Guide to Purchasing Green Power

Guide to Purchasing Green Power
Guide to
Purchasing
Green Power
Renewable Electricity, Renewable
Energy Certificates, and On-Site
Renewable Generation




                              DOE/EE-0307
Guide to Purchasing Green Power
This guide can be downloaded from:

www1.eere.energy.gov/femp/technologies/renewable_purchasingpower.html

www.epa.gov/greenpower/

www.wri.org/publications

www.resource-solutions.org/publications.php




Office of Air (6202J)
EPA430-K-04-015
www.epa.gov/greenpower
March 2010


ISBN: 1-56973-577-8
Guide to Purchasing Green Power
Table of Contents



Summary.........................................................................................................................................................1
Chapter 1: Introduction.....................................................................................................................................2
Chapter 2: Green Power Defined.......................................................................................................................4
Chapter 3: The Benefits and Costs of Green Power.............................................................................................5
      The Benefits........................................................................................................................................................... 5
      The Costs............................................................................................................................................................... 7
Chapter 4: Options for Purchasing Green Power.................................................................................................9
      Renewable Electricity Products.............................................................................................................................. 9
      Renewable Energy Certificates (RECs)................................................................................................................. 10
      On-site Renewable Generation............................................................................................................................. 11
Chapter 5: Steps to Purchasing Green Power.................................................................................................... 14
      Setting Goals....................................................................................................................................................... 14
      Identifying Key Decision-Makers ....................................................................................................................... 14
      Gathering Energy Data........................................................................................................................................ 15
      Choosing Green Power Options.......................................................................................................................... 15
      Evaluating the Purchase...................................................................................................................................... 16
Chapter 6: Procuring Renewable Electricity and Renewable Energy Certificates................................................... 18
      Developing Criteria for Screening Suppliers and Products.................................................................................. 18
      Collecting Product Information .......................................................................................................................... 20
      Creating a Procurement Plan . ............................................................................................................................ 20
Chapter 7: Planning an On-site Renewable Generation Project...........................................................................24
      Screening the Technologies ................................................................................................................................ 24
      Obtaining Resources and Assistance .................................................................................................................. 25
      Creating a Project Plan ....................................................................................................................................... 25
      Anticipating Possible Barriers ............................................................................................................................. 27
      Installing and Operating an On-site Renewable Generation System .................................................................. 28
Chapter 8: Capturing the Benefits of the Purchase.............................................................................................29
      The Environmental Benefits................................................................................................................................ 29
      Internal Promotion.............................................................................................................................................. 30
      External Promotion............................................................................................................................................. 30
Chapter 9: Conclusion....................................................................................................................................32
Chapter 10: Resources for Additional Information.............................................................................................33
Glossary........................................................................................................................................................40
Appendix: Green Power Considerations for Federal Agencies............................................................................43



Guide to Purchasing Green Power                                                                                                                                                    i
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ii
Guide to Purchasing Green Power
Summary




T
        his Guide to Purchasing Green Power is intended for       Chapter 6 discusses the steps to procure renewable electric-
        organizations that are considering the merits of buy-     ity or renewable energy certificates: developing screening
        ing green power as well as those that have decided to     criteria, collecting product information, and drawing up a
        buy it and want help doing so. The guide was written      procurement plan.
for a broad audience, including businesses, government agen-
cies, universities, and all organizations wanting to diversify    Chapter 7 describes the steps to establish an on-site green
their energy supply and reduce the environmental impact of        power system: screening the technologies best suited to the
their electricity use.                                            purchaser’s site, obtaining technical and financial resources
                                                                  and assistance, creating a project plan, anticipating possible
First published in 2004, the Guide to Purchasing Green Power      barriers, and installing and operating the on-site generation
provides an overview of green power markets and describes         system.
the necessary steps to buy green power. The 2010 version
represents the first major update to the guide and includes       Chapter 8 explores ways of taking advantage of promotional
new market information and terminology, case studies, an          opportunities after buying green power. This section cov-
updated additional resources section, and new resources for       ers promotion both inside and outside the organization and
Federal agencies to use when planning on-site renewable           options for quantifying the environmental benefits of the
projects or purchasing green power.                               purchase.

This section summarizes the guide to help readers find the        Chapters 9 and 10 of the guide conclude with a list of
information they need.                                            resources offering more information about all aspects of
                                                                  green power. Because electricity from renewable resources
Chapter 1 describes the concepts of renewable energy and          is relatively new and may be generated in a variety of ways,
green power and discusses their differences from conven-          many institutions are working to facilitate the development
tional energy sources. This section also summarizes recent        of green power markets. Several of these organizations’ pro-
changes in electricity markets and the current availability       grams—the U.S. Department of Energy’s Federal Energy
and use of green power sources.                                   Management Program (FEMP), the U.S. Environmental
                                                                  Protection Agency’s Green Power Partnership, the Green
Chapter 2 defines green power.                                    Power Market Development Group of the World Resources
Chapter 3 summarizes the benefits and costs of purchasing         Institute (WRI), and the Green-e Energy Certification
green power.                                                      Program administered by the Center for Resource
                                                                  Solutions—worked together to write this purchasing guide.
Chapter 4 defines three options for purchasing green power
products: renewable electricity, renewable energy certificates,   The guide also includes a glossary of terms commonly used in
and on-site renewable generation.                                 the green power field.

Chapter 5 outlines the general steps needed to prepare to         Finally, the appendix discusses considerations specific to
buy green power: setting goals, identifying the key decision-     federal agencies that buy green power, particularly the pro-
makers, gathering energy data, choosing the specific green        curement regulations that cover the purchase of green power.
power options available to the purchaser’s facilities, and
evaluating the purchase.




