13.Purchase Green Power

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Guide toPurchasingGreen PowerRenewable Electricity, RenewableEnergy Certificates, and On-SiteRenewable Generation

DOE/EE-030


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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-04-015www.epa.gov/greenpowerMarch 2010

ISBN: 1-56973-577-8
http://www1.eere.energy.gov/femp/technologies/renewable_purchasingpower.htmlhttp://www.epa.gov/greenpowerhttp://www.wri.org/publicationshttp://www.resource-solutions.org/publications.phphttp://www.epa.gov/greenpowerhttp://www.epa.gov/greenpowerhttp://www.resource-solutions.org/publications.phphttp://www.wri.org/publicationshttp://www.epa.gov/greenpowerhttp://www1.eere.energy.gov/femp/technologies/renewable_purchasingpower.html


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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 ............................................................................................5The Benefits ............................................................... ...................................................................... ..................... 5

The Costs ................................................................... ...................................................................... ..................... 7

Chapter 4: Options for Purchasing Green Power ................................................................................................9Renewable Electricity Products ..................................................................... ........................................................ 9Renewable Energy Certificates (RECs) ...................................................................... .......................................... 10

On-site Renewable Generation........................................................... ................................................................. 11

Chapter 5: Steps to Purchasing Green Power ...................................................................................................14Setting 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 .............................................................. ................... 18Collecting Product Information ............................................................................... .......................................... 20

Creating a Procurement Plan ................................................................................... .......................................... 20

Chapter 7: Planning an On-site Renewable Generation Project ..........................................................................24Screening the Technologies ......................................................................... ...................................................... 24

Obtaining Resources and Assistance ........................................................... ...................................................... 25

Creating a Project Plan ........... ..................................................................... ...................................................... 25

Anticipating Possible Barriers ........................................................... ................................................................. 27

Instal ling and Operating an On-site Renewable Generation System ................................................................. 28

Chapter 8: Capturing the Benefits of the Purchase ............................................................................................29

The Environmental Benefits ............................................................. .................................................................. 29Internal 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


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Guide to Purchasing Green Power 1

Summary

This Guide to Purchasing Green Poweris intended fororganizations that are considering the merits of buy-ing green power as well as those that have decided tobuy it and want help doing so. The guide was written

for a broad audience, including businesses, government agen-cies, universities, and all organizations wanting to diversifytheir energy supply and reduce the environmental impact oftheir electricity use.

First published in 2004, the Guide to Purchasing Green Powerprovides an overview of green power markets and describesthe necessary steps to buy green power. The 2010 versionrepresents the first major update to the guide and includesnew market information and terminology, case studies, anupdated additional resources section, and new resources forFederal agencies to use when planning on-site renewableprojects or purchasing green power.

This section summarizes the guide to help readers find theinformation they need.

Chapter 1 describes the concepts of renewable energy andgreen power and discusses their differences from conven-

tional energy sources. This section also summarizes recentchanges in electricity markets and the current availabilityand use of green power sources.

Chapter 2 defines green power.

Chapter 3 summarizes the benefits and costs of purchasinggreen power.

Chapter 4 defines three options for purchasing green powerproducts: renewable electricity, renewable energy certificates,and on-site renewable generation.

Chapter 5 outlines the general steps needed to prepare to

buy green power: setting goals, identifying the key decision-makers, gathering energy data, choosing the specific greenpower options available to the purchasers facilities, andevaluating the purchase.

Chapter 6 discusses the steps to procure renewable electric-ity or renewable energy certificates: developing screeningcriteria, collecting product information, and drawing up aprocurement plan.

Chapter 7 describes the steps to establish an on-site greenpower system: screening the technologies best suited to thepurchasers site, obtaining technical and financial resourcesand assistance, creating a project plan, anticipating possiblebarriers, and installing and operating the on-site generationsystem.

Chapter 8 explores ways of taking advantage of promotionalopportunities after buying green power. This section cov-ers promotion both inside and outside the organization andoptions for quantifying the environmental benefits of thepurchase.

Chapters 9 and 10 of the guide conclude with a list ofresources offering more information about all aspects ofgreen power. Because electricity from renewable resourcesis relatively new and may be generated in a variety of ways,many institutions are working to facilitate the development

of green power markets. Several of these organizations pro-gramsthe U.S. Department of Energys Federal EnergyManagement Program (FEMP), the U.S. EnvironmentalProtection Agencys Green Power Partnership, the GreenPower Market Development Group of the World ResourcesInstitute (WRI), and the Green-e Energy CertificationProgram administered by the Center for ResourceSolutionsworked together to write this purchasing guide.

The guide also includes aglossary of terms commonly used inthe green power field.

Finally, the appendix discusses considerations specific tofederal agencies that buy green power, particularly the pro-curement regulations that cover the purchase of green power


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2 Introduction

Chapter 1

Introduction

Today, the energy sources used to create electricity dif-fer in many ways, including in their environmentalimpacts. In the United States, electricity is most oftengenerated using fossil or nuclear fuelsforms of

power generation that can have detrimental effects on humanhealth and the environment through air emissions and otherproblems. Despite advances in pollution controls over thelast 30 years, this conventional power generation is still thenations single largest source of industrial air pollution and is

a major contributor to greenhouse gas emissions.

Electricity markets now offer cleaner ways of producingpower, however, and give many consumers the ability tochoose how their power is generated. One of these choices ispower from renewable sources, or green power.

In some parts of the United States, consumers can buy greenpower from the provider of their electricity. All consumerscan buy green power in the form of renewable energy cer-tificates (RECs), which are available nationally regardless ofwhether a customers local electricity provider offers a greenpower product.

While no form of electric power generation is completelybenign, electricity generated from renewable resources suchas solar, wind, geothermal, small and low-impact hydropow-er, and biomass has proved to be environmentally preferableto electricity generated from conventional sources such ascoal, oil, natural gas, and nuclear. This Guide to PurchasingGreen Powerfocuses on electricity generated from renewableresources, both delivered through the grid and generated on-site. Although renewable energy can also be used for heatingneeds or for transportation fuels, this guide does not addressthose applications.

According to the U.S. Environmental Protection Agency

(EPA), on average, replacing each kilowatt-hour (kWh) of tra-

ditional power with renewable power avoids the emission ofmore than one pound of carbon dioxide. Because of the sheerquantities of electricity involved nationwide, consumers haveenormous influence to reduce environmental impacts fromconventional power generation. If the typical commercialbuilding switched to 100 percent renewable electricity, theuse of green power would have the equivalent environmentalimpact of avoiding the carbon dioxide emissions of nearly 28vehicles each year.

