Decarbonization is no longer a choice but a necessity. It’s the key to a sustainable future and net zero energy operations. Businesses are embracing carbon reduction strategies to align with regulations, cut emissions, and contribute to a cleaner energy future. In today’s energy climate, businesses across all industries are adopting carbon reduction strategies to reduce their carbon footprint, meet new energy regulations, and participate in the transition to cleaner energy. In this article, we’ll look at practical steps to decarbonize your energy portfolio, the importance of a decarbonization strategy, and how to overcome the challenges of getting to net zero.
Measuring Carbon Emissions
Knowing where your carbon emissions come from is the first step in decarbonizing your energy portfolio. Carbon emissions are typically categorized into three scopes:
Scope 1:
Scope 1 carbon emissions are direct emissions from owned or controlled sources, such as company vehicles or manufacturing processes. These are the easiest emissions to identify and offset.
Scope 2:
Scope 2 emissions are indirect emissions from purchased electricity. Scope 2 measures the carbon emissions of the power generation coming into your facility. While certainly trackable, these emissions are more challenging to quantify and report.
Scope 3:
Scope 3 emissions are from all other activities in your value chain, including transportation, waste, and supplier operations. Larger businesses are starting to adopt certain protocols that require their vendors to report on individual carbon emissions in order to gain an understanding of the total carbon footprint of an organization.
To measure emissions accurately, businesses can use carbon emission tracking software and energy audits. Calculating business energy consumption is a great first step an organization can take in order to see where emissions can be reduced.
What Is Decarbonization?
Decarbonization means reducing carbon dioxide (CO2) emissions and moving to a low-carbon energy footprint. For energy consumers, this means moving away from fossil fuels, improving energy efficiency, and integrating sustainable energy supply, such as a power purchase agreement from a solar farm.
Energy portfolio decarbonization aligns with global goals to combat climate change by reducing greenhouse gas emissions and moving businesses to a net zero status. This includes changing operational strategies, implementing energy efficiency measures, and investing in cleaner energy solutions.
Why Is Decarbonization Important?
Decarbonization is key to businesses being competitive and compliant in an increasingly regulated energy landscape. The Paris Agreement and national emissions targets are driving businesses to go renewable and reduce carbon emissions. In the U.S., state-level initiatives like renewable portfolio standards (RPS) are encouraging businesses, utilities, and retail energy suppliers to invest in sustainable energy. In fact, in most RTO and ISO markets, energy suppliers are required to pay RPS fees to the grid operator on behalf of each energy customer. So, whether they are selling renewable energy or fossil fuel-generated energy supply, these fees help to contribute to a more sustainable energy future.
Decarbonization strategies can also help businesses reduce operational costs, improve energy efficiency ratings, and access energy efficiency incentives and rebates. These energy policies, regulations, and acts when implemented properly, can help a business to become more profitable in the long run.
The 4 Pillars of Decarbonization
A decarbonization strategy is built on four main pillars:
1. Energy Efficiency
Pillar one involves reducing business energy consumption through lighting, HVAC systems, and building automation technologies. This is the most direct way of reducing carbon emissions, as businesses can directly control their energy waste and inefficiencies.
2. Electrification
Pillar two involves moving from fossil fuel-based power generation to electric-powered solutions, such as electric vehicles and heat pumps. This might involve replacing oil-fired heating systems with electric heating or replacing natural gas water heaters with electric water heaters. Today, there are several electric-powered appliances that can be directly connected and powered by solar panels, helping businesses to directly change their carbon footprint.
3. Low-Carbon Energy Sources
Pillar three involves integrating wind, solar, and renewable natural gas into your energy portfolio. This might mean installing a rooftop commercial solar system to power your building or entering into a virtual power purchase agreement (PPA) with a local solar farm. Moving towards renewable energy sources is a critical component of decarbonization.
4. Carbon Capture, Utilization, and Storage (CCUS)
Pillar four involves capturing CO2 from industrial processes and either storing it underground or reusing it for commercial use. This process, known as carbon capture, utilization, and storage (CCUS,) helps to directly impact carbon emissions by reusing energy instead of emitting it. This could involve a concrete plant capturing the heat emitted from the manufacturing process and reusing it to warm buildings and offices.
How to Decarbonize Your Energy Portfolio
Decarbonization starts with setting clear goals, measuring your current emissions, and prioritizing the most impactful actions. Building an effective decarbonization strategy includes:
Measure Energy
Conduct an energy audit to find inefficiencies and opportunities to improve. Measuring your energy consumption and understanding where you emit the most carbon emissions is the first step in building an effective decarbonization strategy. After all, it is impossible to develop a plan without having data and knowledge of the inefficiencies in your building.
