Revving up Renewables: Clean Energy Supply Chains

Feature

As the need to reduce greenhouse gas emissions climbs toward the top of the corporate agenda and clean energy technologies become more available and cost-effective, more companies are looking to renewable and clean energy technologies as a key to decarbonizing their own facilities and vehicle fleets and working with their supply chain partners to do the same.

At its Columbus, Indiana manufacturing campus, MHI member Toyota Material Handling is building a solar array that will help the maker of forklifts and other material handling equipment reduce its dependence on electricity generated by predominantly coal-fired power plants in the region.

It’s the latest move in a shift by Toyota Material Handling to renewable energy over the past few years—one strategy in an ongoing effort to meet goals set by parent company Toyota Industries Corporation (TICO) of reducing its carbon dioxide (CO₂) emissions from its production processes by 50% by 2030 and becoming carbon-neutral by 2050.

The increased focus on renewable energy in Columbus is a microcosm of what’s happening across the material handling and supply chain industries and the broader economy globally. As cutting greenhouse gas (GHG) emissions becomes a high priority for all enterprises, interest in renewables is exploding.

After decades on the fringes of the energy conversation, renewables are commanding unprecedented attention as companies explore how wind, solar, hydro, biomass, green hydrogen, renewable natural gas (RNG) and other low- or zero-emission energy sources can make facilities and vehicle fleets more sustainable.

“Transitioning to renewable energy is one of the biggest levers companies have for reducing greenhouse gas emissions,” MHI member Schneider Electric said in a statement acknowledging an award for its groundbreaking initiative to help Walmart’s U.S. suppliers purchase renewable energy as a group.

Factors driving transition

In addition to the net-zero emissions goals companies are setting for themselves, several forces are accelerating the push to embrace clean-energy technologies, energy experts say.

• Regulatory mandates such as California rules outlawing fossil fuel-powered forklifts and requiring carbon-free truck fleets by 2035 are creating markets for electric forklifts and trucks, as well as trucks fueled by renewable natural gas (RNG) or hydrogen.
• Billions in public and private funding, including the 2021 federal infrastructure bill and last year’s Inflation Reduction Act (IRA), are pouring into renewables and supporting technologies.
• Tax credits and other incentives are creating a boom in the renewables sector, helping to grow a U.S.-based supply chain for clean energy technologies and reduce reliance on foreign suppliers.
• New-era battery technologies are beginning to solve the energy storage conundrum that has limited the viability of intermittent energy sources like wind and solar in many applications.
• Growing concerns about the reliability of the U.S. electric grid are boosting interest in renewables, which can provide a measure of resilience in addition to helping to reduce carbon emissions.

Some experts are predicting record investments in renewable energy this year, according to a survey by energy consulting and engineering firm GHD. More than two-thirds of energy industry leaders said they were accelerating their investments in renewable energy projects and the IRA alone includes $391 billion for clean energy projects, with much of the funding tied to “Made in the USA” requirements.

The legislation is already having the intended impact: Nearly 100 new clean energy manufacturing facilities or factory expansions in the U.S. totaling $70 billion in investments were announced between the IRA’s enactment in August 2022 and the end of May, according to clean energy think tank Rocky Mountain Institute.

“I would argue the IRA is the most profound piece of legislation we’ve seen globally to accelerate the energy transition,” said Tej Gidda, global leader for future energy at GHD. “Now other countries have to measure up against that, otherwise they’re at risk of losing clean energy investments in their countries to U.S. soil, which is something we’re starting to see happen.”

Key emissions-reduction strategy

Regulatory carrots and sticks and government funding will help drive the shift to renewables, but the key players in the fight for energy security are at the enterprise level where companies are taking action to reduce their carbon footprint and provide resilience, said Brian Berland, senior director of VRFB product strategy for MHI member Stryten Energy.

“Companies themselves are taking that step independent of what external pressures might be placed on them,” Berland said. “It’s across industries where people are stepping up to the plate and creating their own internal mandates for 100% electric sustainability or energy resiliency goals.”

The Toyota Material Handling Columbus, Indiana, forklift manufacturing campus. Photo provided by Toyota Material Handling.

As they take inventory of where their emissions are coming from, it’s difficult to ignore the important role renewables can play in reducing their carbon footprint, particularly when it comes to Scope 2 emissions created in producing the energy a company uses in its operations.

As defined by the Greenhouse Gas (GHG) Protocol, Scope 2 includes all indirect emissions from a company’s purchased electricity, steam, heat or cooling. For most companies, Scope 2 emissions represent a significant share of total GHG emissions from their own operations, typically exceeding direct or Scope 1 emissions.

From a macro view, nearly 40% of global GHG emissions can be traced to energy generation, and half of that energy is consumed by industrial and commercial users, according to GHG Protocol estimates. Mitigating Scope 2 emissions has to be a priority for the global economy to achieve net-zero goals.

Like many companies, Toyota Material Handling has attacked its Scope 2 emissions with a two-pronged approach that includes a long-term effort to cut its overall energy use while also increasing investment in renewables, according to Paige Johnson, environmental health and safety engineer at Toyota’s Indiana campus.

Between 2018 and 2021, the company slashed electricity use at the Columbus plant by 22% and natural gas consumption by 23%, reducing overall CO₂ emissions by 37% through a variety of energy-saving projects—impressive enough to win Toyota Material Handling the Governor’s Award for Environmental Excellence in Indiana in 2021.

Options limited for some

By the end of its fiscal year last March, ongoing cuts in energy use coupled with an increased emphasis on renewable energy had enabled Toyota’s Columbus plant to reduce CO₂ emissions by 34% from a FY2019 baseline, meeting TICO’s interim goal of a 32% reduction by the end of FY2026 three years early.

While the solar field will be the first on-site renewable energy project at the facility, Toyota has been increasing its participation in renewable energy for the past several years through the purchase of renewable energy certificates (RECs) through its local utility provider.

Also known as carbon offsets, the credits allow companies to compensate for the fact that their options for utilizing renewable sources of energy—as well as emissions-free nuclear energy—may be limited by where its operations are located. Companies can “retire” the credits they buy, offsetting an equivalent portion of their emissions.

Purchasing wind energy credits through Bartholomew County Rural Electric Membership Cooperative has enabled Toyota to offset approximately 30% of the emissions related to the energy it consumes at the Columbus plant, up from 15% two years ago and 25% last year, according to Toyota’s Johnson.

“Having the ability to purchase renewable energy certificates is a huge help for us,” Johnson said. “In other regions of the country, the energy that companies are using comes almost entirely from renewable sources, but we don’t have that luxury here in the Midwest.”

Inside the Toyota Material Handling forklift manufacturing campus. Photo provided by Toyota Material Handling.

Renewable natural gas made from organic waste is a case in point. While widely used in states like California, where a mandated RNG procurement program has been in place since 2018, elsewhere the market is still developing, and regulators have been slower to approve gas utilities’ RNG initiatives.

St. Louis-based natural gas distributor Spire has seen growing interest in RNG from industrial customers, but it will be 2024 before “green gas” begins flowing from projects in development, said Nick Popielski, vice president of sustainability.

“The infrastructure just isn’t in place in this area yet, so it’s not something we’re using currently,” Johnson said. “I’m hopeful that, with the sustainability push and this push to be carbon-neutral, we’ll see more and more of those opportunities.”

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