A wide range of organizations purchase green power,including: federal, state, and local governments; universi-ties; businesses; nonprofit organizations; and individualconsumers. By purchasing green power, these organizationsare helping the environment and meeting their own goals,such as financial benefits, public relations benefits, and evennational security benefits. In 2008, renewable electricity gen-eration in the United States (excluding hydropower) equalednearly 124 million megawatt-hours (124 billion kilowatt-hours)enough to meet the annual electricity needs ofnearly 12 million average U.S. homes.

Many states already require utilities to supply some of their

electricity from renewable sources. These state mandates(known as compliance markets) require a percentage ofthe utilitys power mix to come from renewable sources, sothat utility customers will green their power mix somewhatwithout taking any conscious action. Voluntary purchases,however, are still an important strategy for organizations thatwant to buy most or all their power from renewable sourcesor want to promote innovative development of green power.Voluntary green power purchases have played an importantrole in driving development of the market (see Figure 1) andare expected to be an important part of the market for theforeseeable future.


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Chapter 1


Leading organizations are finding that using green poweris an effective part of a strategic energy management plan.

Successful energy management plans are based on a portfo-lio analysis that considers options such as energy efficiency,load management, power purchases, on-site generation, andnon-electric (thermal) energy needs. As with any investmentportfolio, the best mix of these options depends on the orga-nizations goals, the cost of various alternatives, and externalmarket conditions.

While voluntary purchases of green power are becomingmore common practice in todays electricity markets, thesemarkets offer a wide range of choices. This guide is intendedfor organizations that have decided to buy green power butwant help in figuring out how to do it, as well as for organi-zations that are still considering the merits of buying greenpower.

The Guide to Purchasing Green Poweraddresses the followingcommonly asked questions:

What is renewable energy and green power? (p. 4)

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

How do I make a business case for buying green power(p. 5)

What is the cost of green power? (p. 6)

What are the options for purchasing green power?(p. 9)

What is the importance of product certif ication andverification? (p. 19)

How should an organization choose a green powerproduct? (p. 15)

What are the best ways of buying green power? (p. 18)

What are the steps to installing on-site renewable gen-eration? (p. 24)

How do I communicate my green power purchase tostakeholders? (p. 30)

0

5,000

10,000

15,000

20,000

25,000

2004 2005 2006 2007 2008

millionso

fkWhannua

lly

Voluntary

Compliance (new renewables)

Figure 1. Comparison of voluntary and compliance markets for renewable energy, 20042008

Note: New renewable resources generally refer to renewable facilities that began operation in 1997 or later.

Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in the United States: A StatusReport (2008 Data). Golden, CO: National Renewable Energy Laboratory.


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4 Green Power Defined

Chapter 2

Green Power Defined

The term green poweris used in a number of differentways. In the broadest sense, green power refers toenvironmentally preferable energy and energy tech-nologies, both electric and thermal. This definition

of green power includes many types of power, from solarphotovoltaic systems to wind turbines to fuel cells for auto-mobiles.

In this guide, green power refers specifically to electricitygenerated from a subset of renewable resources, includingsolar, wind, geothermal, biogas, biomass, and low-impacthydroelectric sources. These electricity sources are derivedfrom natural resources that replenish themselves over shortperiods of time, including the sun, wind, moving water,organic plant and waste material (biomass), and the Earthsheat (geothermal).

Note that the terms green power, environmentally preferable,clean power, and renewable energy may be used in slightlydifferent ways, which differ primarily according to the vary-ing assessments of the environmental impacts of harnessingspecific resources and of the relative significance of eachimpact. The exact definitions of these terms, while always

important, take on added significance when dealing with

state and federal government requirements or determiningeligibility for government and utility incentives. For morediscussion of how each of the organizations that collaboratedon this document defines green power, please refer to theirWeb sites, listed in Chapter 10, Resources for AdditionalInformation.

Helping Consumers IdentifyGreen PowerTo help consumers more easily identify green power products,the Green-e Energy certification program has coordinatedthe development of market-based, consensus definitions forenvironmentally preferable renewable electricity and renew-able energy certificates (RECs). The Green-e Energy program,administered by the nonprofit Center for Resource Solutions,certifies and verifies renewable energy products offered incompetitive electricity markets, sold in utility green pricingprograms, and sold in national markets for RECs. Furtherdetails about Green-e Energy certification are available fromthe Green-e Web site listed in Chapter 10.


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Chapter 3

The Benefits and Costs of Green Power

The Benefits

Green power can offer organizations a variety ofenvironmental, financial, stakeholder relations,economic development, and national securitybenefits. This Guide is designed to help buyers

navigate the costs, contracting challenges, and public rela-tions risks.

Environmental Reduce environmental impacts. Conventional elec-

tricity generation is a significant source of greenhousegas emissions as well as the single largest industrialsource of air pollution in the U.S. The emissions fromconventional electricity generation contribute to a num-ber of serious environmental problems, including acidrain, fine particulate pollution, and climate change.Green power generates less pollution than conventionalpower and produces no net increase in greenhouse gasemissions, helping protect human health and the envi-ronment.

Financial

Provide a hedge against risks posed by:

Electricity price volatility. Purchasing electricitygenerated by renewable energy sources may providethe buyer protection against unstable or rising fossilfuel prices, for example through long-term, fixed-price supply contracts directly with developers orgenerators. Organizations can also encourage stableelectricity prices by supporting new renewablepower resources on the local grid, thereby diver-

sifying the energy mix with resources that are notsubject to the rise and fall of fuel costs.

Fuel supply disruptions. On-site renewable gen-eration can reduce the risk of disruptions in fuelsupplies, like natural gas, resulting from transporta-tion difficulties or international conflict.

Additional environmental regulation. To addressglobal climate change and regional air qualityissues, federal and state regulations could effectively

increase the price of conventional electricity, makinggreen power financially more attractive.

Stakeholder Relations

Meet organizational environmental objectives.

Reducing an organizations environmental impact isone of the main motivations for buying green powerand is often important to stakeholders. For example,buying green power can help reduce greenhouse gasemissions from electricity consumption. If an organi-zation is interested in creating a third-party certifiedenvironmental management system (e.g., ISO-14001certification for environmental performance) or isconducting an organization-wide inventory of its green-house gas emissions, a program for reducing emissionswill be an important part of this certification process.

Price Stability of Green PowerUnlike power generated from fossil fuels, some green powerproducts are not subject to the impact of volatile fuel prices.For this reason, companies like IBM and Advanced MicroDevices (AMD) use green power to hedge against energycost variability.