Guide to Purchasing Green Power                                                                                                    1
Chapter 1
Introduction



T
       oday, the energy sources used to create electricity dif-     ditional power with renewable power avoids the emission of
       fer in many ways, including in their environmental           more than one pound of carbon dioxide. Because of the sheer
       impacts. In the United States, electricity is most often     quantities of electricity involved nationwide, consumers have
       generated using fossil or nuclear fuels—forms of             enormous influence to reduce environmental impacts from
power generation that can have detrimental effects on human         conventional power generation. If the typical commercial
health and the environment through air emissions and other          building switched to 100 percent renewable electricity, the
problems. Despite advances in pollution controls over the           use of green power would have the equivalent environmental
last 30 years, this conventional power generation is still the      impact of avoiding the carbon dioxide emissions of nearly 28
nation’s single largest source of industrial air pollution and is   vehicles each year.
a major contributor to greenhouse gas emissions.
                                                                    A wide range of organizations purchase green power,
Electricity markets now offer cleaner ways of producing             including: federal, state, and local governments; universi-
power, however, and give many consumers the ability to              ties; businesses; nonprofit organizations; and individual
choose how their power is generated. One of these choices is        consumers. By purchasing green power, these organizations
power from renewable sources, or “green power.”                     are helping the environment and meeting their own goals,
                                                                    such as financial benefits, public relations benefits, and even
In some parts of the United States, consumers can buy green         national security benefits. In 2008, renewable electricity gen-
power from the provider of their electricity. All consumers         eration in the United States (excluding hydropower) equaled
can buy green power in the form of renewable energy cer-            nearly 124 million megawatt-hours (124 billion kilowatt-
tificates (RECs), which are available nationally regardless of      hours)—enough to meet the annual electricity needs of
whether a customer’s local electricity provider offers a green      nearly 12 million average U.S. homes.
power product.
                                                                    Many states already require utilities to supply some of their
While no form of electric power generation is completely            electricity from renewable sources. These state mandates
benign, electricity generated from renewable resources such         (known as “compliance” markets) require a percentage of
as solar, wind, geothermal, small and low-impact hydropow-          the utility’s power mix to come from renewable sources, so
er, and biomass has proved to be environmentally preferable         that utility customers will “green” their power mix somewhat
to electricity generated from conventional sources such as          without taking any conscious action. Voluntary purchases,
coal, oil, natural gas, and nuclear. This Guide to Purchasing       however, are still an important strategy for organizations that
Green Power focuses on electricity generated from renewable         want to buy most or all their power from renewable sources
resources, both delivered through the grid and generated on-        or want to promote innovative development of green power.
site. Although renewable energy can also be used for heating        Voluntary green power purchases have played an important
needs or for transportation fuels, this guide does not address      role in driving development of the market (see Figure 1) and
those applications.                                                 are expected to be an important part of the market for the
According to the U.S. Environmental Protection Agency               foreseeable future.
(EPA), on average, replacing each kilowatt-hour (kWh) of tra-




2                                                                                                                       Introduction
Chapter 1




Figure 1. Comparison of voluntary and compliance markets for renewable energy, 2004–2008
                                        25,000

                                                              Voluntary
                                        20,000
                                                              Compliance (new renewables)
             millions of kWh annually




                                        15,000



                                        10,000



                                         5,000



                                            0
                                                         2004                   2005                   2006                    2007                   2008

                                                 Note: “New” renewable resources generally refer to renewable facilities that began operation in 1997 or later.
                    Source:
  Figure 1. Comparison  ofBird, Lori, Claire Kreycik,
                            voluntary           andandcompliance
                                                       Barry Friedman. 2009. Green Power for
                                                                          markets        Marketing in the United States:
                                                                                              renewable                  A Status 2004-2008
                                                                                                                   energy,
                                                 Report (2008 Data). Golden, CO: National Renewable Energy Laboratory.

Leading organizations are finding that using green power                                                • How do I make a business case for buying green power?
is an effective part of a strategic energy management plan.                                               (p. 5)
Successful energy management plans are based on a “portfo-
lio analysis” that considers options such as energy efficiency,                                         • What is the cost of green power? (p. 6)
load management, power purchases, on-site generation, and
non-electric (thermal) energy needs. As with any investment                                             • What are the options for purchasing green power?
portfolio, the best mix of these options depends on the orga-                                             (p. 9)
nization’s goals, the cost of various alternatives, and external
market conditions.                                                                                      • What is the importance of product certification and
                                                                                                          verification? (p. 19)
While voluntary purchases of green power are becoming
more common practice in today’s electricity markets, these                                              • How should an organization choose a green power
markets offer a wide range of choices. This guide is intended                                             product? (p. 15)
for organizations that have decided to buy green power but
want help in figuring out how to do it, as well as for organi-                                          • What are the best ways of buying green power? (p. 18)
zations that are still considering the merits of buying green
power.                                                                                                  • What are the steps to installing on-site renewable gen-
                                                                                                          eration? (p. 24)
The Guide to Purchasing Green Power addresses the following
commonly asked questions:                                                                               • How do I communicate my green power purchase to
                                                                                                          stakeholders? (p. 30)
  • What is renewable energy and green power? (p. 4)

  • What benefits will my green power purchase bring?
    (p. 5)




Guide to Purchasing Green Power                                                                                                                                          3
Chapter 2
Green Power Defined