Set Targets
Set realistic emissions reduction and net-zero targets. It is not feasible to expect to become net-zero from the start. While decarbonizing is an important goal, you also have a business to run. Prioritize the most impactful actions and start with them. Make a plan to implement energy efficiency strategies, enter into renewable energy agreements, and install on-site renewable energy generation.
Choose Low-Carbon Technologies
Invest in solar and wind or buy renewable energy credits (RECs). One of the quickest ways to directly impact your emissions goals is to change your energy supply from fossil-fuel to renewable sources. If you do not have the capital or space to install solar panels onsite, consider purchasing RECs from your retail energy supplier or entering into a virtual PPA.
Integrate Smart Solutions
Implement demand response programs and smart metering to optimize energy consumption. Another great way to improve energy efficiency is to utilize the many programs that are available to commercial and industrial customers. Offsetting peak demand through demand response or replacing inefficient motors is a great way to reduce energy consumption and costs.
Monitor Progress
Use carbon accounting tools to track emissions and measure progress towards goals. It is important to record the data and report on the impact of your efforts. There are many software platforms available that can measure energy consumption at the motor level and allow you to directly quantify your carbon emission offset.
A Guide to Decarbonizing Your Business Operations
For businesses and organizations looking to offset carbon emissions, here is a practical guide to getting started today.
1. Renewable Energy Investments
First, consider on-site PPAs or off-site PPAs to get renewable energy at fixed power prices. These agreements allow end users to enter into long-term energy supply contracts directly with renewable power generation sites. Commercial solar installations are another option for businesses looking to reduce costs and emissions.
2. Efficiency Upgrades
Retrofit buildings with energy-efficient lighting, insulation, and climate control systems. Finding and correcting small inefficiencies in your building is another great step towards reducing energy usage. Many organizations can offset nearly 70% of their energy usage by replacing inefficient lighting with LEDs.
3. Offset Residual Emissions
Use carbon offsets to offset unavoidable emissions. For those processes that simply cannot be changed, you might want to consider purchasing carbon offsets in a secondary market that can help neutralize your carbon footprint. This practice is often used by large manufacturing companies who simply cannot afford to replace machinery and equipment that relies on fossil fuels.
Challenges of Removing Carbon Emissions
While decarbonization has many benefits, there are many challenges that businesses and organizations might face on their way to becoming carbon-neutral.
Upfront Costs
Renewable energy projects and efficiency upgrades require significant upfront investment. For those organizations with constrained cash flow, it can be challenging to finance renewable energy projects. We recommend turning to renewable energy companies that can help finance projects out of future energy savings, allowing businesses to remain cash flow positive.
Regulatory Complexity
Navigating the maze of local, state, and federal policies can be difficult without expert help. There are several energy policies and regulations that impact where and how certain energy projects can be implemented, and approvals can take months, if not years. It is best to consult with an energy consultant or experienced firm that can guide you through your options and help you implement various renewable energy projects.
Technology Gaps
Some industries don’t have alternatives to fossil fuels for certain applications. It can be nearly impossible to replace burning coal with renewable natural gas at your manufacturing plant if the gas pipeline is five miles away. This might cost the business hundreds of thousands of dollars to connect to the pipeline, which is just not financially feasible. While there are creative ways to bridge these technological gaps, it’s important to consult with an expert to explore your options.
Market Fluctuations
Energy prices can be volatile and impact long-term planning. For a business looking to enter into a power purchase agreement with a solar farm, they need to evaluate their current energy supply prices to ensure there is savings to be had. If the business was able to purchase energy futures when they were low, it could be hard to justify the transition to higher-cost energy.
The Future of Decarbonization
The decarbonization drive will only get more intense with renewable energy, CCUS technologies, and grid modernization on the horizon. Businesses that decarbonize now will be ahead of the curve, reduce costs, and meet stakeholder expectations. While the future is uncertain, there have been indicators of financial penalties for businesses that do not make a plan to decarbonize. When looking at the renewable energy trends of 2025 and into the future, all signs point to a cleaner future free of fossil fuels.
Need Help Developing a Decarbonization Plan?
Decarbonizing your energy portfolio is now a necessity for businesses wanting to be competitive in a low-carbon world. By decarbonizing, integrating low-carbon energy, and becoming more energy efficient, your business can be part of the global net zero journey.
At Diversegy, we help businesses navigate the complexities of energy portfolio decarbonization and energy procurement by negotiating renewable energy supply contracts and power purchase agreements. Get in touch today to build a decarbonization strategy that works for you.