In 2001, the energy managers at IBMs Austin, Texas, facilitywere able to lock in power rates by signing up for Austin

Energys GreenChoice program. With GreenChoice, thenormal fossil fuel charge on the customers bill is replaced bya green power charge for the amount of green power thatthe customer chooses to buy. Unlike the fossil fuel charge,the green power charge is fixed until 2011. As it turned out,Austin Energys fuel charge for conventional power spiked in2001 and IBM saved $20,000 in its first year in the program.When the fuel charge increased again in 2004, IBM savedmore than $60,000.

Similarly, AMD saw significant cost savings after its firstpurchase of renewable energy in 2000 from Austin Energy.Shortly after AMDs purchase, natural gas prices soared andbecame more costly than the fixed green power premium.By 2001, AMD saved approximately $100,000 and, in

response, doubled the companys green power purchase forthe following year. In 2009, AMD purchased nearly 74 mil-lion kilowatt-hours of green power annually, which supplies100 percent of its Austin facilitys energy needs.


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Chapter 3

6 The Benefits and Costs of Green Power

Demonstrate civic leadership. Being among thefirst in a community to purchase green power is a dem-onstration of civic leadership. It makes a statement thatan organization is willing to act on its statedenvironmental or social goals. These purchases alsodemonstrate an organizations responsiveness to its cus-

tomers, the majority of whom favor renewable energy.See Chapter 10, Resources for Additional Information,for details.

Generate positive publicity. Buying green poweraffords an opportunity for and builds on existing publicrecognition and public relations activities. Companiesthat are in the public eye need to be responsive tothe concerns of environmentally conscious custom-ers, shareholders, regulators, and other constituents.Programs promoting green power, such as EPAs GreenPower Partnership or Green-e Marketplace, provideassistance in reaching broad audiences to convey the

benefits of green power purchases.

Improve employee morale. Progressive action andleadership on environmental issues like renew-able energy may improve employee morale, whichin turn can reduce employee turnover, attract newemployees, and improve productivity. In a survey of464 organizations, sponsored by the National WindCoordinating Collaborative, improving employeemorale was cited as the third most important motiva-tion for buying green power.

Differentiate products or services. By purchasinggreen power, a company may be able to differentiateits products or services by, for example, offering themas made with certified renewable energy. Purchasersof green power can also join their power supplier to

market their products together. In addition, purchas-ers of products certified by the Center for ResourceSolutions Green-e Marketplace program can display theGreen-e logo on their product packaging to indicate acommitment to using 100 percent green power in themanufacturing of the product. Many companies are alsofinding that producing their products with green power

gives them an advantage in selling to their businesscustomers who are trying to green their supply chain.

Economic Development and NationalSecurity

Stimulate economies. Manufacturing, installing, andoperating renewable resources in the United Statesrequires a clean energy workforce. By purchasing greenpower, an organization can help create new, domesticjobs. These high-quality, often well-paying, jobs helpgrow the local economy. Renewable power facilities can

also increase a local tax base and can provide incomefor farmers and rural communities through landownerlease payments. The renewable energy industry is animportant growth sector that can simultaneously boostthe nations economy while meeting the nations energychallenges.

Increase fuel diversity. Green power diversifies thenations electricity portfolioa good way to manageriskand, because renewable resources are indigenous,

Demonstrating CommunityLeadership: City of Bellingham,WashingtonBy a unanimous city council vote in mid-2006, Bellingham,

Washington, took a leadership role in promoting renew-able energy by choosing to purchase 100 percent greenpower for all electricity used in city-owned facilities. FromSeptember 2006 through Earth Day 2007, the city part-nered with the local utilitys green power program and alocal nonprofit organization to conduct the BellinghamGreen Power Community Challenge. The goal of the chal-lenge was to increase green power purchasing among thecitys residents and businesses to meet at least two percentof the citywide electric load. Bellinghams results have farexceeded original challenge goals. To date, the green powerannually purchased by more than 2,680 households, 125businesses, and five large volume purchasers totals 82.8 mil-lion kilowatt-hours of renewable energy certificates (RECs)

and represents approximately 12 percent of the communitystotal yearly electricity use. The communitys purchase resultedin EPA recognizing Bellingham as the first EPA Green PowerCommunity in Washington State.

Green Powers Role in OverallEnvironmental StrategyA recent survey of corporate participants in the Green-eMarketplace program indicates that most companies viewtheir renewable energy purchases as part of a larger com-mitment to environmental sustainability.

75 percent said support of renewable energy was part ofa multi-pronged corporate environmental strategy.

70 percent differentiate their company as an environmental

leader by supporting renewable energy. 45 percent of respondents indicated that developing an

environmentally friendly brand was very important.

A Web link to the full survey is provided in Chapter 10,Resources for Additional Information.


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Chapter 3


green power reduces the countrys dependence onimported fuels.

Reduce infrastructure vulnerability. The distributednature of renewable resources allows for the distrib-uted generation of renewable energy, thus, reducing the

countrys reliance on a vulnerable, centralized electric-ity infrastructure.

Economies of Scale. Most renewable energy technolo-gies are manufactured on assembly lines, where massproduction can reduce costs. By purchasing greenpower, organizations can help build demand, which inturn could lead to lower production costs and poten-tially lower prices.

The Costs

Green power can be priced differently than standard powersources. It has usually been more expensive than conven-tional electricity sources, largely due to the relative newnessof renewable technologies and their gradual diffusion intomainstream markets, compared with conventional electricity.Chapter 6, Procuring Renewable Electricity and RenewableEnergy Certificates, suggests ways of minimizing these costsin conjunction with a procurement plan. Nonetheless, thecost of green power is continuing to fall as growing demanddrives the expansion of manufacturing facilities and reducesproduction costs. Figure 2 illustrates the levelized costs ofrenewable and fossil fuel technologies, showing that severalgreen power technologies are now cost-competitive with con-ventional sources.

100

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0

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EnergyEfficiency

Wind(onshore)

Biomass NaturalGas

Coal Nuclear Solar PV

CurrentLeve

lize

dCosts

($/MWh)

Geothermal

Estimated implied cost in2012 for crystalline PVsystem

Targeted implied cost in2012 for thin film PVsystem

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

Note: Costs have been levelized over the lifetime of the technology and include construction, fuel, and operation and maintenancecosts. 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.

.
http://blog.cleanenergy.org/files/2009/04/lazard2009_levelizedcostofenergy.pdfhttp://blog.cleanenergy.org/files/2009/04/lazard2009_levelizedcostofenergy.pdf


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Chapter 3

8 The Benefits and Costs of Green Power

The actual price for green power depends on a number offactors, including the availability and quality of the resource,manufacturing capacity and world demand for the technol-ogy, the availability of subsidies to encourage green power,and the quantity purchased and terms of the contract.Generally, the price of green power ranges from less than

that of the standard power mix, especially in competitivemarkets and where state subsidies exist, up to one to fourcents more per kilowatt-hour. When the market price ofconventional electricity is high, purchasers of green power ata fixed price may actually save money. Of course, when themarket price of conventional electricity drops, they will bepaying a premium. Since 2000, the average price premiumhas dropped at an average annual rate of eight percent (seeFigure 3).