T
       he term green power is used in a number of different     state and federal government requirements or determining
       ways. In the broadest sense, green power refers to       eligibility for government and utility incentives. For more
       environmentally preferable energy and energy tech-       discussion of how each of the organizations that collaborated
       nologies, both electric and thermal. This definition     on this document defines green power, please refer to their
of green power includes many types of power, from solar         Web sites, listed in Chapter 10, Resources for Additional
photovoltaic systems to wind turbines to fuel cells for auto-   Information.
mobiles.
In this guide, green power refers specifically to electricity
generated from a subset of renewable resources, including
solar, wind, geothermal, biogas, biomass, and low-impact
                                                                  Helping Consumers Identify
hydroelectric sources. These electricity sources are derived      Green Power
from natural resources that replenish themselves over short       To help consumers more easily identify green power products,
periods of time, including the sun, wind, moving water,           the “Green-e Energy” certification program has coordinated
organic plant and waste material (biomass), and the Earth’s       the development of market-based, consensus definitions for
heat (geothermal).                                                environmentally preferable renewable electricity and renew-
                                                                  able energy certificates (RECs). The Green-e Energy program,
Note that the terms green power, environmentally preferable,      administered by the nonprofit Center for Resource Solutions,
clean power, and renewable energy may be used in slightly         certifies and verifies renewable energy products offered in
different ways, which differ primarily according to the vary-     competitive electricity markets, sold in utility green pricing
ing assessments of the environmental impacts of harnessing        programs, and sold in national markets for RECs. Further
                                                                  details about Green-e Energy certification are available from
specific resources and of the relative significance of each
                                                                  the Green-e Web site listed in Chapter 10.
impact. The exact definitions of these terms, while always
important, take on added significance when dealing with




4                                                                                                             Green Power Defined
Chapter 3
The Benefits and Costs of Green Power


The Benefits


G
                                                                  Price Stability of Green Power
             reen power can offer organizations a variety of
                                                                  Unlike power generated from fossil fuels, some green power
             environmen­tal, financial, stakeholder relations,
                                                                  products are not subject to the impact of volatile fuel prices.
             economic development, and national security
                                                                  For this reason, companies like IBM and Advanced Micro
             benefits. This Guide is designed to help buyers      Devices (AMD) use green power to hedge against energy
navigate the costs, contracting challenges, and public rela-      cost variability.
tions risks.
                                                                  In 2001, the energy managers at IBM’s Austin, Texas, facility
                                                                  were able to lock in power rates by signing up for Austin
Environmental                                                     Energy’s GreenChoice® program. With GreenChoice, the
                                                                  normal fossil fuel charge on the customer’s bill is replaced by
  • Reduce environmental impacts. Conventional elec-              a green power charge for the amount of green power that
    tricity generation is a significant source of greenhouse      the customer chooses to buy. Unlike the fossil fuel charge,
    gas emissions as well as the single largest industrial        the green power charge is fixed until 2011. As it turned out,
    source of air pollution in the U.S. The emissions from        Austin Energy’s fuel charge for conventional power spiked in
                                                                  2001 and IBM saved $20,000 in its first year in the program.
    conventional electricity generation contribute to a num-
                                                                  When the fuel charge increased again in 2004, IBM saved
    ber of serious environmental problems, including acid
                                                                  more than $60,000.
    rain, fine particulate pollution, and climate change.
                                                                  Similarly, AMD saw significant cost savings after its first
    Green power generates less pollution than conventional
                                                                  purchase of renewable energy in 2000 from Austin Energy.
    power and produces no net increase in greenhouse gas
                                                                  Shortly after AMD’s purchase, natural gas prices soared and
    emissions, helping protect human health and the envi-         became more costly than the fixed green power premium.
    ronment.                                                      By 2001, AMD saved approximately $100,000 and, in
                                                                  response, doubled the company’s green power purchase for
                                                                  the following year. In 2009, AMD purchased nearly 74 mil-
Financial                                                         lion kilowatt-hours of green power annually, which supplies
                                                                  100 percent of its Austin facility’s energy needs.
  • Provide a hedge against risks posed by:
     • Electricity price volatility. Purchasing electricity
       generated by renewable energy sources may provide                increase the price of conventional electricity, making
       the buyer protection against unstable or rising fossil           green power financially more attractive.
       fuel prices, for example through long-term, fixed-
       price supply contracts directly with developers or
       generators. Organizations can also encourage stable       Stakeholder Relations
       electricity prices by supporting new renewable             • Meet organizational environmental objectives.
       power resources on the local grid, thereby diver-            Reducing an organization’s environmental impact is
       sifying the energy mix with resources that are not           one of the main motivations for buying green power
       subject to the rise and fall of fuel costs.                  and is often important to stakeholders. For example,
     • Fuel supply disruptions. On-site renewable gen-              buying green power can help reduce greenhouse gas
       eration can reduce the risk of disruptions in fuel           emissions from electricity consumption. If an organi-
       supplies, like natural gas, resulting from transporta-       zation is interested in creating a third-party certified
       tion difficulties or international conflict.                 environmental management system (e.g., ISO-14001
                                                                    certification for environmental performance) or is
     • Additional environmental regulation. To address              conducting an organization-wide inventory of its green-
       global climate change and regional air quality               house gas emissions, a program for reducing emissions
       issues, federal and state regulations could effectively      will be an important part of this certification process.

Guide to Purchasing Green Power                                                                                                     5
Chapter 3



