The scale of renewable energy generation growth required to meet targets puts the natural environment at risk
COMPETITION CONCERN
Greater ESG focus is causing investors and power purchasers to examine the biodiversity impact of their assets
MARKET REDESIGN
Tender and permitting procedures should consider biodiversity measures alongside prices for future projects
KEY QUOTE
It is completely impossible to reach our climate goals if biodiversity and protection of nature are not taken more into account in renewable energy deployment
Irrefutably, a massive expansion of renewable energy capacity is a prerequisite to achieving the global carbon reduction targets set out in the 2015 Paris Agreement on climate change. This growth is beginning to pick up speed with a growing number of ambitious national and regional plans. The International Energy Agency forecasts clean energy investments to exceed $1.4 trillion in 2022 with an annual growth rate of 12% since 2020. The significant increase in demand will bring a realisation of large gigawatt-scale tenders, new market possibilities and compelling returns on investments. However, there is also an ongoing debate about the potential negative impacts of this expansion of renewables generation on local nature and biodiversity. For many years now, this has been one of the main reasons for the delay or even abandoning of many renewables projects. It is also threatening the clean energy targets required to avoid the catastrophic effects of climate change. RISK FOR BUSINESS To meet the EU 2030 climate targets, Eurelectric, a power trade association, calculated an additional 8900 square kilometres for offshore wind, 10,152 square kilometres for onshore wind and 2028 square kilometres for solar would be needed—putting at risk locations precious to nature and wildlife. This 21,080 square kilometres of additional area for renewables capacity equates to a little more than the total size of Israel. Minimising the biodiversity impact of both solar and wind installations and integrating biodiversity aspects into the development of renewable energy projects is gaining more attention from energy companies, authorities and investors. According to Virginia Dundas at Danish energy company Ørsted, biodiversity is a risk for business. “It is clear from the current state of nature and biodiversity that the world is in urgent need of ways to ensure that the renewable energy build-out is in balance with nature. Biodiversity loss has been highlighted as one of the top five business risks by the World Economic Forum in 2022, so we must find solutions that address the biodiversity crisis and minimise business risk,” she says. Dundas believes biodiversity efforts are important to enhance renewable energy deployment. “We need to find a way of building in balance with nature or else we won’t be able to deliver the accelerated green energy build-out that the world needs to realise our global climate goals and solve the increasing biodiversity crisis,” Dundas adds. In 2021, Ørsted presented a new biodiversity strategy with the ambition to provide a “net-positive biodiversity impact” at all its renewable energy projects that will be commissioned from 2030.
BIODIVERSITY BENEFITS According to Kristian Ruby of Eurelectric, there are many benefits for energy companies to include biodiversity considerations more when developing renewable energy projects. “Renewable energy projects can actually, if planned smartly and based on holistic thinking, contribute to improving local nature and biodiversity. This can help speed up approval processes, reduce the extra costs and economic losses that many companies are currently experiencing in approval processes and it can help ensure more broad support to the expansion of,” Ruby says. Eurelectric’s Power Plant report, published in June 2022, recommends a new model for renewable energy deployment where biodiversity and nature are integrated into development plans. “It is completely impossible to reach our climate goals if biodiversity and protection of nature are not taken more into account in renewable energy deployment. So it is important that companies and also authorities begin to look at biodiversity and renewable energy as deeply interconnected,” says Ruby.
SOCIAL ACCEPTANCE Even though renewable energy projects are vital to secure the world’s biodiversity from a carbon reduction perspective, several analyses also show that renewable energy installations do have negative impacts on nature across its whole lifecycle. This is regarding the withdrawal of natural materials, the construction and year-round operation of wind and solar farms and the decommissioning of turbines and panels. This has led to criticism from local communities, nature protection groups and political parties. In Denmark, public opposition, based directly on biodiversity arguments, has delayed and closed down several wind energy projects. In 2021, Swedish Energy company Vattenfall cancelled plans to expand the Danish Nørrekær Enge wind farm comprising 36 new turbines delivering an annual 400,000 megawatt-hours due to local protests. Soon after, the company also chose to divest all of its wind activities on land in Denmark.
