Mars' 100% renewables pledge: a cause for celebrations?

On a beautiful barren stretch of the Scottish Highlands, just south of Inverness, spin 20 brand new 3,300-kilowatt wind turbines. The second these industrial-scale turbines came on stream last month, all Mars UK’s factories and offices became immediately zero carbon.

The US confectionary giant negotiated with the UK arm of Eneco, the Dutch utility behind the Moy Wind Farm, to buy 85% of the turbines’ output over the next 10 years. The move follows similar steps in the US, where Mars says its operations are carbon neutral thanks to a deal to buy power from a large-scale wind farm in Mesquite Creek, Texas.

The two deals – known generically as renewable power purchase agreements (PPAs) – represent a new trend in the drive by big business to go green. Adobe, BT Group, Goldman Sachs, Google, Microsoft, Nestlé, Novo Nordisk, Salesforce, and Unilever are just a handful of the large corporations now using the mechanism to meet their ambitions of going fully renewable.

On the face of it, such deals appear all upside. The buyer gets to boast about their green credentials, while the developer locks in a high-profile, reliable corporate customer for 10 years or more.

So are these deals as good as they look? Or should customers and the public take corporate claims to carbon neutrality with a pinch of salt?

Emily Farnworth of the non-profit Climate Group is quick to defend both the business and environmental rationale behind long-term purchase agreements. That’s not entirely surprising: it’s her job. She is campaign director for RE100, an initiative launched 18 months ago to encourage multinational companies to commit to using 100% renewable energy. PPAs represent the “simplest route” to doing so, as one RE100 signatory concedes.

The green credentials of PPAs appear relatively robust. Unlike carbon credits, where companies essentially pay to offset their ongoing use of dirty energy, renewable PPAs genuinely result in a switch to the clean stuff. Companies still buy from the conventional grid, but they receive green certificates that prove that the electricity they take from the grid equates to the zero-carbon energy put in by the likes of Eneco.

So far RE100 has 65 signatories to the 100% renewable campaign, with more to be announced at the end of this month. But if PPAs offer such a winning formula, why aren’t more companies jumping on the bandwagon? Farnworth says it a case of raising awareness and overcoming historical misconceptions about the high cost of renewables.

It’s not quite as straightforward as that, however. On the environment side, there are persistent question marks over double counting. How can consumers be sure that the clean power put into the grid isn’t being “used” by more than one buyer? There are now rules in place “which help clarify where energy comes from and therefore make it easier to claim carbon neutrality,” says
Myles McCarthy, director of implementation at the London-based Carbon Trust, a low-carbon advisory group.

A more serious issue is what happens when the sun doesn’t shine or the wind stops blowing? While McCarthy says that power storage is evolving significantly, he concedes that there remains a “slight discrepancy” in the event of such shortfalls.

For multinational companies, supply constraints make a global commitment to going 100% renewable problematic. In some regions of the world, the infrastructure for low-carbon power generation doesn’t yet exist at the required scale. Hence Mars’ carbon-neutral claims are still only on a country-by-country basis. That will need to change if it’s to meet its 2040 goal of 100% renewable energy across its entire operations.

In other, more developed markets, a surge in demand for PPAs could feasibly saturate existing clean energy supply and potentially push up clean energy prices. The competitiveness of renewables could also wobble as governments reduce their support for the renewables sector, such as the UK’s decision to abolish the Renewables Obligation in April next year.

Arguably, the biggest issue is not around the technicalities of PPAs but the ambition that underpins them. Not all PPAs suppose a 100% conversion to renewables. Indeed, many of the early movers set themselves fairly modest targets, says
Gordon Edge, director of policy at the trade association RenewablesUK. As a consequence, some corporates find that they are achieving their renewable targets well ahead of time.

Last month, for instance, Dow Chemicals nearly doubled its 2025 renewables goal to 750MW after hitting its initial 400 MW target in just one year. The quick success follows an agreement by the US chemicals giant with power producer NRG Energy to purchase output from two of its wind farms in Texas. Because PPAs potentially enable companies to become 100% renewable at the stroke of a pen, there’s a theoretical danger that they might slow down on energy efficiency measures too.

One sign of true ambition would be to build renewable facilities on-site, rather than outsourcing the responsibility. Lego, Ford and Ikea are among the few experimenting with this approach. The benefit of doing so is that corporations – as clean power producers themselves – can help their key suppliers and even consumers to begin to cut their own power-related carbon footprint.

So while 100% renewable is certainly a laudable objective and while PPAs can help companies get there, both are interim steps to what should be a wider corporate commitment to greening the world’s energy consumption.

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