    • Demonstrate civic leadership. Being among the
      first in a community to purchase green power is a dem-        Demonstrating Community
      onstration of civic leadership. It makes a statement that
      an organization is willing to act on its stated               Leadership: City of Bellingham,
      environmental or social goals. These purchases also           Washington
      demonstrate an organization’s responsiveness to its cus-      By a unanimous city council vote in mid-2006, Bellingham,
      tomers, the majority of whom favor renewable energy.          Washington, took a leadership role in promoting renew-
      See Chapter 10, Resources for Additional Information,         able energy by choosing to purchase 100 percent green
      for details.                                                  power for all electricity used in city-owned facilities. From
                                                                    September 2006 through Earth Day 2007, the city part-
    • Generate positive publicity. Buying green power               nered with the local utility’s green power program and a
                                                                    local nonprofit organization to conduct the “Bellingham
      affords an opportunity for and builds on existing public
                                                                    Green Power Community Challenge.” The goal of the chal-
      recognition and public relations activities. Companies        lenge was to increase green power purchasing among the
      that are in the public eye need to be responsive to           city’s residents and businesses to meet at least two percent
      the concerns of environmentally conscious custom-             of the citywide electric load. Bellingham’s results have far
      ers, shareholders, regulators, and other constituents.        exceeded original challenge goals. To date, the green power
      Programs promoting green power, such as EPA’s Green           annually purchased by more than 2,680 households, 125
      Power Partnership or Green-e Marketplace, provide             businesses, and five large volume purchasers totals 82.8 mil-
      assistance in reaching broad audiences to convey the          lion kilowatt-hours of renewable energy certificates (RECs)
      benefits of green power purchases.                            and represents approximately 12 percent of the community’s
                                                                    total yearly electricity use. The community’s purchase resulted
                                                                    in EPA recognizing Bellingham as the first EPA Green Power
                                                                    Community in Washington State.
    Green Power’s Role in Overall
    Environmental Strategy
    A recent survey of corporate participants in the Green-e           market their products together. In addition, purchas-
    Marketplace program indicates that most companies view             ers of products certified by the Center for Resource
    their renewable energy purchases as part of a larger com-          Solutions’ Green-e Marketplace program can display the
    mitment to environmental sustainability.                           Green-e logo on their product packaging to indicate a
    • 75 percent said support of renewable energy was part of          commitment to using 100 percent green power in the
      a multi-pronged corporate environmental strategy.                manufacturing of the product. Many companies are also
    • 70 percent differentiate their company as an environmental       finding that producing their products with green power
      leader by supporting renewable energy.                           gives them an advantage in selling to their business
    • 45 percent of respondents indicated that developing an           customers who are trying to “green” their supply chain.
      environmentally friendly brand was very important.
    A Web link to the full survey is provided in Chapter 10,
    Resources for Additional Information.
                                                                   Economic Development and National
                                                                   Security
                                                                    • Stimulate economies. Manufacturing, installing, and
                                                                      operating renewable resources in the United States
    • Improve employee morale. Progressive action and                 requires a clean energy workforce. By purchasing green
      leadership on environmental issues like renew-                  power, an organization can help create new, domestic
      able energy may improve employee morale, which                  jobs. These high-quality, often well-paying, jobs help
      in turn can reduce employee turnover, attract new               grow the local economy. Renewable power facilities can
      employees, and improve productivity. In a survey of             also increase a local tax base and can provide income
      464 organizations, sponsored by the National Wind               for farmers and rural communities through landowner
      Coordinating Collaborative, improving employee                  lease payments. The renewable energy industry is an
      morale was cited as the third most important motiva-            important growth sector that can simultaneously boost
      tion for buying green power.                                    the nation’s economy while meeting the nation’s energy
                                                                      challenges.
    • Differentiate products or services. By purchasing
      green power, a company may be able to differentiate           • Increase fuel diversity. Green power diversifies the
      its products or services by, for example, offering them         nation’s electricity portfolio—a good way to manage
      as “made with certified renewable energy.” Purchasers           risk—and, because renewable resources are indigenous,
      of green power can also join their power supplier to

6                                                                                              The Benefits and Costs of Green Power
Chapter 3



                                  green power reduces the country’s dependence on
                                  imported fuels.
                                                                                                              The Costs
              • Reduce infrastructure vulnerability. The distributed                                          Green power can be priced differently than standard power
                nature of renewable resources allows for the distrib-                                         sources. It has usually been more expensive than conven-
                uted generation of renewable energy, thus, reducing the                                       tional electricity sources, largely due to the relative newness
                country’s reliance on a vulnerable, centralized electric-                                     of renewable technologies and their gradual diffusion into
                ity infrastructure.                                                                           mainstream markets, compared with conventional electricity.
                                                                                                              Chapter 6, Procuring Renewable Electricity and Renewable
              • Economies of Scale. Most renewable energy technolo-                                           Energy Certificates, suggests ways of minimizing these costs in
                gies are manufactured on assembly lines, where mass                                           conjunction with a procurement plan. Nonetheless, the cost of
                production can reduce costs. By purchasing green                                              green power is continuing to fall as growing demand drives the
                power, organizations can help build demand, which in                                          expansion of manufacturing facilities and reduces production
                turn could lead to lower production costs and poten-                                          costs. Figure 2 illustrates the levelized costs of renewable and
                tially lower prices.                                                                          fossil fuel technologies, showing that several green power tech-
                                                                                                              nologies are now cost-competitive with conventional sources.


Figure 2. Levelized cost of new power generation technologies in 2008

                                    200

                                    180

                                    160

                                    140
Current Levelized Costs ($/MWh)




                                    120
                                                                                                                                                                     a
                                    100
                                                                                                                                                                     b
                                      80

                                      60

                                      40

                                      20

                                       0
                                             Energy       Geothermal          Wind           Biomass          Natural           Coal          Nuclear         Solar PV
                                            Efficiency                      (onshore)                          Gas


                                                  a Represents estimated implied cost in 2012 for crystalline PV system
                                                  b Represents a leading thin film PV company's targeted implied cost of energy in 2012
                                                  Note: Costs have been levelized over the lifetime of the technology and include construction, fuel, and operation and maintenance
                                                  costs. The bars represent typical cost ranges at average capacity factors for each technology.
                                                  Source: Lazard. February 2009. Levelized Cost of Energy Analysis, Version 3.0.
                                                   .