PERMITTING PROCEDURE In a 2021 survey of 44 solar developers in the United States, more than half placed permitting challenges among the top three barriers to achieving the nation’s solar energy goals. Among other high-ranked challenges were access to transmission lines and supply chain disruptions. According to Eurelectric’s report, it takes developers four-to-six years to complete the permitting procedure for new renewable energy installations with issues around nature and biodiversity as the main factor for delays, says Ruby. “Permitting is the main bottleneck for wind farms,” says Mattia Cecchinato at WindEurope, a trade association. “Improving the impact on biodiversity is an option to shorten permitting processes and also to help maintain high levels of social acceptance for wind farms,” Cecchinato adds.
CHANGE OF STRATEGY In line with Ørsted, several renewable energy companies such as Iberdrola, Vattenfall and Enel have started to look more closely into biodiversity aspects when setting up new renewable energy installations and are beginning to incorporate biodiversity protection measures as part of their business strategy. Ørsted, for instance, includes a criterion that all new projects by 2030 must have an overall net-positive contribution to natural ecosystems, habitats and species in and around new renewable energy projects. “This means that we make a measurable contribution to improving biodiversity and nature is left in better shape than before we started,” says Dundas. Vattenfall has announced an ambition to become biodiversity net positive in all of its activities by 2030. “It is clear that we are facing a global biodiversity crisis, if we don’t manage our biodiversity impact, it will also affect our ability to run a successful business. It is becoming more and more important in environmental approval processes, in winning tenders and ensuring our general acceptance,” says Helle Herk-Hansen from the Swedish utility. She adds that protests and concerns about the impact on biodiversity are a threat to the company’s activities. “We spend more time on environmental approvals than on the actual setting up of the wind turbines, therefore biodiversity and our work to avoid negative impact on nature and biodiversity and attain positive impact instead have to be an important part of our strategic work,” Herk-Hansen says.
NON-PRICE CRITERIA At a political level, there is also a growing focus on biodiversity aspects within renewable energy market design. In 2019, the UK Government ruled that new projects in England would be required to demonstrate a 10% increase in biodiversity on or near development sites. Meanwhile, the tender of the 1.5 gigawatt Hollandse Kust West offshore wind site in the Netherlands included extensive use of non-price criteria including biodiversity and system integration. At one of the two sites, “nature contribution” was a main criterion for the bidders, with 50% of the tender scoring weighted to this. “There are more and more countries that are beginning to include non-price criteria in tenders with biodiversity and nature as one of the indicators. We expect this to become much more widespread in the coming years as part of improving permitting timescales and ensuring social acceptance of the renewable energy expansion,” says WindEurope’s Cecchinato. The European Commission also recently presented its Nature Protection Package, which set a 20% legally binding restoration target of European land and sea for all member states. The package will also affect the expansion possibilities and locations of new renewable energy installations. INVESTOR RESPONSE Off the back of these revised regulations, investors are also looking more closely into the impact on biodiversity of their green assets and renewable energy projects. According to Torben Möger Pedersen at PensionDanmark, Denmark’s largest labour market pension fund and one of the 50 largest pension funds in Europe, the EU’s financial taxonomy for sustainable finance and other new regulation is pushing in that direction. “Extensive regulation of sustainable financing has already been initiated by the EU, which is why investors like PensionDanmark must report to a much greater extent on the impact of our investments on biodiversity. We expect that the increasing regulation in the area will create ripples in the water, which will ensure that biodiversity aspects are integrated to an even greater extent in all renewable energy projects,” says Möger Pedersen. Möger Pedersen adds that biodiversity is being increasingly included in tenders as a competitive parameter. Herk-Hansen of Vattenfall says the company is also experiencing an increase in questions regarding the company’s biodiversity efforts, not only from investors but also from business customers when discussing power purchase agreements.
