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Using renewable energy to drive

supply chain innovation


A series exploring Industry 4.0 technologies and their potential
impact for enabling digital supply networks in manufacturing.
Using renewable energy to drive supply chain innovation

Contents
What is renewable energy? 04

Benefits of renewable energy in the supply chain 05

Criteria for evaluation and adoption 07

Key levers for renewable energy in your supply chain 10

Deloitte contacts in renewable energy and supply chain management 11

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Using renewable energy to drive supply chain innovation

Do you need renewable energy in your supply chain? Renewable energy


resources, or renewables are naturally replenishing energy sources that can
replace coal, oil, natural gas, and nuclear power across your supply chain with
clean, safe, reliable power at low or zero carbon emissions.

Of interest because: potential to avoid risks and cost implications of fossil fuel
price fluctuations and regulatory changes; attract customers, partners, and
employees interested in corporate responsibility; drive corporate growth by
keeping pace with competitors.

Could improve your supply chain by: decreasing


long-term costs, providing price stability, mitigating future regulatory risk,
enhancing brand value, driving new revenue, and improving employee
engagement.

Why not? Requires careful upfront feasibility assessment, based on availability


of resources and infrastructure, investment strategy and financial return, and
secondary considerations such as reputation enhancement.

Deloitte recommends: With renewable energy more accessible and affordable


than ever, evaluate your supply chain now for ways to switch to renewables
such as solar, wind, biomass, geothermal, and hydro power to start realizing the
benefits as soon as possible.

Deloitte Consulting LLPs Supply Chain and Manufacturing Operations practice helps companies understand and
address opportunities to apply Industry 4.0 technologies in pursuit of their business objectives. Our insights into
additive manufacturing, the Internet of Things, and analytics enable us to help organizations reassess their people,
processes, and technologies in light of advanced manufacturing practices that are evolving every day.

03
Using renewable energy to drive supply chain innovation

What is renewable
energy?
Overview Overcoming traditional barriers has Overview
Renewable energy resources, or accelerated the pace of adoption and
Value Clean reliable power
renewables are naturally replenishing fuel progress of renewables.
drivers Insulate against fuel price
sources, most notably solar, wind, biomass,
Renewable energy is now more accessible volatility
geothermal, and hydro power. Unlike
and affordable than ever. The cost of the Reduce risk of regulation
nuclear power and fossil fuels (coal, oil, and
technology itself has decreased. New impact
natural gas), renewables provide clean, safe,
financing vehicles have improved access and Lower long-term energy
and reliable power, with low or zero carbon
lowered capital requirements. And favorable costs
emissions.
regulation in parts of the United States has Increase employee
Recent developments and outlook provided incentives for selling excess supply engagement
The share of US electricity supplied by back to the grid. Improve revenue through
renewables increased from 8% in 2007 to brand enhancement
The United Nations Conference on Climate
13% in 2014. Renewables constituted 90%
Change (COP21), which resulted in 195 Scope Supply power to all
of the increase in electricity generation in
countries approving the first universal, segments of the supply
2015.1 And zero-emission energy sources
legally binding global climate deal on chain
are expected to constitute 60% of installed
greenhouse gas emissions, underscores
capacity by 2040.2 Technology Traditional fossil fuels (coal,
the growing influence policy has in shaping
substitutes oil, natural gas), nuclear
renewable energy growth.3
power

Five key developments in renewable energy In response to shifting public sentiment,


many organizations are reviewing and
modifying energy management initiatives,
Financing innovation of which renewables are typically a core
component. Corporations such as
Apple Inc., and Kohls are going all-in
on renewables.4 One hundred fifty four
Energy storage companies have signed the American
Business Act on Climate Pledge, and eighty
one companies have committed to pursuing
Grid integration 100% renewable energy through the RE100
initiative.5
Renewable energy in the supply chain
Renewable energy can be used throughout
Regulatory reform and public policy support
the supply chain to decrease long-term
costs, mitigate risk, drive new revenue,
enhance brand value, and improve
Corporate commitment employee engagement. As technologies
and regulations mature, companies should
be re-evaluating their energy procurement
Source: Deloitte Trends to Watch in Alternative Energy strategy to take advantage of these
potential benefits.

