Part 2: Strategic Roadmapping for your Decarbonization Goals

Climate change is no longer a platform in a political debate, it is now the central concern driving corporate environmental sustainability strategy and is directly influencing consumer purchasing behaviors. Global energy production and consumption are at the center of the fight against negative impacts of climate change, bringing net-zero carbon emissions commitments front and center.

An energy transition is on the rise as global stakeholders aim to reduce carbon emissions in alignment with the targets set forth in the Paris agreement to limit warming to 1.5 degrees Celsius from the pre-industrial era. In this edition of Customer Insights, we’ll outline how to get started with decarbonizing your value chain and how to develop a successful roadmap to overcome challenges and achieve reduction results.

Before establishing carbon reduction targets, it is important to know your carbon inventory and establish a baseline from which progress can be made. As the saying goes, you can only effectively manage what you measure. Internal stakeholder support after the baseline is set, including the backing of the executive team, will be critical in understanding the vision of the company and establishing a decarbonization budget. It is important to follow this step before setting net-zero emission targets to avoid unattainable goals and commitments. Check out our Customer Insights Part 1: Effectively Managing Your Greenhouse Gas Emissions Inventory for more details.

Decarbonization Considerations

Once you have established your baseline inventory and have a carbon emission reduction target in mind, it is time to build your decarbonization roadmap. The declining cost and proliferation of renewable energy sources such as wind and solar, advancements in energy efficiency, and emerging carbon-free energy production technologies in the market offer promising pathways to reaching your target. However, in laying out the actual roadmap of how to get there, numerous complexities arise.

For instance, energy markets vary widely from region to region, local to global, and each has various energy rates, tariffs and structures. The variability in the energy markets not only makes carbon inventory and accounting difficult, but it makes carbon-free emission solution landscaping a tremendous task. Adding energy data collection, standardization, and analysis to the mix when evaluating solutions to fit within your roadmap can become almost insurmountable. The complexity of energy markets and data collection are only some of the many considerations that need to be fully baked for a robust decarbonization strategy.

Another area of complexity comes in reducing energy usage and replacing energy production with renewable resources. Energy efficiency and energy conservation measures vary depending on the facility, equipment and technology that makes up a facility portfolio. Reducing energy usage is a great first step in a decarbonization roadmap but ensuring power quality and energy demand are met at critical points is essential.

Renewable energy technology is a carbon-free way to supply your energy demands but has intermittent production cycles making it feasible in specific territories (cost-benefits vary across locations and energy markets). Renewable energy credits to offset usage are also subject to market viability and need a thorough evaluation to avoid price spikes or limited availability.

Organizations that fail to account for the complexity of energy markets and carbon reduction solutions and the great challenge of crafting and executing a decarbonization strategy in the face of such complexity are subject to the risk of not meeting targets or not adequately assessing the costs to decarbonize. To effectively manage risks and avoid poorly performing solutions and suboptimal outcomes, it is important to follow a programmatic and holistic approach towards a decarbonization strategy that effectively deals with the full range of options, parameters, and associated complexities.

In short, you need a good decarbonization roadmap.

Building your Decarbonization Roadmap

Applying a structured process to developing a decarbonization roadmap will help organizations identify challenges, uncover opportunities, and develop effective plans and strategies to meet greenhouse gas emission reduction targets. Utilizing the Total Energy Management integrated approach is the most consistent, end-to-end process to build your decarbonization roadmap to avoid piecemeal solution pitfalls:

• Surveying the landscape for all available opportunities;
• Assessing opportunities for your specific organizational needs;
• Developing strategies for long-term success;
• Executing programs timely and efficiently; and
• Managing programs for ensuring a culture of continuous improvement

Surveying the landscape for all available opportunities

The first step in your decarbonization roadmap is uncovering the available options to reduce carbon emissions within your facilities and across operational regions. There are many opportunities to reduce carbon emissions expanding from energy efficiency, electrification to renewable energy. The key objective is to develop a menu of all carbon reduction opportunities that exist, and their application based on facility and geographic feasibility. Understanding all of the options at your disposal is necessary to find the right solution that fits your specific energy needs.

Assessing opportunities for your specific organizational needs

Once you have a landscape of the available decarbonization opportunities, it is time to assess each opportunity’s financial and environmental impact. Analysis in this phase will determine if beneficial electrification opportunities exist, optimal energy efficiency investments, and which renewable energy solutions are viable in each region. The result is an assessment that identifies which solutions have the highest environmental and financial impact at the lowest cost for the entire facility portfolio.

Developing strategies for long-term success

Now that you have the detailed financial and environmental assessment, the strategy will lay itself out for implementation based on the highest impact, lowest cost solutions. It is important to understand the perception of solutions when finalizing solutions in this phase and ask yourself “am I checking a box or am I directly meeting my carbon emission reduction goals?”

As the environmental sustainability discussion continues to grow among stakeholders and investors, it is important to align your decarbonization roadmap with reputational risk in mind. One way to address potential risk is to focus first on renewable energy supply, electrification and energy efficiency reserving renewable energy credits and carbon offsets for later when you have met most of your carbon reduction targets.

Executing programs timely and efficiently

With a strong decarbonization strategy in place, it is time to execute on your roadmap solutions. A solid program management strategy throughout the execution phase is needed to ensure successful implementation, measure performance and identify success and failure modes. This is of particular importance for emission disclosures and progress reports to meet outlined company emission targets. Often, the road towards a carbon-neutral organization requires strategic partnerships to assist with strategy development, carbon reduction opportunity analysis, an effective execution strategy, and a transparent reporting mechanism.

Managing programs for ensuring a culture of continuous improvement

From end to end, AEP Energy is uniquely qualified to be a trusted advisor every step of the decarbonization journey. As an energy company, we are not merely observers, advisors, or administrators, but active participants across all energy domains, with a deep understanding of how customers use energy and vast experience with energy markets and utility rates. Regardless of where you are on your energy sustainability journey, AEP Energy is the perfect partner for you, with a proven track record of over 100 years.

Key Takeaways:

• Reducing carbon emissions to meet future net-zero emissions is complex requiring a holistic approach to developing a successful roadmap
• There are many options available to reduce carbon emissions that need to be evaluated based on financial and environmental impact
• Partnership to meet net-zero emission goals is key to successful implementation

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