OBVIOUS SYNERGIES Eurelectric’s Power Plant report identifies a range of areas and examples where safeguarding biodiversity and optimising power output from wind energy could be “mutually beneficial” if installations are built based on more nature-friendly practices and design. “The industry has made big steps in limiting the impact that wind farms can have on biodiversity and nature and there have been many technological improvements for instance in reducing noise and vibrations emissions when installing offshore wind turbines,” says Cecchinato of WindEurope. Dundas from Ørsted says there is evidence that including biodiversity initiatives at renewable energy sites can help to restore habitats and species while also addressing climate change. “There is consensus amongst our stakeholders that the offshore wind industry can contribute to the recovery and restoration of marine biodiversity and the societal benefits of restoring ecosystems and species are well documented,” says Dundas. Möger Pedersen points to the 400 megawatt Anholt Offshore Wind Farm, of which PensionDanmark owns 30%, as an example. At the site in the Kattegat, environmental NGO WWF Denmark and Ørsted installed 12 3D-printed artificial reef formations on the seabed between the project’s turbines that offer juvenile cod a safe haven where they can find food until they are big enough to move on. “This will hopefully create a better marine environment, while the offshore wind farm produces sustainable electricity,” Möger Pedersen says.
FAR TO GO Despite these early efforts and a growing focus, there is a long way to go before reaching a net-positive biodiversity impact for renewables projects. Integrating biodiversity measures is at a pilot scale and inclusion of biodiversity considerations is yet to become a widespread standard in the renewable energy sector. “Focus on this is growing, but it is still only a small group of frontrunners that are going beyond legal compliance and are really starting to integrate regenerative biodiversity in their business activities,” says Eurelectric’s Ruby. It is also a complex task with difficulties accessing relevant and qualified data, limited experience with the area and a lack of industry-wide standardised approaches to measure biodiversity impact. The Science Based Targets Network, which is an alliance of companies and organisations that originates from the Science Based Targets Initiative (SBTi), is developing nature science-based targets and is working on a framework for measuring and setting targets for reducing companies’ biodiversity footprint. This is a cross-sector framework but would be relevant for the renewable energy sector’s biodiversity efforts, according to the Power Plant report. “We need to ensure that biodiversity efforts are truly green and not greenwashing. This calls for standardised methodologies that provide credible and transparent data on companies’ impact on biodiversity,” says Ruby. Vattenfall is also in the process of calculating its biodiversity footprint from its economic activities throughout the value chain in collaboration with French environmental protection company CDC Biodiversité. “An important first step in this is to ensure qualified data and full overview of our biodiversity footprint—just as we have done with our carbon footprint. This is a prerequisite to work with this on a strategic level, set the right targets, initiatives and measure our progress,” says Herk-Hansen.
COMMON RULES Another important step is also to ensure further development of a stronger common legislative framework for including biodiversity in renewables projects. A study published in the Proceedings of the National Academy of Sciences that examines the potential impacts on biodiversity and nature by the global expansion of renewables capacity concludes that conflicts between renewables and protected areas do occur. Renewables however would not significantly affect area-based conservation targets if deployed with appropriate policies and regulations. Including biodiversity as a bigger part of the permitting frameworks and tenders—in line with its Hollandse Kust West site—is also a priority of Ørsted. “We believe action could be taken earlier in the process incorporating the requirement for biodiversity action into the bidding process for offshore wind,” says Dundas. Möger Pedersen says biodiversity should be incorporated as a factor in the approval process of renewables projects from day one. “What Europe generally needs now is actually to speed up, not delay the handling process of green investment projects. It will, among other things, be a good idea from the start to consider these [biodiversity and renewable energy projects] together rather than treat them separately and often even an extension of each other.” •
TEXT Anna Fenger Schefte