Contracting Challenges

Green power may also be more difficult than conventional

power for an organization to purchase, causing transactioncosts in addition to any price premiums. Although organiza-

tions that are buying green power for the first time mightneed to invest extra effort, these costs fall significantly overtime as the electricity purchasers gain experience. Followingthe information and strategies provided in this guidebook,particularly Chapter 6, Procuring Renewable Electricityand Renewable Energy Certificates, should help reduce the

contracting challenges faced by new purchasers of greenpower. In addition, sample contract templates are publiclyavailable to help buyers avoid difficulties in signing a greenpower contract (see Chapter 10, Resources for AdditionalInformation).

Public Relations Risk

Some stakeholders might regard the purchase of greenpower as a token effort or greenwashing. Organizationscan improve the credibility of their green power purchaseby buying green power as part of a broader environmen-tal management program and by working with third-party

organizations for independent auditing, certification,endorsement, and minimum purchasing benchmarks.

0

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2.5

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3.5

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2000 2001 2002 2003 2004 2005 2006 2007 2008

Resi

dentia

lPremium

(ce

nts/kWh)

Average

Median

Figure 3. Trends in utility green pricing premiums, 20002008

Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in theUnited States: A Status Report (2008 Data). Golden, CO: National Renewable Energy Laboratory.


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Chapter 4

Options for Purchasing Green Power

Green power can be procured several differentways. The main distinction among the options isthe type of supplier and where the electricity gen-eration equipment is located: on the electric grid

or at the facility. For electricity delivered over the power grid,the status of utility restructuring in that state will determinewhether an organization is limited to buying green powerfrom its local distribution utility or whether it can chooseamong competitive power suppliers. Even if the state has no

green power marketers or the utility does not offer a greenpower option, an organization can buy renewable energycertificates (RECs). For on-site green power, the resourcesavailable at that site (e.g., solar, wind, biomass) are the mainfactors determining a projects feasibility.

The range of supply options in the market provides consid-erable flexibility to green power buyers. Organizations areable to consider factors such as price, specific green powergeneration resource (e.g., wind versus solar), ease of procure-ment, and the location and year of the generating facilityin their purchasing decisions. By considering these issues,buyers may be able to choose a specific type of green power

product or mix and match green power products to meettheir desired goals.

Renewable Electricity Products

Customers in many states have the ability to purchase agreen power product directly from their electricity provider.In regulated electricity markets, customers may be able tobuy agreen pricing product from their local utility. Greenpricing is an optional service offered by regulated entities toallow customers to support a greater level of utility invest-ment in renewable energy by paying a premium on theirelectric bill. In competitive electricity markets, customers canswitch electricity service providers if their current providerdoes not offer a green pricing product. In this market, thecustomer can purchase agreen marketing product from a pro-vider other than their local utility. Again, a green marketingcustomer pays a small premium in exchange for electricitygenerated from green power resources.

Most renewable electricity products (i.e., green pricing orgreen marketing products) are one of three types:

Fixed energy quantity block. A block is a quantity of100 percent renewable electricity, often 100 kilowatt-hours (kWh), offered for a fixed monthly price. Theprice is often expressed as a price premium above theprice of conventional power. Customers usually maysign up for as many blocks as they wish, with themonthly cost of these products based on how manyblocks they buy. This type of product is available insome competitive markets but is more often found inregulated utility green-pricing programs.

Percentage of monthly use. Customers may choosegreen power to supply a fixed percentage of theirmonthly electricity use. In practice, this usuallyresults in the purchase of blended green and conven-tional power. This is typically priced as a premiumon a cents per kWh basis over the standard rate or asa fixed charge per kWh. The monthly cost for theseproducts varies with use and the percentage of green

power chosen.

Long-term fixed price contracts. Buying a portion ofthe output of a renewable energy project in a long-termcontract can help a project developer secure financing,while giving the end-user a stable electricity contract.This model has been used with several governmentand academic institutions. WRIs Green Power MarketDevelopment Group is exploring this model for com-mercial users.

Some renewable electricity products require a fixed monthlyfee to support a given amount of renewable generation

capacity. Others require contributing to a green power fundthat finances renewable projects. These products can be aneffective way to assist the green power industry but do not,however, result in a metered amount of renewable electricitybeing generated, which is necessary to quantify the environ-mental benefits of the green power purchase. For this reasonthese products are not discussed further in this guide.Chapter 6, Procuring Renewable Electricity and Renewable


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Chapter 4

10 Options for Purchasing Green Power

Energy Certificates, provides more details about implement-ing a renewable electricity purchase.

Renewable Energy Certificates

Renewable energy certificates (RECs), also known as greentags, green certificates, and renewable energy credits,

are tradable instruments that can be used to meet volun-tary renewable energy targets as well as to meet compliancerequirements for renewable energy policies. A REC is a cer-tificate that represents the generation of one megawatt-hour(MWh) of electricity from an eligible source of renewableenergy. Each REC denotes the underlying generation energysource, location of the generation, and year of generation(a.k.a. vintage), environmental emissions, and other char-acteristics associated with the generator. RECs represent a

claim to the environmental attributes associated with renew-able energy generation, but purchasers should neverthelessensure that their contracts are explicit about which envi-ronmental attributes are conveyed to them. Figure 4 (above)illustrates the REC transaction path.

RECs may be sold bundledpaired by the electric serviceprovider with grid electricity delivered to the buyerorunbundled from electricity as a stand-alone product andpaired by the buyer with its grid electricity purchase. RECscombined with plain grid electricity are functionally equiva-lent to green power purchases from a local utility, no matterwhere the REC may be sourced. Purchasers of RECs maymake claims about their purchase of green power similar topurchasers of renewable electricity products.

Because RECs are not tied to the physical delivery of elec-trons, they allow organizations to purchase green power from

ConventionalPower

GreenPower

ElectricitySupplier

RECSupplier

ElectricityConsumer

POWER GRID

POWER

POWER

POWER

POWER

REC

REC

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

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


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Chapter 4


suppliers other than their local electricity provider. RECshelp overcome a major barrier to renewable facility develop-mentthe fact that the best renewable resources may not belocated close to population centers. The sale of RECs allowsthese more remote facilities to benefit from support for greenpower.

