Guide to Purchasing Green Power - Renewable Electricity, Renewable Energy Certificates, and On-Site Renewable Generation
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Guide to
Purchasing
Green Power
Renewable Electricity, Renewable
Energy Certificates, and On-Site
Renewable Generation
DOE/EE-0307
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
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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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 1Chapter 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 IntroductionChapter 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 3Chapter 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 DefinedChapter 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 5Chapter 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 PowerChapter 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 7Chapter 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 PowerChapter 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 9Chapter 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 PowerChapter 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 PowerChapter 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 13Chapter 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 PowerChapter 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
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