Guide to Purchasing Green Power                                                                                                                                                              7
Chapter 3



The actual price for green power depends on a number of                                                    tions that are buying green power for the first time might
factors, including the availability and quality of the resource,                                           need to invest extra effort, these costs fall significantly over
manufacturing capacity and world demand for the technol-                                                   time as the electricity purchasers gain experience. Following
ogy, the availability of subsidies to encourage green power,                                               the information and strategies provided in this guidebook,
and the quantity purchased and terms of the contract.                                                      particularly Chapter 6, Procuring Renewable Electricity
Generally, the price of green power ranges from less than                                                  and Renewable Energy Certificates, should help reduce the
that of the standard power mix, especially in competitive                                                  contracting challenges faced by new purchasers of green
markets and where state subsidies exist, up to one to four                                                 power. In addition, sample contract templates are publicly
cents more per kilowatt-hour. When the market price of                                                     available to help buyers avoid difficulties in signing a green
conventional electricity is high, purchasers of green power at                                             power contract (see Chapter 10, Resources for Additional
a fixed price may actually save money. Of course, when the                                                 Information).
market price of conventional electricity drops, they will be
paying a premium. Since 2000, the average price premium                                                    Public Relations Risk
has dropped at an average annual rate of eight percent (see
Figure 3).                                                                                                 Some stakeholders might regard the purchase of green
                                                                                                           power as a token effort or “greenwashing.” Organizations
Contracting Challenges                                                                                     can improve the credibility of their green power purchase
                                                                                                           by buying green power as part of a broader environmen-
Green power may also be more difficult than conventional                                                   tal management program and by working with third-party
power for an organization to purchase, causing transaction                                                 organizations for independent auditing, certification,
costs in addition to any price premiums. Although organiza-                                                endorsement, and minimum purchasing benchmarks.


Figure 3. Trends in utility green pricing premiums, 2000–2008

                                                          4

                                                         3.5
                       Residential Premium (cents/kWh)




                                                          3

                                                         2.5

                                                          2

                                                         1.5
                                                                                 Average
                                                          1
                                                                                 Median
                                                         0.5

                                                          0
                                                                2000 2001 2002 2003 2004 2005 2006 2007 2008

                                                               Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in the
                      Figure 3.                                United
                                                               Trends States:in
                                                                              A Status
                                                                                  utilityReportgreen
                                                                                                (2008 Data).  Golden, CO:premiums,
                                                                                                          pricing         National Renewable Energy Laboratory.
                                                                                                                                          2000-2008




8                                                                                                                                                The Benefits and Costs of Green Power
Chapter 4
Options for Purchasing Green Power



G
            reen power can be procured several different             Most renewable electricity products (i.e., green pricing or
            ways. The main distinction among the options is          green marketing products) are one of three types:
            the type of supplier and where the electricity gen-
            eration equipment is located: on the electric grid         • Fixed energy quantity block. A block is a quantity of
or at the facility. For electricity delivered over the power grid,       100 percent renewable electricity, often 100 kilowatt-
the status of utility restructuring in that state will determine         hours (kWh), offered for a fixed monthly price. The
whether an organization is limited to buying green power                 price is often expressed as a price premium above the
from its local distribution utility or whether it can choose             price of conventional power. Customers usually may
among competitive power suppliers. Even if the state has no              sign up for as many blocks as they wish, with the
green power marketers or the utility does not offer a green              monthly cost of these products based on how many
power option, an organization can buy renewable energy                   blocks they buy. This type of product is available in
certificates (RECs). For on-site green power, the resources              some competitive markets but is more often found in
available at that site (e.g., solar, wind, biomass) are the main         regulated utility green-pricing programs.
factors determining a project’s feasibility.
                                                                       • Percentage of monthly use. Customers may choose
The range of supply options in the market provides consid-               green power to supply a fixed percentage of their
erable flexibility to green power buyers. Organizations are              monthly electricity use. In practice, this usually
able to consider factors such as price, specific green power             results in the purchase of blended green and conven-
generation resource (e.g., wind versus solar), ease of procure-          tional power. This is typically priced as a premium
ment, and the location and year of the generating facility               on a cents per kWh basis over the standard rate or as
in their purchasing decisions. By considering these issues,              a fixed charge per kWh. The monthly cost for these
buyers may be able to choose a specific type of green power              products varies with use and the percentage of green
product or mix and match green power products to meet                    power chosen.
their desired goals.
                                                                       • Long-term fixed price contracts. Buying a portion of
                                                                         the output of a renewable energy project in a long-term
Renewable Electricity Products                                           contract can help a project developer secure financing,
                                                                         while giving the end-user a stable electricity contract.
                                                                         This model has been used with several government
Customers in many states have the ability to purchase a
                                                                         and academic institutions. WRI’s Green Power Market
green power product directly from their electricity provider.
                                                                         Development Group is exploring this model for com-
In regulated electricity markets, customers may be able to
                                                                         mercial users.
buy a green pricing product from their local utility. Green
pricing is an optional service offered by regulated entities to      Some renewable electricity products require a fixed monthly
allow customers to support a greater level of utility invest-        fee to support a given amount of renewable generation
ment in renewable energy by paying a premium on their                capacity. Others require contributing to a green power fund
electric bill. In competitive electricity markets, customers can     that finances renewable projects. These products can be an
switch electricity service providers if their current provider       effective way to assist the green power industry but do not,
does not offer a green pricing product. In this market, the          however, result in a metered amount of renewable electricity
customer can purchase a green marketing product from a pro-          being generated, which is necessary to quantify the environ-
vider other than their local utility. Again, a green marketing       mental benefits of the green power purchase. For this reason,
customer pays a small premium in exchange for electricity            these products are not discussed further in this guide.
generated from green power resources.                                Chapter 6, Procuring Renewable Electricity and Renewable




Guide to Purchasing Green Power                                                                                                    9
Chapter 4



Figure 4. Renewable energy certificate (REC) transaction path in a voluntary green power market


                                   Conventional                                                                  Green
                                      Power                                                                      Power




                                                     POWER                                            POWER



                                                                   POWER GRID

                                               POWER
                                                                                                            REC

                                       Electricity                                                                REC
                                        Supplier                                                                Supplier


                                                             POWER                             REC



                                                                         Electricity
                                                                         Consumer




                 Note: Figure 4 is not intended to represent a comprehensive view of all the possible ways a REC can be traded and used.