Unlike electricity, RECs do not need to be scheduled on atransmission system, and they can be used at a different timethan the moment of generation. Certificate tracking systemshave been established in different states or regions to issueand record the exchange of RECs, making REC markets evenmore accessible.

Customers do not need to switch from their current elec-tricity supplier to purchase RECs, and they can buy RECsbased on a fixed amount of electricity rather than on theirdaily or monthly load profile. Because RECs are indepen-dent of the customers electricity use, load profile, and thedelivery of electricity, they provide greater flexibility than

purchasing bundled RECs and electricity from a utility.While RECs offer increased contracting convenience, theydo not provide the same protection against price volatilityas long-term contracts.

The price for voluntary RECs can be lower than the premi-ums for renewable electricity products for several reasons: 1)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 RECpurchaser with the associated transmission and distributioncosts; 3) the supplier is not responsible for meeting the pur-chasers electricity needs on a real-time basis.; and 4) REC

prices reflect greater competition because RECs are fungiblein a voluntary market. To the extent that electricity providersare also sourcing their green power products from purchasedRECs, however, the premium that they would charge mightnot differ greatly from the cost of the unbundled RECs thatorganizations can buy.

An alternative way to buy RECs is through a subscription, orfuture RECs, which involves an up-front purchase of RECs

to be generated in the future by a new or soon-to-be-builtrenewable electricity facility. The advantage of this approachis that it promotes new renewable facilities by providingup-front financial assistance for their development and con-struction. In return, the purchaser receives the RECs as theyare generated over an extended period of years. Nevertheless,

even though they are paying upfront for future RECs, buyerscannot make environmental claims against those RECs untilthey are generated. A risk of this approach is that the facilitymight not be constructed or could be destroyed by a naturaldisaster after construction, and buyers should investigatewhat remedy the seller proposes in such an event. As with alproducts, independent product certification and verificationof the claims made is an important aspect to consider.

For a company or institution with operations and offices inmultiple locations, purchasing RECs can consolidate the pro-curement of green power thus eliminating the need to buygreen power for different facilities through multiple suppliers

Chapter 6, Procuring Renewable Electricity and RenewableEnergy Certificates, provides more details about purchasingRECs.

Business and organization purchases of different green powerproduct types is shown in Figure 5, but on-site renewablegeneration is not included because equivalent data are notavailable.

On-site RenewableGeneration

In addition to buying renewable electricity from a utility orbuying renewable energy certificates, organizations caninstall renewable power generation at their facilities.They can either buy the system outright or install a systemthat is owned by another party and buy the electricity as itis generated.

On-site renewable generation offers advantages such asenhanced reliability, power quality, and protection against

Green Pricing Green Marketing REC Markets Total

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

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

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 (2008Data). Golden, CO: National Renewable Energy Laboratory.


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12 Options for Purchasing Green Power

price volatility, as well as a visible demonstration of envi-ronmental commitment. It is important to note that sellingRECs from an on-site facility negates the system ownersclaim to using a corresponding amount of renewable electric-ity generated on site because the REC buyer is buying thatclaim specifically and contractually. In order to claim the

zero greenhouse gas emissions from electricity generatedon-site, the RECs would need to be retired and not sold to athird party. In many states, excess electricity generated withon-site renewable generation may be sold back to the grid atthe same price at which power is bought, through a processcalled net metering. This arrangement can improve the finan-cial return for on-site renewable power systems, although netmetering is often limited to small installations. For example,the state of California limits on-site generation systems to1 megawatt (MW) (10 MW for up to three biogas digesters)and the aggregated on-site systems capacity may not producemore than 2.5 percent of a utilitys peak demand.

On-site renewable energy technologies for power generationinclude photovoltaic panels, wind turbines, fuel cells, andbiomass combustion. Large facilities sited near a munici-pal landfill or sewage treatment plant may be able to userecovered methane gas for on-site electricity and/or heatproduction. The following describes each of these options inmore detail:

Solar. Solar systems can be configured to almost anysize from a few kilowatts up to several megawatts.On-site photovoltaic (PV) systems may be situated onschools, homes, community facilities, and commer-cial buildings. They can be integrated into a building,

displacing other building material costs, such as forroofing shingles or car park shading.

Wind. Wind turbines vary in size. A typical smallunit provides 100 kilowatt (KW) or less, whereaslarge turbines range from 500 kW to more than 3MW. On-site applications are usually only possible innonurban areas, and often require zoning permits toexceed 35-foot height restrictions (a tower for a 250 kWturbine is 130 feet high with a blade sweep of 98 feet).Such installations usually require approximately 1 acreof land per turbine and wind speeds that average 15mph at a 150-foot height. In addition, placing turbines

in urban areas is inadvisable because nearby buildingsmay create wind turbulence that can disrupt the tur-bines performance.

Landfill and sewage methane gas. Methane gasderived from landfills or sewage treatment plants canbe used to generate electricity. Methane gas also maybe generated using digesters that operate on manure oragricultural wastes. The methane gas is then convertedto electricity using an internal combustion engine, gasturbine (depending on the quality and quantity of the

gas), direct combustion boiler and steam turbine gen-erator set, microturbine unit, or other power conversiontechnologies. Most methane gas projects produce from0.5 to 4 MW of electrical output.

Biomass. Biomass is plant material burned in a boilerto drive a steam turbine to produce electricity. Thissystem is good for producing combined heat and power

(CHP) at facilities with large thermal loads. Biomassprojects are best suited to locations with abundant bio-mass resources (often using waste products from theforest industry or agriculture).

Fuel cells. Fuel cells are another way of producingpower. They emit essentially no air pollution and aremore efficient than other forms of generation, but theycannot be considered a renewable resource unless theyoperate on a renewably generated fuel, such as digestergas or hydrogen derived from PV or wind power.

In this era of power reliability problems and national secu-

rity concerns, domestic, on-site renewable generation offersimportant advantages over central-station and fossil-fueledpower plants. Moreover, on-site generation can be designedto provide backup power for critical loads when powerfrom the grid is interrupted, as well as when the renewableresource is not available. This ability to operate indepen-dently of the power grid is a great advantage, particularly atremote facilities. Because renewable generation technologiescan be modular and used on a small scale, the on-site gen-

On-site Generation: BMWManufacturing CompanyAutomaker BMW pipes methane gas 9.5 miles from a landfillto serve the electric and thermal needs of its manufactur-ing facility in Greer, South Carolina. Rather than invest innew internal combustion engines to generate electricity, in2003 BMW converted four turbines that previously ran onpurchased natural gas. In 2009, BMW replaced the originalfour turbines with two new highly efficient turbines that willincrease the electrical output from 14 percent to almost 30percent. By recovering the waste heat from the turbines, the11-megawatt combined heat and power project satisfiesmore than 60 percent of the facilitys thermal needs, as wellas nearly 20 percent of its electricity use. To date, the projecthas saved the automaker an average of more than $5 millioneach year in energy costs. The new turbines installed in 2009should return an additional average annual cost savings ofup to $2 million. With the success of its landfill gas project,the facility is exploring on-site wind and has completed astudy of the sites wind speed and direction. For more on-site examples, see Chapter 10, Resources for AdditionalInformation.


