The Business Case for Climate Change and Solar Energy

The Business Case for Climate Change and Solar Energy

MGT481 Fall 2017
Climate Change – The Science, international efforts

The Business Case for Climate Change

Solar City Case (Team 1 case analysis)

Challenges and Opportunities for the Clean Energy/ Green Economy Development in the U.S.

Climate Change
“any change in climate over time, whether due to natural variability or as a result of human activity” (Intergovernmental Panel on Climate Change,

CO2 and some other gases (water vapor, methane, nitrous oxide, hydrofluorocarbons, sulfur hexafluoride) impose a blanketing effect known as “greenhouse effect”.

Climate Change – Warning Signs
Global mean warming of about 0.7 ºC has occurred over the past 100 years

Eleven of the twelve years 1995-2006 rank among the twelve warmest years in the instrumental record of global surface temperature (since 1850) (IPCC, 2007). Year 2010 tied 2005 as the Earth’s warmest on record.

Global average sea level has risen since 1961 at an average rate of 1.8 [1.3 to 2.3] mm/yr and since 1993 at 3.1 [2.4 to 3.8] mm/yr, with contributions from thermal expansion, melting glaciers and ice caps, and the polar ice sheets (IPCC 2007)

Climate Change – causes
Natural processes – fluctuations in sun activity; natural processes

Human influences:
burning fossil fuels (coal, oil, natural gas, and wood)
land use (deforestation, farming and building cities)
storage and use of water (e.g., dams, reservoirs, and irrigation)
generation of heat (e.g., furnaces)
Climate Change – Forecasted Impacts
Human systems
Increased droughts, floods, landslides, heat waves, avalanches, and windstorms.
Water resources (reduced availability and quality) 2B people live in water stressed regions now; 5B by 2025.
Agriculture (food security – reduced crop yield in most tropical and sub-tropical regions)
Forestry (fire incidence and severity)
Coastal zones (flooding) and marine systems (fisheries)
Human health – increase in vector-borne (e.g., malaria) and water-borne (e.g., cholera) diseases; heat stress mortality.
Increase demand for space cooling
Losses in the insurance industry and other sectors.
Climate Change – International Efforts
UN Framework Convention on Climate Change, March 21, 1994 (186 countries are parties, including EU and US).

Kyoto Protocol:
International agreement to reduce GHG emissions
Adopted on 11 Dec. 1997 in Kyoto, Japan
Covers only developing countries
Goal to reduce GHG emissions by at least 5% below 1990 level during the period 2008-2012 (e.g., EU – 8%, US – 7%, Canada – 6%, Norway may increase emissions by 1%, Australia-by 8%)
Entered into force on 16 Feb. 2005
182 countries ratified it (U.S. did not)
Ways to reduce emissions – emission trading; emission cups; Clean Development Mechanism (CDM).

Copenhagen Meeting, 2009

Cancun Meeting, Mexico, 2010

Durban Meeting, South Africa, 2011

Doha Meeting, Qatar, 2012

Warsaw UN Climate Conference, 2013

Bonn UN Climate Change Conference, Oct. 2014

Paris UN Climate Change Meeting, Dec. 2015
Climate Change: Policy Options
Immediate steps are necessary to:
Commit to post-Kyoto Targets

Reduce burning of fossil fuels (switch to wind, solar, geothermal, hydro energy, fuel cells)

Target both stationary and mobile sources (automobiles contribute to 30% of GHG; buildings – 40% of GHG).

Increase fuel efficiency (for automobiles, heating/cooling, industrial uses, etc.)

Emission trading; emission caps, Clean Development Mechanism
What percent of U.S. energy today comes from renewables?

What are the largest sources of renewable energy?

Which renewable energy sources do you believe have the greatest potential for electricity generation in the future? Why?
Trends in Renewable Energy Consumption and Electricity
Source: U.S. EIA,
Renewable energy projected to grow to 23-31% of U.S. Electricity generation by 2040

Business and Climate Change
All industries will be affected but most vulnerable will be companies in energy, transportation, insurance and heavy industries.

Some large companies are already pressing suppliers to report and reduce carbon emissions (e.g., Wal-Mart, Procter & Gamble, Unilever, Tesco PLC, Nestle).

Carbon Disclosure Project – initiated by Socially Responsible Investors and requesting information about the carbon emissions of companies.

What are the business benefits from climate protection?
Business Benefits from Climate Protection
Enhanced financial performance from energy and material cost savings

Enhanced core business value
Sector performance leadership
Greater access to capital
First mover advantage
Improved corporate governance
Ability to drive innovation and retain competitive advantage
Enhanced reputation and brand development
Market share capture and product differentiation
Ability to attract and retain the best talent
Increased employee productivity and health
Improved communication, creativity and morale in the workplace
Better stakeholder relations

Reduced risk:
Insurance access and cost containment
Legal compliance
Ability to manage exposure to increased carbon regulation
Reduced shareholder activism
Reduced risk of exposure to higher carbon prices

Product Innovation and Brand Differentiation
“ GE is going to make a business out of being green.(1)

“We’re sold out of our solar products…We’re sold out of our wind products… and we’re pretty much sold out on some of our most efficient aircraft engines”.(2)
Garry Sheffer, General Electric
Energy Efficiency Saves Dell $3M,, August 7, 2008
Announced a goal to become “carbon neutral” by late 2008

Met the goal 5 months in advance:
5% reduction in energy demand by lighting upgrades, HVAC retrofits, changing building temperature settings, shutting computers when not used (low-hanging fruit)
Equipment upgrades (e.g., data centers account for 20% of global power use), ROI usually 3 years or less
Buying renewable energy – 20% of worldwide portfolio (typically wind energy)
Additional goal to reduce and reuse 99% of its waste by 2012.