Energy Certificates, provides more details about implement-                        claim to the environmental attributes associated with renew-
ing a renewable electricity purchase.                                              able energy generation, but purchasers should nevertheless
                                                                                   ensure that their contracts are explicit about which envi-
                                                                                   ronmental attributes are conveyed to them. Figure 4 (above)
Renewable Energy Certificates                                                      illustrates the REC transaction path.
                                                                                   RECs may be sold “bundled”—paired by the electric service
Renewable energy certificates (RECs), also known as “green                         provider with grid electricity delivered to the buyer—or
tags,” “green certificates,” and “renewable energy credits,”                       “unbundled” from electricity as a stand-alone product and
are tradable instruments that can be used to meet volun-                           paired by the buyer with its grid electricity purchase. RECs
tary renewable energy targets as well as to meet compliance                        combined with plain grid electricity are functionally equiva-
requirements for renewable energy policies. A REC is a cer-                        lent to green power purchases from a local utility, no matter
tificate that represents the generation of one megawatt-hour                       where the REC may be sourced. Purchasers of RECs may
(MWh) of electricity from an eligible source of renewable                          make claims about their purchase of green power similar to
energy. Each REC denotes the underlying generation energy                          purchasers of renewable electricity products.
source, location of the generation, and year of generation
(a.k.a. “vintage”), environmental emissions, and other char-                       Because RECs are not tied to the physical delivery of elec-
acteristics associated with the generator. RECs represent a                        trons, they allow organizations to purchase green power from



10                                                                                                                         Options for Purchasing Green Power
Chapter 4



suppliers other than their local electricity provider. RECs                          to be generated in the future by a new or soon-to-be-built
help overcome a major barrier to renewable facility develop-                         renewable electricity facility. The advantage of this approach
ment—the fact that the best renewable resources may not be                           is that it promotes new renewable facilities by providing
located close to population centers. The sale of RECs allows                         up-front financial assistance for their development and con-
these more remote facilities to benefit from support for green                       struction. In return, the purchaser receives the RECs as they
power.                                                                               are generated over an extended period of years. Nevertheless,
                                                                                     even though they are paying upfront for future RECs, buyers
Unlike electricity, RECs do not need to be scheduled on a                            cannot make environmental claims against those RECs until
transmission system, and they can be used at a different time                        they are generated. A risk of this approach is that the facility
than the moment of generation. Certificate tracking systems                          might not be constructed or could be destroyed by a natural
have been established in different states or regions to issue                        disaster after construction, and buyers should investigate
and record the exchange of RECs, making REC markets even                             what remedy the seller proposes in such an event. As with all
more accessible.                                                                     products, independent product certification and verification
Customers do not need to switch from their current elec-                             of the claims made is an important aspect to consider.
tricity supplier to purchase RECs, and they can buy RECs                             For a company or institution with operations and offices in
based on a fixed amount of electricity rather than on their                          multiple locations, purchasing RECs can consolidate the pro-
daily or monthly load profile. Because RECs are indepen-                             curement of green power thus eliminating the need to buy
dent of the customer’s electricity use, load profile, and the                        green power for different facilities through multiple suppliers.
delivery of electricity, they provide greater flexibility than                       Chapter 6, Procuring Renewable Electricity and Renewable
purchasing bundled RECs and electricity from a utility.                              Energy Certificates, provides more details about purchasing
While RECs offer increased contracting convenience, they                             RECs.
do not provide the same protection against price volatility
as long-term contracts.                                                              Business and organization purchases of different green power
                                                                                     product types is shown in Figure 5, but on-site renewable
The price for voluntary RECs can be lower than the premi-                            generation is not included because equivalent data are not
ums for renewable electricity products for several reasons: 1)                       available.
RECs have no geographic constraints and therefore can pro-
vide access to the least expensive renewable resources;
2) the supplier does not have to deliver the power to the REC
purchaser with the associated transmission and distribution                          On-site Renewable
costs; 3) the supplier is not responsible for meeting the pur-
chaser’s electricity needs on a real-time basis.; and 4) REC
                                                                                     Generation
prices reflect greater competition because RECs are fungible                         In addition to buying renewable electricity from a utility or
in a voluntary market. To the extent that electricity providers                      buying renewable energy certificates, organizations can
are also sourcing their green power products from purchased                          install renewable power generation at their facilities.
RECs, however, the premium that they would charge might                              They can either buy the system outright or install a system
not differ greatly from the cost of the unbundled RECs that                          that is owned by another party and buy the electricity as it
organizations can buy.                                                               is generated.
An alternative way to buy RECs is through a subscription, or                         On-site renewable generation offers advantages such as
“future RECs,” which involves an up-front purchase of RECs                           enhanced reliability, power quality, and protection against


Figure 5. Nonresidential green power sales by product type, 2008 (millions of kWh)

                      Green Pricing                        Green Marketing                           REC Markets                       Total

                              2,100                                  1,200                                15,400                     18,700

                  Note: Nonresidential customers refer to business and institutional customers. Data for on-site renewable generation are not available.
                  Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in the United States: A Status Report (2008
           Note:Data).
                 Nonresidential
                       Golden, CO: Nationalcustomers
                                            Renewable Energyrefer   to business and institutional customers. Data for
                                                             Laboratory.
           on-site renewable generation is not available.
Guide to Purchasing Green Power                                                                                                                                   11
         Figure 5: Nonresidential Green Power Sales by Product Type, 2008 (Millions of kWh)
Chapter 4