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eration system can be designed to enhance the redundancyand diversity of a facilitys energy supply.

On-site renewable generation typically has higher capital costsand lower operating costs compared with installing fossil-fueled generation. Although these costs can make the initialinvestment in on-site generation more difficult to justify,once that investment has been made, the annual budgets formaintaining the system are much easier to justify (comparedwith purchasing renewable electricity), which makes sustain-ing a commitment to renewable power easier. Additionally,there are new financing models for on-site generation beingdeveloped to lower the upfront capital investment, such as thesolar power purchase agreement (SPPA).

An organization that installs its own generation capabilitymay have problems with the requirements for connecting

to the utility distribution system, commonly referred to asinterconnection. Interconnection rules designed for largegenerators often are unnecessarily burdensome for smallgenerators. Increasingly, however, state interconnection rulesare being standardized and simplified for smaller genera-tors. In addition, national standards have been issued by the

Federal Energy Regulatory Commission (FERC) that mayease interconnection in special cases. Chapter 7, Planning anOn-site Renewable Generation Project, provides more detailsabout procuring an on-site renewable generation system.Customers considering on-site generation should check withtheir local utility or with the state utility commission aboutinterconnection rules. Chapter 10, Resources for AdditionalInformation, provides more sources of information aboututility interconnection.


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14 Steps to Purchasing Green Power

Chapter 5

Steps to Purchasing Green Power

To buy green power, an organization first should deter-mine what green power products will help fulfill itselectricity needs and decide how to procure thoseproducts. Figure 6 illustrates the steps in this process.

The preliminary steps described in this section are the samefor all types of green power products. The final steps differfor purchased green power products (renewable energy cer-tificates [RECs] and utility-supplied) and on-site renewablegeneration. These steps are explained in later chapters ofthis guide.

Setting Goals

The first step in any type of green power purchase is to setgoals about what the objectives are for purchasing greenpower, considering the following questions at a minimum:

Why is the organization considering green power?

What does the organization hope to get from it?

What selection criteria are important to theorganization?

Are independent certification and verification importantto the organization?

These questions are best considered as part of the organiza-tions overall energy or environmental management process.Such a process is an ongoing effort to improve the energyand environmental performance of the organization, usuallydriven by goals set by the organizations top-level leaders.The goals for a specific purchase of green power then flow

from, and are greatly informed by, these overall goals.

Identifying Key Decision-Makers

The people in an organization who are interested in greenpower may be high-level decision-makers as well as stafffrom the purchasing, facilities/energy management, environ-mental health and safety, legal, corporate relations, and/or

marketing departments. All of their interests and concernsmust be addressed early in the planning process. Experiencehas demonstrated that not doing so often leads to disagree-ments later in the process. Because buying green power isultimately a financial decision, it is very important to have

Capturing the Benefits (8)

Creating aProcurement Plan (6)

Creating aProject Plan (7)

Obtaining Resourcesand Assistance (7)

Screening theTechnologies (7)

Collecting ProductInformation (6)

DevelopingScreening Criteria (6)

Choosing Green Power Options (5)

Gathering Energy Data (5)

Identifying Key Decision-Makers (5)

Setting Goals (5)

RenewableElectricity

On-site RenewableGeneration

RECs

AnticipatingPossible Barriers (7)

Installing andOperating an On-siteRenewable System (7)

Evaluating the Purchase (5)

(Indicates Corresponding Chapter)

Re-assess GreenPower Purchase

Figure 6. Steps to a successful green power project


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the chief financial officer involved in and supportive of thedecision. In addition, other departments, such as market-ing or environment, health, and safety, may also contributefunds to help pay for green power.

Designating a contact person who can draw on expertisefrom throughout the organization is an important step. Thedepartments chosen to participate will probably depend onthe type of products being considered. It also is importantto involve senior management in the planning and decisionprocess. In many cases, the greatest advocate of buying greenpower is an executive such as a chief executive officer orpresident. With this high-level support, buying and promot-ing green power is much easier. Some organizations involvetheir employees (or students, in the case of educational insti-tutions) in selecting the green power products.

Gathering Energy Data

The organization considering green power should take aninventory of its energy use, including electricity and ther-mal. Its annual electricity use can be calculated from theutility bills for each facility or business unit and for theentire organization. These data will help: 1) compare theorganizations energy performance against peer facilitiesenergy performance and understand energy use patterns andtrends; 2) determine how much green power to buy; and,3) evaluate the environmental impacts of the organizationselectricity use. Monthly electricity consumption data arethe most important, while peak demand and interval-meterdata are useful if available. Each organization should studyits consumption data over the past year before specifying itsrequirements in order to have a complete and accurate pic-ture of energy use. Outside consultants or organizations canhelp with these steps.

As mentioned earlier, green power can be considered part ofan energy portfolio that includes energy efficiency upgrades,load management, and combined heat and power. The morean organizations energy requirements can be reduced, theless green power it will need to buy to achieve a given objec-tive, which in turn makes green power more affordable.Some organizations have saved enough money from energyefficiency upgrades to enable them to pay for their green

power purchases.

Many resources are available to help improve the energyefficiency of buildings and equipment. A good starting pointis the ENERGY STAR Portfolio Manager, an online tool thatcompares a buildings energy usage with that of similarbuildings. The ENERGY STAR Web site offers simple energy-saving tips and a directory of ener-gy services companies to provide additional assistance, suchas a facility energy audit.

Calculating an organizations annual electricity use can deter-mine the quantity of emissions associated with that use andhelp estimate the emissions that could be prevented by buy-ing green power. EPA offers an online tool to help estimateemissions from an organizations current conventional elec-tricity use at .

Choosing Green PowerOptions

The next step is finding the appropriate green power solu-tions for the organization. Another goal of this step isbecoming familiar with the electricity markets in the organi-zations area and the available green power technologies.

The first decision is whether to generate power on-site and/orto purchase power or RECs from outside vendors. The main

differences between these options are the ease and cost ofimplementation, the need for capital investment, the abilityto hedge risk, and the length of time over which one realizesthe benefits. On-site renewable generation typically requiresan up-front investment (as part of either a financed project ora capital appropriation), but the reduction in the consump-tion of conventional energy can last for as many as 30 years.There are new financing models being developed to helpovercome the upfront financial barriers to on-site genera-tion. These models are discussed in more detail in Chapter 7Planning an On-site Renewable Generation Project.