04
Using renewable energy to drive supply chain innovation

Benefits of renewable
energy in the supply chain
Primary potential benefits Value drivers for renewable energy by 30% from 2005 levels, future government
When treated as a strategic asset rather action on climate change could introduce
than a tactical expense, renewable energy new compliance requirements.8 Investing
can provide cost and risk benefits across the in a clean energy plan now may provide a
Produce clean and
supply chain. head start on managing potential future
reliable power
regulatory changes.
Renewable energy can provide a more
predictable and consistent energy supply Increasing the use of renewable energy in
Insulate against than fossil fuels, potentially with fewer the supply chain also has the potential to
commodity price associated risks such as commodity price increase revenue. Consumers increasingly
volatility risk volatility.6 choose to purchase from and invest in more
environmentally and socially responsible
Mitigate potential Onsite renewables like wind and solar can
companies. The Conference Board
implications (cost and be paired with storage devices and fuel cells
examined 12 S&P Global 100 companies and
reputational) from shifts to provide uninterrupted power to critical
found a 91% increase in aggregate revenues
in regulation business operations and supply chain
from sustainable products and services
functions.
from 2010 to 2013, outgrowing overall
Reduce long-term energy To achieve scale, many companies choose sales growth of just 15% over the same
costs and energy spend to procure offsite renewable energy through time period.9
(improves gross margins)
power purchase agreements (PPA), which
offer electricity for a fixed price across Secondary potential benefits
Enhance revenue by
typically 15-20 year contracts.7 The shift (intangibles) of renewables
unlocking opportunities
from payment of monthly electricity bills
for new products, services, Enhance company culture and
to long-term energy procurement through
or business models employee engagement
PPAs moves energy from an overhead cost
to a strategically managed direct material Advance sustainability agenda and
input, creating net-positive impacts on cost helps achieve sustainability goals
structure.
Strengthen corporate reputation
A procurement plan for renewable energy
Drive corporate growth by keeping
is also an active way to manage risk from
pace with competitors and signaling
regulatory changes. From COP21 to the 2015
leading environmental stewardship
U.S. Clean Power Plan, which proposes to
to customers
cut carbon pollution from the power sector

05
Using renewable energy to drive supply chain innovation

Generally speaking, many of todays supply


chains are still people intensive. Positive Case study: International Manufacturing Co.
impact on corporate talent strengthens Over the past decade, a leading Expected benefits of the 100%
the case for adopting renewable energy: manufacturing company had realized renewable energy goal:
Company performance on sustainability savings through various sustainability
issues can help attract and retain talent.10 11 Estimated 5% reduction in total energy
innovations. Yet, as energy cost
Switching to renewable energy in ways that cost
fluctuations continued to add pressure
are visible to employees can help decrease on gross margins, stakeholder Highly visible strategy of mainly onsite
attrition rates thus reduce training costs, expectations increased around and offsite generation, leveraging
increase in-house experience, and serve as environmental impact and transparency, Renewable Energy Credits solely for
a talent differentiator. and competitors responded with their locations where renewable energy is
These talent-related, intangible benefits own aggressive sustainability programs, not feasible
may be more difficult to quantify but are the company looked to Deloitte to help
Unifies the company under one energy
nonetheless an important consideration develop a renewable energy strategy to
procurement strategy, spreading
in renewable energy strategy decisions. drive advancement.
benefits across brands that would
Installing highly visible renewable energy The end result was a strategy focusing not have the scale to achieve the
technologiessolar carports in parking on powering 100% of the companyall milestone alone
facilities, for exampleis just one way facilities, including manufacturing,
companies can achieve intangible benefits Meets the growing sustainability
distribution, retail, and officefrom
from renewable energy. expectations of the companys
renewable energy. Implementation is
downstream partners: renewable
now in progress.
energy will increase performance on
procurement scorecards

Demonstrates advanced commitment


to the shared values of its products
end users, enabling the company
to target market segments with
environmentally focused branding

