeptly. Acquired skills in data management and analysis may optimize decision-making, while legal and accounting expertise ensure compliance and accurate reporting. Effective treasury management and energy procurement training may also secure renewable sources and enhance supply chain sustainability.

Lastly, leadership in sustainability drives alignment with ambitious environmental goals, leveraging frameworks like RE100, CDP, and SBTi for transparent reporting and accountability. By enhancing these capabilities, organizations not only strengthen operational resilience but also lead in sustainable practices, fostering long-term value and competitive advantage in a global context focused on sustainability.

Next steps.

Establishing robust resource plans: Implement centralized resource management systems to efficiently allocate resources to initiatives. Use them to coordinate funding, personnel, and technological resources across the organization. Secure stakeholder buy-in to prioritize and sustain these resources over time.

Integrating resources into strategic planning: Utilize consistent frameworks to optimize resource deployment and monitor progress towards decarbonization goals. Foster partnerships with external experts to enrich internal capabilities, bringing innovative solutions and fresh perspectives to bolster sustainability efforts.

Continuous improvement and adaptation: Continuously monitor resource utilization and performance data to inform adjustments to plans. Use this iterative process to ensure alignment with evolving environmental regulations, technological advancements, and market dynamics. Maintain strategic flexibility to capitalize on opportunities and address challenges promptly, reinforcing resilience in achieving decarbonization targets.

Conclusion

As we face increasing climate challenges, decarbonization has become a top priority for companies worldwide. Beyond meeting regulatory requirements, it is a fundamental necessity to protect our planet's ecosystems and resources for future generations. Successful decarbonization efforts provide dual benefits: reducing greenhouse gas emissions and enhancing long-term sustainability. Companies that adopt these strategies often see improved efficiency, lower energy costs, better brand reputation, and greater appeal to eco-conscious investors.

Looking ahead, companies must proactively embrace decarbonization despite its complexities. By integrating sustainability into their core business roadmap, firms can reduce climate risks and seize opportunities for innovation and growth in the green economy. Strategic investments are crucial for navigating the path to sustainability. Collaborative efforts between businesses, governments, and communities will be essential to driving systemic change and achieving collective goals for a cleaner, healthier planet.

Together, we can catalyze significant positive impacts on the environment, society, and the global economy.