Renewable electricity purchases and RECs usually require no

up-front capital and are relatively easy to procure, but theydeliver benefits only for the term of the purchase contract.

An organizations motivations for purchasing green powerwill help decide which costs and benefits are most importantand thus which type of green power is most appropriate. Forexample, an organization that wants to manage fuel pricerisk might be more interested in buying fixed-price renew-able electricity. An organization that finds the reliability of itspower supply to be most important might be more interestedin on-site renewable generation. These options can also becombined. For instance, an organization might install on-sitegeneration to meet part of its electricity needs and purchaseRECs to match the remainder of its electricity use. Likewise,organizations with facilities in multiple locations must deter-mine whether to procure green power from one provider forall sites, or whether to procure green power from multipleproviders based on unique options that might be available toan individual site. Organizations with facilities in multiplelocations must also select the appropriate green power prod-uct for each site.

The green power options available to an organization aredetermined partly by the electricity market structure in the
http://www.energystar.gov/http://www.energystar.gov/http://www.epa.gov/cleanenergy/powerprofiler.htmhttp://www.epa.gov/cleanenergy/powerprofiler.htmhttp://www.energystar.gov/http://www.energystar.gov/


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state in which the facility is located. Each state has differentrules governing power marketers, and the level of competi-

tion varies among the states. Large electricity purchasersmight be able to work with their local utility or electricityprovider to tailor a product to meet their needs.

For on-site renewable generation, the organization shouldassess the renewable energy resources available at its facility,including the quality of wind and solar resources, the avail-ability of biomass fuel or landfill gas, and siting constraints(such as space limitations or shading from neighboringbuildings). The cost of conventional power at the facility alsois important to consider. The organization should read overits utilitys and states interconnection rules to make surethere are no obvious provisions that would prohibit grid-

connected, on-site generation. The goal at this stage is toeliminate any renewable options that are clearly not feasiblefor the organization.

When considering green power options, it is useful toconsider the motivations of other green power purchas-ers. A 2008 survey of corporations by the World ResourcesInstitute (WRI) and the Climate Group found that the topcriteria against which companies evaluate low-carbon tech-nology projects include:

Financial metrics. The return on investment (ROI) ofprojects is of paramount importance.

Marketing value. The ability of projects to improvea companys brand value or image is a key factor indecision-making.

Carbon dioxide (CO2) benefit. The extent to whichprojects can help companies reach their emissionreduction goals is also a factor they considered.

The key conclusion from the WRI-Climate Group surveyis that low-carbon technology projects must be able tocompete financially with non-renewable related projects inorder to be funded.

It is also important to anticipate barriers to making a pur-chase, so that the process can be structured to overcomethese barriers. The same WRI-Climate Group survey foundthat the most common barriers to wider investment andgreater deployment of low-carbon technologies include:

Cost of the technology.

Insufficient financial performance.

Availability of financing.

Lack of staff capacity and knowledge.

Inadequate baseline energy data against which to dem-onstrate improved performance.

Lack of a streamlined decision-making process.

Evaluating the Purchase

Once the green power purchase has been implemented, it is

important to collect information and evaluate how well thepurchase achieved the purchases preliminary goals. Areas ofevaluation could include:

How well the procurement process worked.

Whether the vendors delivered what was expected.

Whether the green power purchase is providing protec-tion against rising fossil fuel prices.

Using Energy Efficiency Savingsto Purchase Green Power:University of PennsylvaniaThe University of Pennsylvania is funding its sizeable wind

power purchase with savings achieved through energy con-servation. Over the past few years, the university reducedpeak electricity demand by 15 percent. This reduction enabledthe university to purchase nearly 193 million kilowatt-hoursof wind-generated renewable energy certificates (RECs), anamount equivalent to 46 percent of its total campus electric-ity use. Penns long-term commitment to buying green powerhelps support development of new wind generation facilities,including a 12-turbine, 20-megawatt Pennsylvania wind farm.

Finding Green Power Suppliers Organizations with facilities in several states should use a

national locator such as EPAs Green Power Locator or the Green-eEnergy Find Renewable Energy locator . The latter is also useful for locating certified products.

Many state governments, often the public utilities commission,maintain a list of power marketers offering green powerproducts in the state, especially if state electricity marketshave been restructured.

Smaller facilities (such as retail stores) may find it easier tohave a single point of contact compiling this information andmaking it available across the entire organization. Largerfacilities (such as factories or research campuses) oftenhave enough expertise to gather information and negotiatecontracts on their own.

See Chapter 10 for more resources.
http://www.epa.gov/greenpower/pubs/gplocator.htmhttp://www.epa.gov/greenpower/pubs/gplocator.htmhttp://www.green-e.org/buyhttp://www.green-e.org/buyhttp://www.green-e.org/buyhttp://www.green-e.org/buyhttp://www.epa.gov/greenpower/pubs/gplocator.htmhttp://www.epa.gov/greenpower/pubs/gplocator.htm


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How well the organization promoted its green powercommitment.

How well the organization educated employees aboutthe green power commitment.

Whether the green power purchase is helping the orga-nization meet its corporate or institutional goals relatedto environmental improvement and sustainability.

Additional evaluation factors apply for on-site generationsystems, such as how much energy the system is producing(both initially and over time), how the system operation andmaintenance costs compare to expected, and whether outputis being appropriately reported to tracking systems for theissuance of RECs that the owner will use to substantiate its

renewable electricity use claims.


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18 Procuring Renewable Electricity and Renewable Energy Certificates

Chapter 6

Procuring Renewable Electricity

and Renewable Energy Certificates

To select the green power supplier and the product, itis helpful to develop specific criteria for judging thealternatives. These criteria can be ranked, keeping inmind the goals identified early in the process when

the project team was assembled.

Developing Criteria for

Screening Suppliers andProducts

The following criteria might be helpful when screening sup-pliers and products:

Reputation. A suppliers reputation is influenced byfactors such as how well it honors its commitments,how easy it is to work with, its list of clients, and howwell it is viewed by the industry. Assessing a suppliersreputation may require references and a perusal of theenergy industrys literature. Environmental groups alsomight have information about the supplier.

Financial strength and credit. To research the finan-cial health of a power supplier, look at its Web site andperhaps its annual report, Securities and ExchangeCommission filings, and bond ratings.

Location. If buying green power from a local supplieris important, call the supplier and find out where itsrenewable generation is located. Public utility com-missions Web sites often have contact information forregistered retail suppliers.

