Jens Schumacher, managing partner of STX Group talks to Environmental Finance about how STX is working with its clients as the renewable energy revolution picks up pace on a global scale.
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Environmental Finance: Corporate appetite to explore new kinds of renewable energy products and certificates is growing. What is driving this?
Jens Schumacher: There is both public pressure and a feeling of responsibility. We have seen a lot of interest by the corporates this year. Many have not procured their energy certificates yet – because of the circumstances we are in with Covid-19 – but it remains high on the agenda.
In Europe this year we will see one of the biggest changes in the energy market the European Union as ever experienced with the implementation of the Renewable Energy Directive II (RED2) and the European Green Deal. In the US, the new administration has indicated the fight against climate change will be a top priority, so we expect similar developments there as well.
Wherever there is energy demand there is a transition to renewables ahead. This process will be easier for less-industrialised nations where the renewables infrastructure can be set up from scratch, rather than having to transition from fossil fuels to renewable networks as we have had to do in Europe and other industrialised nations. That phase has not even properly started yet.
EF: What are some of the challenges that corporates are facing with the 'greenification' of their supply chains and how are you working with them on that?
JS: When reducing emissions, whether within scope 1, or 2 and 3, standardisation is probably one of the key elements here. Corporates are requesting harmonised and reliable solutions on a global scale.
In Europe, we have a Guarantee of Origins (GoO) system, which is governed by the EU and requires member states to issue certificates of renewable electricity. With the implementation of the RED2, this system will be extended to other renewable energy sources, such as gas, and likely even to non-renewables. The USA have a similar system, called Renewable Energy Certificates (RECs).
In other regions of the world there is a standard commonly used called International REC (I-REC). This seeks to create a certain standard for Energy Attribute Certificates (EACs) in countries where there is no national scheme available.
Standardisation and harmonisation are the most important elements that ensure credibility. When corporates believe that the purchase of such certificates is a viable solution and there is a framework in place, then they are comfortable that what they are doing is correct. If there is a standard, there is a norm, and STX can provide companies with that solutions in line with these standards.
Scope 1 and 3 emissions are mainly being reduced using carbon offsets. This year, we have seen a strong increase in consumers addressing and approaching their supply chain footprint.
EF: You work with companies to buy certificates but also to sell them. What are the advantages of doing both?
JS: At STX, we add value for the buyer and the seller. For a possible seller – such as an energy producer or maybe an investor – we provide long-term offtake agreements for the energy certificates on a global scale. And for the buyers – utilities and corporates alike – we provide a great variety of solutions of EACs from our portfolio of around 200 terawatt hours annually.
We also know how different markets operate, how they are developing, and we have the network and experience to manage cross-border issues. With the RED II law being implemented in Europe, this will help to standardise the renewable energy markets and allow more cross- border transactions – on both the electricity and on the gas side.
EF: What has been the impact of Covid-19 on GoOs?
JS: Energy demand was immediately impacted by lockdown measures. Because less energy has been needed – but the supply of the renewables remained stable – we have seen the lowest prices in years. However, the renewable energy revolution had already started before Covid-19 came along and net zero strategies were already in place. In the short-term, the markets have been very bearish, but if you look at forward markets – especially the electricity and EAC markets – there is a very bullish outlook already. We expect already a strong increase in demand in 2021 with even further increases in the following years to come.
EF: You have performed particularly well in the European and North American regions in our Market Rankings this year. To what do you attribute to your success in these regions?
JS: We have been providing solutions to the global markets for over 15 years now. In addition, we have local expertise, in combination with a global reach. Our global network consists of independent generators, project developers, investment funds, major utilities, and corporates. We support, connect, and access a wide range of international opportunities, all through a single point of contact. Recently, we also established a new a new initiative called Climate Solutions. It is totally dedicated to providing direct access to global markets as a single, reputable partner and serving as one-stop-shop for environmental solutions.