price volatility, as well as a visible demonstration of envi-
ronmental commitment. It is important to note that selling          On-site Generation: BMW
RECs from an on-site facility negates the system owner’s
claim to using a corresponding amount of renewable electric-        Manufacturing Company
ity generated on site because the REC buyer is buying that          Automaker BMW pipes methane gas 9.5 miles from a landfill
claim specifically and contractually. In order to claim the         to serve the electric and thermal needs of its manufactur-
                                                                    ing facility in Greer, South Carolina. Rather than invest in
zero greenhouse gas emissions from electricity generated
                                                                    new internal combustion engines to generate electricity, in
on-site, the RECs would need to be retired and not sold to a        2003 BMW converted four turbines that previously ran on
third party. In many states, excess electricity generated with      purchased natural gas. In 2009, BMW replaced the original
on-site renewable generation may be sold back to the grid at        four turbines with two new highly efficient turbines that will
the same price at which power is bought, through a process          increase the electrical output from 14 percent to almost 30
called net metering. This arrangement can improve the finan-        percent. By recovering the waste heat from the turbines, the
cial return for on-site renewable power systems, although net       11-megawatt combined heat and power project satisfies
metering is often limited to small installations. For example,      more than 60 percent of the facility’s thermal needs, as well
the state of California limits on-site generation systems to        as nearly 20 percent of its electricity use. To date, the project
                                                                    has saved the automaker an average of more than $5 million
1 megawatt (MW) (10 MW for up to three biogas digesters)
                                                                    each year in energy costs. The new turbines installed in 2009
and the aggregated on-site systems’ capacity may not produce        should return an additional average annual cost savings of
more than 2.5 percent of a utility’s peak demand.                   up to $2 million. With the success of its landfill gas project,
                                                                    the facility is exploring on-site wind and has completed a
On-site renewable energy technologies for power generation
                                                                    study of the site’s wind speed and direction. For more on-
include photovoltaic panels, wind turbines, fuel cells, and         site examples, see Chapter 10, Resources for Additional
biomass combustion. Large facilities sited near a munici-           Information.
pal landfill or sewage treatment plant may be able to use
recovered methane gas for on-site electricity and/or heat
production. The following describes each of these options in           gas), direct combustion boiler and steam turbine gen-
more detail:                                                           erator set, microturbine unit, or other power conversion
     • Solar. Solar systems can be configured to almost any            technologies. Most methane gas projects produce from
       size from a few kilowatts up to several megawatts.              0.5 to 4 MW of electrical output.
       On-site photovoltaic (PV) systems may be situated on
       schools, homes, community facilities, and commer-            • Biomass. Biomass is plant material burned in a boiler
       cial buildings. They can be integrated into a building,        to drive a steam turbine to produce electricity. This
       displacing other building material costs, such as for          system is good for producing combined heat and power
       roofing shingles or car park shading.                          (CHP) at facilities with large thermal loads. Biomass
                                                                      projects are best suited to locations with abundant bio-
     • Wind. Wind turbines vary in size. A typical small              mass resources (often using waste products from the
       unit provides 100 kilowatt (KW) or less, whereas               forest industry or agriculture).
       large turbines range from 500 kW to more than 3
       MW. On-site applications are usually only possible in        • Fuel cells. Fuel cells are another way of producing
       nonurban areas, and often require zoning permits to            power. They emit essentially no air pollution and are
       exceed 35-foot height restrictions (a tower for a 250 kW       more efficient than other forms of generation, but they
       turbine is 130 feet high with a blade sweep of 98 feet).       cannot be considered a renewable resource unless they
       Such installations usually require approximately 1 acre        operate on a renewably generated fuel, such as digester
       of land per turbine and wind speeds that average 15            gas or hydrogen derived from PV or wind power.
       mph at a 150-foot height. In addition, placing turbines
                                                                  In this era of power reliability problems and national secu-
       in urban areas is inadvisable because nearby buildings
                                                                  rity concerns, domestic, on-site renewable generation offers
       may create wind turbulence that can disrupt the tur-
                                                                  important advantages over central-station and fossil-fueled
       bines’ performance.
                                                                  power plants. Moreover, on-site generation can be designed
     • Landfill and sewage methane gas. Methane gas               to provide backup power for critical loads when power
       derived from landfills or sewage treatment plants can      from the grid is interrupted, as well as when the renewable
       be used to generate electricity. Methane gas also may      resource is not available. This ability to operate indepen-
       be generated using digesters that operate on manure or     dently of the power grid is a great advantage, particularly at
       agricultural wastes. The methane gas is then converted     remote facilities. Because renewable generation technologies
       to electricity using an internal combustion engine, gas    can be modular and used on a small scale, the on-site gen-
       turbine (depending on the quality and quantity of the

12                                                                                                Options for Purchasing Green Power
Chapter 4



eration system can be designed to enhance the redundancy          to the utility distribution system, commonly referred to as
and diversity of a facility’s energy supply.                      interconnection. Interconnection rules designed for large
                                                                  generators often are unnecessarily burdensome for small
On-site renewable generation typically has higher capital costs   generators. Increasingly, however, state interconnection rules
and lower operating costs compared with installing fossil-        are being standardized and simplified for smaller genera-
fueled generation. Although these costs can make the initial      tors. In addition, national standards have been issued by the
investment in on-site generation more difficult to justify,       Federal Energy Regulatory Commission (FERC) that may
once that investment has been made, the annual budgets for        ease interconnection in special cases. Chapter 7, Planning an
maintaining the system are much easier to justify (compared       On-site Renewable Generation Project, provides more details
with purchasing renewable electricity), which makes sustain-      about procuring an on-site renewable generation system.
ing a commitment to renewable power easier. Additionally,         Customers considering on-site generation should check with
there are new financing models for on-site generation being       their local utility or with the state utility commission about
developed to lower the upfront capital investment, such as the    interconnection rules. Chapter 10, Resources for Additional
solar power purchase agreement (SPPA).                            Information, provides more sources of information about
An organization that installs its own generation capability       utility interconnection.
may have problems with the requirements for connecting




Guide to Purchasing Green Power                                                                                               13
Chapter 5
Steps to Purchasing Green Power



T
      o buy green power, an organization first should deter-        Figure 6. Steps to a successful green power project
      mine what green power products will help fulfill its
      electricity needs and decide how to procure those
      products. Figure 6 illustrates the steps in this process.                                             Setting Goals (5)

The preliminary steps described in this section are the same
for all types of green power products. The final steps differ                                      Identifying Key Decision-Makers (5)
for purchased green power products (renewable energy cer-
tificates [RECs] and utility-supplied) and on-site renewable
generation. These steps are explained in later chapters of                                             Gathering Energy Data (5)
this guide.

