Considering Green Power Options
If you are considering green power options as part of your electricity procurement strategy, you need to examine your financial criteria, your motivation, and the option to generate or purchase the power.
What Are Your Criteria?
When considering green power options, it is useful to consider the criteria used by other green power purchasers. A 2008 survey of corporations by the World Resources Institute (WRI) and the Climate Group found that the top criteria against which companies evaluate low-carbon technology projects include:
- Financial Metrics: The return on investment (ROI) of projects is of paramount importance.
- Marketing Value: The ability of projects to improve a company’s brand value or image is a key factor in decision-making.
- Carbon Dioxide (CO2) Benefit: The extent to which projects can help companies reach their emission reduction goals is also a factor they considered.
The key conclusion from the WRI-Climate Group survey is that low-carbon technology projects must be able to compete financially with non-renewable related projects in order to be funded.
What Is Your Motivation?
An organization’s motivations for purchasing green power will help decide which costs and benefits are most important and thus which type of green power is most appropriate. For example, an organization that wants to manage fuel price risk might be more interested in buying fixed-price renewable electricity. An organization that finds the reliability of its power supply to be most important might be more interested in on-site renewable generation. These options can also be combined. For instance, an organization might install on-site generation to meet part of its electricity needs and purchase RECs to match the remainder of its electricity use.
Generate or Purchase?
The next decision is whether to generate power on-site and/or to purchase power or RECs from outside vendors. The main differences between these options are the ease and cost of implementation, the need for capital investment, the ability to hedge risk and the length of time over which one realizes the benefits. On-site renewable generation typically requires an up-front investment (as part of either a financed project or a capital appropriation), but the reduction in the consumption of conventional energy can last for as many as 30 years. There are new financing models being developed to help overcome the upfront financial barriers to on-site generation.
Renewable electricity purchases and RECs usually require no up-front capital and are relatively easy to procure, but they deliver benefits only for the term of the purchase contract.
For on-site renewable generation, the organization should assess the renewable energy resources available at its facility, including the quality of wind and solar resources, the availability of biomass fuel or landfill gas, and siting constraints (such as space limitations or shading from neighboring buildings). The cost of conventional power at the facility also is important to consider. The organization should read over its utility’s and state’s interconnection rules to make sure there are no obvious provisions that would prohibit grid-connected, on-site generation. The goal at this stage is to eliminate any renewable options that are clearly not feasible for the organization.
Likewise, organizations with facilities in multiple locations must determine whether to procure green power from one provider for all sites, or whether to procure green power from multiple providers based on unique options that might be available to an individual site. Organizations with facilities in multiple locations must also select the appropriate green power product for each site.
The green power options available to an organization are determined partly by the electricity market structure in the state in which the facility is located. Each state has different rules governing power marketers, and the level of competition varies among the states. Large electricity purchasers might be able to work with their local utility or electricity provider to tailor a product to meet their needs.