06
Using renewable energy to drive supply chain innovation

Criteria for evaluation


and adoption
Operational considerations Locations and markets Proximity and visibility
To increase renewable energy use across Energy incentives and regulations vary Renewable energy has the potential to be
your supply chain, start by developing an among and within countries. What is viable a highly visible corporate responsibility
energy procurement strategy based on in one country may not be in another; in statement. This is becoming increasingly
your companys profile and specific needs. the United States, for example, PPAs are important as stakeholders such as
The following five attributes can help shape only possible in states with deregulated downstream customers have become more
your renewables strategy decisions and electricity markets. vocal in their expectations, and even more
determine the potential overall return so as employees and customers align with
Facility locations and local markets will
on your companys renewable energy more responsible corporate environmental
offer different options for available types of
investments. action.
generation and ownership models. Basic
Company size and energy profile questions in this category are: Many companies adopt renewable energy
Renewable energy procurement options What countries do you operate in? in an effort to be more socially responsible.
and constraints vary according to company Are your facilities concentrated in one Selecting a highly visible location for the
size and energy profile, with smaller state or country or are they distributed system may be more important in this case
companies typically the most challenged.12 broadly worldwide? than the actual renewable energy type, as
Key questions in this category include: What renewables are available in your long as the financials and technical viability
Do you represent a small (< $100M location(s)? are sound.
revenue), mid-cap ($100M-$500M How will regulations and business model
Is the visibility of a renewable energy
revenue), or enterprise company ($500M+ options in each location impact your
system important to your company? Why?
revenue)? renewables strategy?
How much energy do you use each year? Are there other non-financial or strategic
Investment
Is your companys energy profile chiefly measures that could provide value?
Renewable energy procurement can be
purchased energy or do you rely more on
heavily tailored to limit risk and overall
onsite generation?
investment. Even for companies in highly
Facility profile competitive, energy-intensive industries,
Energy procurement decisions should renewable energy can be a good option that
be based on facility type and whether its conforms to specific financial obligations
owned or leased. Leased properties are and risk tolerance. Key questions:
typically more challenging: Installing onsite
What investment considerations must be
renewable energy is more viable when
taken into account?
a company owns the building and has
decision-making power as well as access to What is the financial feasibility of new
the roof, parking lot, and other real estate generation at a specific location?
required for system installation.
Key considerations in this category:

What types of facilities (laboratory, data


center, manufacturing facility, distribution
center, office, retail store) do you want to
use renewables for?

Are your companys properties majority


owned or leased?

07
Using renewable energy to drive supply chain innovation

Framework for decision making


Renewable energy success factors Investment impact matrix
Leveraging industry leading practices can Renewable energy investments should be
help define and facilitate implementation prioritized to achieve energy procurement
of an optimal renewable energy strategy. and sustainability goals. While renewable
Goals for driving renewable energy in the energy can pay dividends in many ways, it
supply chain should match your companys is important to work towards the optimal
overall vision, goals, strategy, and ability to portfolio for your companys profile and
implement and continuously improve. specific operational considerations in order
to achieve desired benefits.
Impactful
Purposeful and
strategic goals Talent Growth
driven by
executive-level
support; impacts
clearly
communicated to
internal and
Tailored external
Customized stakeholders
to an
organizations
specic needs,
constraints, and Risk Cost and
Flexible
brand identity mitigation eciency
Portfolio approach
to implementation,
allowing
organizations to The dividends realized for each of the four
take advantage of
alternative key value driver areas above will differ based
nancing and on the magnitude and type of renewable
Partnerships marketplace energy investments you make. Returns, or
Engaged opportunities
derived benefits such as an energy portfolio
partnership
model to drive that creates positive cash flows and
unique reduces long-term energy costs, should be
opportunities
strategically managed to create the
and innovation
for growth Accountable desired position.
Dened
implementation
accountability with
strong program
management and
interim
project goals

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Using renewable energy to drive supply chain innovation

Renewable energy procurement These options do not exist in silos.


options Companies can pursue one or a
Once you have established the desired combinationa hybrid approach is
outcomes for increased adoption of often the norm. The key takeaway is that
renewable energy in the supply chain, todays renewable energy leaders can and
you can begin to evaluate procurement should tailor investment decisions to their
options and determine which best suit your companys individual energy profile and
organizations goals. In addition to the three corporate goals.
methods presented below, other financing
and purchasing options for renewable
energy include sponsor or tax equity, green
funds, and community solar.

Onsite generation Offsite generation Renewable energy


credits (RECs)13

Overview Renewable energy Renewable energy Tradable energy


solution located solution located away certificates that
on the property of from the end users represent 1 MWh
the end user of the property, whereby generated from an
generated energy energy is purchased eligible renewable
via contract from the energy resource
generating party located anywhere on
the electrical grid
Energy impact Direct Indirect Zero

Visibility14 High Medium / low Low

Difficulty of High / medium Medium / low Low


implementation

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Using renewable energy to drive supply chain innovation

Key levers for renewable


energy in your supply chain
Supply chain applications
Significant renewable energy opportunities exist at each stage of the supply chain.