                                                                                                   Choosing Green Power Options (5)

Setting Goals
                                                                                    Renewable          RECs                On-site Renewable
The first step in any type of green power purchase is to set                         Electricity                              Generation
goals about what the objectives are for purchasing green
                                                                                        Developing                           Screening the
power, considering the following questions at a minimum:                            Screening Criteria (6)                  Technologies (7)
  • Why is the organization considering green power?              Re-assess Green
                                                                  Power Purchase       Collecting Product                 Obtaining Resources
  • What does the organization hope to get from it?                                     Information (6)                    and Assistance (7)


  • What selection criteria are important to the                                          Creating a                              Creating a
    organization?                                                                    Procurement Plan (6)                       Project Plan (7)


  • Are independent certification and verification important
                                                                                                                               Anticipating
    to the organization?                                                                                                   Possible Barriers (7)

These questions are best considered as part of the organiza-                                                                 Installing and
tion’s overall energy or environmental management process.                                                                Operating an On-site
Such a process is an ongoing effort to improve the energy                                                                 Renewable System (7)

and environmental performance of the organization, usually
driven by goals set by the organization’s top-level leaders.
The goals for a specific purchase of green power then flow                                              Capturing the Benefits (8)

from, and are greatly informed by, these overall goals.
                                                                                                       Evaluating the Purchase (5)


Identifying Key Decision-
                                                                                                   (Indicates Corresponding Chapter)
Makers                                                               marketing departments. All of their interests and concerns
The people in an organization who are interested in green            must be addressed early in the planning process. Experience
power may be high-level decision-makers as well as staff             has demonstrated that not doing so often leads to disagree-
from the purchasing, facilities/energy management, environ-          ments later in the process. Because buying green power is
mental health and safety, legal, corporate relations, and/or         ultimately a financial decision, it is very important to have


14                                                                                                             Steps to Purchasing Green Power
Chapter 5



the chief financial officer involved in and supportive of the     Calculating an organization’s annual electricity use can deter-
decision. In addition, other departments, such as market-         mine the quantity of emissions associated with that use and
ing or environment, health, and safety, may also contribute       help estimate the emissions that could be prevented by buy-
funds to help pay for green power.                                ing green power. EPA offers an online tool to help estimate
                                                                  emissions from an organization’s current conventional elec-
Designating a contact person who can draw on expertise            tricity use at .
from throughout the organization is an important step. The
departments chosen to participate will probably depend on
the type of products being considered. It also is important
to involve senior management in the planning and decision         Choosing Green Power
process. In many cases, the greatest advocate of buying green
power is an executive such as a chief executive officer or
                                                                  Options
president. With this high-level support, buying and promot-       The next step is finding the appropriate green power solu-
ing green power is much easier. Some organizations involve        tions for the organization. Another goal of this step is
their employees (or students, in the case of educational insti-   becoming familiar with the electricity markets in the organi-
tutions) in selecting the green power products.                   zation’s area and the available green power technologies.
                                                                  The first decision is whether to generate power on-site and/or
Gathering Energy Data                                             to purchase power or RECs from outside vendors. The main
                                                                  differences between these options are the ease and cost of
The organization considering green power should take an           implementation, the need for capital investment, the ability
inventory of its energy use, including electricity and ther-      to hedge risk, and the length of time over which one realizes
mal. Its annual electricity use can be calculated from the        the benefits. On-site renewable generation typically requires
utility bills for each facility or business unit and for the      an up-front investment (as part of either a financed project or
entire organization. These data will help: 1) compare the         a capital appropriation), but the reduction in the consump-
organization’s energy performance against peer facilities’        tion of conventional energy can last for as many as 30 years.
energy performance and understand energy use patterns and         There are new financing models being developed to help
trends; 2) determine how much green power to buy; and,            overcome the upfront financial barriers to on-site genera-
3) evaluate the environmental impacts of the organization’s       tion. These models are discussed in more detail in Chapter 7,
electricity use. Monthly electricity consumption data are         Planning an On-site Renewable Generation Project.
the most important, while peak demand and interval-meter          Renewable electricity purchases and RECs usually require no
data are useful if available. Each organization should study      up-front capital and are relatively easy to procure, but they
its consumption data over the past year before specifying its     deliver benefits only for the term of the purchase contract.
requirements in order to have a complete and accurate pic-
ture of energy use. Outside consultants or organizations can      An organization’s motivations for purchasing green power
help with these steps.                                            will help decide which costs and benefits are most important
                                                                  and thus which type of green power is most appropriate. For
As mentioned earlier, green power can be considered part of       example, an organization that wants to manage fuel price
an energy portfolio that includes energy efficiency upgrades,     risk might be more interested in buying fixed-price renew-
load management, and combined heat and power. The more            able electricity. An organization that finds the reliability of its
an organization’s energy requirements can be reduced, the         power supply to be most important might be more interested
less green power it will need to buy to achieve a given objec-    in on-site renewable generation. These options can also be
tive, which in turn makes green power more affordable.            combined. For instance, an organization might install on-site
Some organizations have saved enough money from energy            generation to meet part of its electricity needs and purchase
efficiency upgrades to enable them to pay for their green         RECs to match the remainder of its electricity use. Likewise,
power purchases.                                                  organizations with facilities in multiple locations must deter-
Many resources are available to help improve the energy           mine whether to procure green power from one provider for
efficiency of buildings and equipment. A good starting point      all sites, or whether to procure green power from multiple
is the ENERGY STAR Portfolio Manager, an online tool that         providers based on unique options that might be available to
compares a building’s energy usage with that of similar           an individual site. Organizations with facilities in multiple
buildings. The ENERGY STAR Web site  offers simple energy-saving tips and a directory of ener-    uct for each site.
gy services companies to provide additional assistance, such      The green power options available to an organization are
as a facility energy audit.                                       determined partly by the electricity market structure in the


Guide to Purchasing Green Power                                                                                                   15
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