Heavy industry’s transition to clean energy

With governmental pressure in most countries ramping up and bold deadlines to phase out fossil fuel within the upcoming decades, many companies and industries are adapting to the large-scale transition to clean energy. For traditional heavy industries such as manufacturing and logistics, the shift is a big one, and identifying how to achieve that objective can seem like a very complex challenge. Here, Christian Carraro, General Manager South Europe at SolarEdge Technologies, a global leader in smart energy technology, shares his insights on the key issues that manufacturing and logistics companies need to consider to achieve their sustainability goals, and the business opportunities they can bring.

In Europe, there are some 300 industries – many of them international – that have set due dates to significantly reduce carbon emissions. The years commonly range from 2025 to 2035, and for some, 2050, depending on the country.

Promises have been made by companies to shareholders and communities, and pledges posted on websites. While genuine commitment to ‘play their part’ is a key factor, action is also spurred by incentives from regional utilities to encourage adoption of renewable energy – as well as the incoming carbon taxes on industries that do not meet legislated emissions levels.

Solar typically doesn’t require planning permission and the ROI period is becoming ever more attractive

Among the companies leading the cause are the heavy industries historically perceived as major polluters, such as oil and gas, chemical and automotive, logistics and large-scale industrial manufacturing. I have been working closely with companies in these industries for over a decade, helping them to transition to renewable energy, specifically solar.

These operators typically have large premises and potentially acres of empty roof space, and solar modules provide a very visible demonstration of their commitment to sustainability. At the same time, the flexible nature of solar means it does not typically require planning permission, and, thanks to improvements in solar technology and fluctuating energy prices, the return on investment (ROI) period for solar projects is becoming ever more attractive.

Transition to solar can present a challenge

For organisations whose business has never been power generation, making the transition to solar can present a challenge, and certainly there are several considerations that need to be taken into account. For example, there may be variations in national or even regional regulations that dictate the maximum size allowed for a PV system.

There is a lack of understanding of the value of the transition to solar and how to best implement it

Sometimes, the buildings used by companies may not have suitable rooftops, or the buildings may only be leased or rented making the landlord’s commitment to installations problematic. Landlords are often reluctant to allow a solar installation with an ROI of less than the occupier’s lease.

Within large industrial corporations there can also often be complexity in the decision-making process. This may involve corporate-level management, investors, regional management, plant managers, risk assessment officers, energy managers, sustainability managers, insurance officers, local officials (including fire departments), and often risk, insurance and energy consultants.

The challenge here is to ensure all stakeholders in the decision-making process understand what the end goal is and that they can work together to achieve it.

Addressing concerns before taking the road to transition

Once a company is aligned internally, the next step is to find competent partners who can help it navigate the transition and minimise risk. These are likely to include a mix of companies, from consultants and EPCs to technology providers who can provide expertise based on decades of installing solar systems.

These providers could be either local or global depending on the needs of the company, though many companies that have made the transition often find that the involvement of local partners who know the regulatory and operational conditions is very important.

Companies will have to bear the majority of the cost up front as CAPEX

In a recent meeting with a large chemical company, I was asked in jest, ‘if our tree has always been fruitful, why take it down and grow a new one?!’. Referencing their longstanding use of traditional energy supply, they knew the answer to the analogy, but it does exemplify a wider industry consensus that while the transition to solar is needed, it comes with a lack of understanding of its value and how to best implement it.

The transition to solar requires a solid understanding of the requirements and risk factors involved. First, the financial case needs to be considered. Solar provides a very attractive ROI over the total lifetime of a system, having saved many of our longstanding customers millions.

However, companies will have to bear the majority of the cost up front as CAPEX. The next step is the process of putting solar panels on the roofs of buildings and achieving the promised energy supply, which is a relatively simple and low-risk exercise.

Safety and risk management

With chemical, oil and gas, and automotive companies, the main concerns are around safety and risk. These concerns come from a variety of sources, from risk and safety officers, to building managers (and owners), local councils and fire departments, and the companies’ insurance managers.

The insurance element is, itself, complex as it includes building insurance, insurance of the solar system, business insurance and general liability.

Overcoming fear of risk takes time and requires the right experts to provide credible data-backed input and proper due diligence

As the solar industry matures and the number of installations increase, stricter safety standards and regulations are now commonplace. These safety standards often outline that should maintenance on the roof be necessary, or in case of an emergency, the solar inverter must be able to reduce the DC current produced by solar panels to a touch-safe voltage within a specified amount of time.

Overcoming fear of risk takes time and requires the right experts to provide credible data-backed input and proper due diligence. We work with Marsh LLC, who are global experts in risk management and insurance-focused brokerage. Our partnership with such a highly respected company with a long track record provides a lot of reassurance for enterprises that are considering investing in solar.

Cross-industry collaboration is key

Once the first PV installation has been successfully completed, we find that companies quickly move on to the next one, often accompanied by the question ‘why didn’t we do this sooner?!’. The completion of each successful solar project becomes the model for the next, albeit local adjustments may need to be made.

Every industry has its own unique set of challenges

For example, in some countries excess solar energy cannot be fed into the grid. However, we can help implement energy storage systems so that excess energy can be managed and used to further reduce the dependency on the grid.

It’s important to recognize that every industry has its own unique set of challenges which must also be taken into account to ensure a smooth transition away from fossil fuels. One of the ways we do this is to bring together different companies from within the same industry, for example chemicals, to discuss their requirements and concerns.

This helps us to better understand the specific needs of each industry and best guide them on what steps are required to effectively make the transition. You’d be surprised at the level of cooperation these often-competing companies can achieve in order to find the best sustainable energy solution to power their business.

Transitioning to a brighter future

While COP27 certainly shone a spotlight on the need to accelerate change, the reality is that the dial is slower than most of us would like. For heavy industries, the introduction of solar energy requires a shift in mindset on many levels.

For example, it requires greater collaboration between separate departments and responsibilities. It also requires stakeholders to move away from thinking about risk reduction centred around initial CAPEX, to recognizing the opportunities to future-proof businesses, especially against the recent energy pricing volatility we’ve seen in many countries.

I’ve spoken to many companies who now view solar as a valuable asset that not only helps meet corporate sustainability goals, but can also be turned into a revenue stream. When that suddenly clicks and the mindset changes, it really is a magical thing to see.

For more information, visit the SolarEdge webpage.