01 02 03 04 05 06

Develop Plan Source Make Deliver Return

Examples 06. Return: Use material waste or capabilities to capture value from
unsellable organic products (food waste) renewable energy must design a portfolio
01. Develop: Energy consumption
to make energy using of investments tailored to its own
is often high during design and
waste-to-energy technologies such as organizational profile, making investments
prototyping activities due to the energy
anaerobic digesters. in renewable energy can have a profound,
requirements of early-stage design
positive impact on their businesses.
equipment. Renewables can help reduce These examples are just a few of the many
energy spend and impact, improving opportunities to advance supply chain with
overall life cycle assessment (LCA) renewable energy. Opportunities exist in the Renewables convert traditional
of products during this stage of the end-to-end supply chain for cost reduction energy expenses into tangible
product lifecycle. and value creation. brand value to potentially:

02. Plan: Improve forecasts and reduce Motivation for action Provide access to clean, consistent,
exposure to commodity price fluctuation and reliable poweran innovative
The time for companies to assess their
associated with traditional fossil fuels. and potentially disruptive force in
supply chains for renewable energy
an organizations operations and
03. Source: Effectively shift energy from an adoption is now. Access to renewable
supply chain
overhead to direct material by sourcing energy is better than it has ever been.
a 15-year PPA for energy generated from Overall technology costs have decreased Propel a shift in energy
an offshore wind farm. and new financing structures are providing procurement from simply
flexibility for dynamic implementation. transactional to strategic
04. Make: Decrease manufacturing-related
Through improving shifts in capital costs,
operational costs and sensitivity to Hedge against financial and
technology efficiency, regulation, and
commodity prices by locking in cheaper, reputational risk
public or other stakeholder opinion,
longer-term contracts for renewables.
the motivationand momentumfor Reduce price volatility
05. Deliver: Reduce warehouse energy renewable energy is strong.
spend through onsite rooftop Help enhance an organizations
Renewable energy can be a significant position as a sustainability leader
solar photovoltaics, and reduce
source of value for many organizations.
transportation fuel costs through truck
While each company that builds the
electrification technologies powered by
the same system.

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Using renewable energy to drive supply chain innovation

Deloitte contacts in renewable


energy and supply chain
management
Marlene Motyka Evan Quasney
Principal, Deloitte Advisory Senior Manager, Supply Chain &
US Renewable Energy Leader Manufacturing Operations
Deloitte Transactions and Deloitte Consulting LLP
Business Analytics LLP +1.415.205.6128
+1.917.476.9190 equasney@deloitte.com
mmotyka@deloitte.com

Joseph Fitzgerald Jake Shirmer


Principal, Supply Chain & Manager, Sustainability &
Manufacturing Operations Climate Change
Supply Chain Innovation Deloitte Consulting LLP
Deloitte Consulting LLP +1.267.800.6562
+1.415.519.2115 jshirmer@deloitte.com
josfitzgerald@deloitte.com

Josh Mellinger
Senior Manager, Sustainability &
Climate Change
Deloitte Consulting LLP
+1.713.828.6036
jmellinger@deloitte.com

The authors of this paper would like to thank the following contributors:
Adam Volini, Manager, Deloitte Consulting LLP; Sundeep Raja, Manager, Deloitte Consulting LLP; Winnie Yeh, Senior
Consultant, Deloitte Consulting LLP; Max Bearse, Business Analyst, Deloitte Consulting LLP; Megan Reichert, Business
Analyst, Deloitte Consulting LLP; Sophia Moradian, Business Analyst, Deloitte Consulting LLP.

11
Endnotes
1. International Energy Agency (Renewables have held steady at about 9.5% of total energy production in the U.S. since 2013)
2. Bloomberg New Energy Finance
3. http://newsroom.unfccc.int/unfccc-newsroom/finale-cop21/
4. Deloitte Trends to watch in alternative energy
5. As of October 6, 2016: http://re100.org/; https://www.whitehouse.gov/climate-change/pledge
6. Deloitte Analysis on the benefits of Power Purchase Agreements (PPAs)
7. Renewable Choice Energy
8. https://www.epa.gov/cleanpowerplan/fact-sheet-clean-power-plan-overview
9. https://www.greenbiz.com/article/green-product-sales-average-91-ge-dow-others
10. Deloitte Millennial Survey 2016
11. Embedded Sustainability by Christopher Laszlo and Nadya Zhexembayeva
12. Deloitte Resources 2016 Study
13. RECs may also be known as Renewable Energy Certificates, Green Tags, Tradeable Renewable Certificates, or Guarantees of
Origin or Go Certificates (Europe)
14. Visibility to customers, consumers, investors, foundations, and other entities

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