Example: Solar
PV on R&D Campus
Green Building
Green building:
Green or sustainable building is the practice of creating healthier and more resource-efficient models of construction, renovation, operation, maintenance, and demolition.

LEEDS Certification:
The Leadership in Energy and Environmental Design (LEED) Green Building Rating System, developed by the U.S. Green Building Council (USGBC), provides a suite of standards for environmentally sustainable construction.
Green Building – cont’d
US generates 25% of world’s GHG emissions
48% of US GHG emissions are result of energy in buildings
Buildings in the U.S. consume:
70% of electricity
40% of primary energy
40% of raw materials
12% of potable water

Costs and Benefits of Green Building
Source: Greg Kats, “Greening Our Built World”, Good Energies, May 2010,
Defining the Green Economy
The term “green economy” first introduced in 1989 in the U.K. report “Blueprint for a Green Economy”

Green economy policy measures included in 1992 Rio Declaration (Principle 16 called for “promoting internalization of environmental costs and the use of economic instruments,” and Principle 8 called for “eliminating unsustainable consumption and production”)

“A green economy is economy that leads to improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities” (UNEP, 2012)

Difference between green economy and clean tech
Defining Green Jobs
“Work in agriculture, manufacturing, research and development, administrative and service activities that contribute substantially to preserving and restoring environmental quality” (UNEP)

“Jobs involved in producing green products and services and increasing the use of clean energy, energy efficiency, and mitigating negative impacts on the environment” (U.S. BLS)
BLS Green Jobs Initiative
3.4 million green jobs in the U.S. in 2011; 2.6% of all jobs
75% of U.S. companies use at least one green technology or practice
(57% -energy efficiency; 55% -waste reduction; 2% – renewable energy use)
MA Tops ACEEE State Energy Efficiency Scorecard for 5 years in a row
2015 Ranking:

Massachusetts (#1)
California (#2)
Rhode Island
Massachusetts Clean Energy Industry

What are the main barriers for implementing low-carbon strategies by business?
Key Barriers
Cost of renewable energy

Lack of measurement (e.g., carbon accounting and cost estimates)

Lack of effective policies to encourage transition to low-carbon strategies

Lack of awareness and expertise

Capital investments required


Expiration of many federal clean economy tax and other incentives
Source: Brookings Institution, “Sizing the clean economy: A national and regional jobs assessment”, 2011
Government Policies to Support the Green Economy in the U.S.
1. Laws and regulations
Renewable Portfolio Standard (RPS)
Energy Efficiency Resource Standards (EERS)
Public Benefit Funds (PBF)
Energy Code Implementation
Building Energy Benchmarking and Disclosure Mandates
Appliance Standards
2. Financing sources and mechanisms
American Recovery and Reinvestment Act (2009), $93B
Better Building Initiative (2011), $4B
U.S. DoE loan guarantee program
3. Green procurement requirements
Executive Order 13514 for federal buildings
State and local green procurement initiatives
Green labeling and certification
4. Policies supporting cluster development

Massachusetts Policies to Support the Green Economy

Global Warming Solutions Act, 2008
Green Communities Act, 2008
Green Jobs Act, 2008
Renewable Portfolio Standard, 2002
Commercial Food Waste Ban, 2014
Building Energy Reporting and Disclosure Ordinance (City of Boston, Cambridge)

Are green jobs always safe for the workers?
Green Jobs and Worker Health and Safety
Current definitions of “green jobs” do not include health and safety (e.g., BLS, UNEP). Many clean energy sectors involve serious occupational exposures and safety risks:

Weatherization and energy efficiency jobs: traditional hazards such as falls, musculoskeletal stress and airborne chemicals (e.g., fiber cement contains crystalline silica)

Solar energy manufacturing, installation and EoL management includes exposure to more than 15 hazardous materials (ILO, 2012):
Cadmium telluride (cadmium compounds are highly toxic; kidney, liver, bone, blood and lung cancer)
Gallium arsenide (effects on lung, liver, immune and blood systems)
Silicon tetrachloride (extremely toxic; causes skin burns; respiratory, skin and eye irritant)
Sulfur hexafluoride (used to clean the reactors in silicon production; the most potent GHG)
Sodium hydroxide & potassium hydroxide (caustic chemicals dangerous to the eyes, lungs and skin)
Lead (used in solar PV circuits for wiring, paint; known for its neurotoxicity, dev. toxicity, cancer)
Trichloroethylene (used as solvent for cleaning; known carcinogen)

Wind turbines occupational hazards: similar to the automobile industry and aerospace installations, construction (e.g., exposure to styrene, epoxy resins, solvents, harmful gases, vapors and dusts)

Variety of occupational risks from nanoengineered materials
Strategies to Support Clean Energy and the Green Economy in the U.S.
Introduce energy tax changes

Increase government support of R&D in clean technologies to promote disruptive innovation

Introduce carbon tax to promote energy efficiency and expansion of mature clean technologies

Support financing of clean technologies

Increase demand for clean technologies

Focus on regions and build the clean economy cluster by cluster

Ensure that green jobs are also safe

Develop and train skilled workforce
Team 1: SolarCity Case

What is SolarCity trying to do? How is this challenging conventional utility companies?

What is SolarCity’s business model? Is it viable?

What are the challenges facing Lyndon Rive and his team? What would you recommend they do?

Which are the top countries for installed PV capacity?
Worldwide solar PV installations (equivalent to power 29 million homes)
Top Countries for Installed PV Capacity
Top PV Markets
Two ways to get solar PV presently
Purchase the PV system
Lease the PV system (Power Purchase Agreement or PPA)