Product choice. Some suppliers offer several green

power products, varying in the amount of renewablepower and types of resources. If a supplier offers achoice of green power products, this may enable theorganization to change the product it purchases in thefuture without having to search for a new supplier andnegotiate a new contract.

Environmental performance. Assessing a sup-pliers environmental performance can be useful.Organizations should review the suppliers annual

financial or environmental report, examine its otherelectricity products, and review its other businessactivities.

For renewable electricity products, consider the followingadditional criteria:

Price. When considering price, organizations shouldmake sure they are comparing apples to apples. Pricesmight reflect different types of products, so it is essen-tial that organizations understand how products underconsideration might differ. For example, renewableelectricity products might quote total price per kilowatt-hour for electricity including the green attributes, whichcan be compared to the standard electricity price, butother products, such as renewable energy certificates(RECs) and many utility green pricing products, quoteonly the incremental cost of green power, which mustbe added to standard electricity rates. Furthermore,prices might be fixed or escalate over time, or can varyaccording to a price index such as the wholesale priceof electricity. Finally, the purchase of some utility green

power products might offer an exemption from variablefuel charges or environmental taxes, which should befactored into the ultimate price.

Percentage of renewable energy. For a particular greenpower product, the resource mix can range from 1 to100 percent renewable power. When buying certificatesor bundled products, an organization can still calculatethe percentage of its electricity use served by renewablepower.

Percentage of new or incremental renewable sources.Many experts argue that only new generation provides

incremental environmental benefits. New renew-able resources generally refer to renewable facilitiesthat began operation in 1997 or later, which is whenthe voluntary market for green power began to grow.Besides the direct impact of purchases from new renew-able sources, these purchases also help create thedemand necessary for constructing additional renew-able resources.


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In states that have adopted a renewable portfolio stan-dard (RPS), electricity providers are required to includea minimum percentage of renewable electricity intheir standard product offering. Renewable electric-ity products create additional environmental benefitsonly if the power purchased is not already part of the

providers minimal RPS requirement. In other words,an organization should purchase a renewable electricityproduct that is not already being used to satisfy a RPSmandate or goal imposed on a utility nor is the renew-able electricity product included in the utilitys standardelectricity service.

Renewable energy/resource mix. A renewable energy/resource mix refers to the kinds of resources used inthe green power product. For example, is the productgenerated from wind, biomass, solar, geothermal, orhydro? Some resources have a greater environmentalimpact than others. Wind, solar, and geothermal power

usually are the most environmentally preferable energysources. Each is renewable and nonpolluting, withlimited impact on the land or local habitats. Certainenvironmental groups regard some types of hydropow-er, biomass, and municipal solid waste as less desirable.Hydropower dams may drastically alter river habitatsand fish populations; biomass facilities may emit sig-nificant quantities of smog-forming pollutants; andburning municipal solid waste may release heavy met-als and other toxins into the environment. Municipalsolid waste may also include nonrenewable materialsderived from fossil fuels, such as tires and plastics,which when burned release carbon dioxide into the air.

It also is important to check the environmental char-acteristics of any nonrenewable generation resources,as they will contribute to the overall environmentalimpact of the power purchased.

Renewable energy resources also have different asso-ciated costs. For instance, a green power productgenerated from a resource that is scarce in one part ofthe country will be more expensive than purchasing thesame resource-derived product from another part of thecountry.

Length of contract. Some buyers prefer a short-termcontract in case the market changes and better offerscome along. But an organization may be able to lock ina lower price if it signs a multiyear contract. A longer-term contract might also offer greater price stability aswell as provide better support to new renewable energyprojects. When determining the value of price stability,be aware of typical market fluctuations in power pric-es and how the price of renewable electricity can vary.Finally, a contract may include options for renewal,which can offer flexibility in the future. Before entering

into a long-term contract, however, buyers should takeinto consideration potential policy changes (most nota-bly, a carbon cap-and-trade program) that impact futureenvironmental claims for purchasing green power.

Third-party certification and verification. A greenpower product can be certified and verified by anindependent third party. Such certification can providecredibility and confirmation of the products envi-ronmental value. By purchasing a product that hasmet specific environmental and consumer protectionguidelines adopted by the certifying organization, apurchaser will be better positioned to address stake-holder questions about purchase quality and credibilityVisit for more information aboutcertification and verification.

Location of generation. In order to support the local

economy and to contribute local environmental ben-efits, some organizations may prefer local or in-staterenewable generation. Some renewable electricityproducts, however, use resources located out-of-state,and renewable energy certificates may be based on gen-eration located outside of the purchasers region. Forexample, purchasing RECs from a state in which fossilfuel comprises more of the electric generation mix mayprovide greater environmental benefit than purchas-ing RECs from a state in which renewable electricity

The Role of Product CertificationOne of the major concerns with buying green power isensuring that purchasers get what they pay for. It can bedifficult to substantiate claims made about the quantity andcharacteristics of the product purchased. Also, it is important

to ensure that two organizations are not claiming to havepurchased the same green power, or are double-countingthe same green power benefits. Moreover, purchasers maybe unable to ensure public acceptance of their purchase andavoid criticism from external stakeholders without indepen-dent information about the product. Third-party certificationaddresses these concerns by setting standards for greenpower products in the following areas:

Minimum levels of environmentally acceptable renewableresources

Overall environmental impact

Ethical conduct for suppliers, including advertising claimsand regular reporting

Third-party certification usually also requires independentverification by an auditor to document that green power sell-ers have generated or purchased enough renewable energyto match their sales commitments. Visit for additional information about third-party certification andverification.
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generation is plentiful; RECs, therefore, do not neces-sarily represent a uniform set of environmental impactsor attributes. As a reporting convention, EPA allowsClimate Leader Partners to claim emission reductionsbased on the regional average emissions rate for wherethe REC was generated. Regional average emissions

rates can be found by visiting EPAs Emissions andGeneration Resource Integrated Database (eGRID) at. Further guidance can be foundin Chapter 10, Resources for Additional Information.

Specific generation facility. Some green power pro-viders generate their power at a specific site, such asa nearby wind farm, rather than offering green powerfrom a mix of different resources. These products, suchas the annual output of one particular wind turbine,are sometimes preferred by customers because suchproducts offer a closer sense of connection betweena purchase and a specific environmentally beneficial

facility.

Collecting Product Information

A good place to start collecting information about specificgreen power options is the many Internet sources listed inthis guide. Be sure to collect enough information to answerthe decision criteria listed earlier. For useful comparisons,the information should be as consistent as possible amongsuppliers and among products. A good way to find consistentinformation is through an exploratory letter or a request for

information (RFI) addressed to specific suppliers.

In many states, competing electricity suppliers are requiredto provide an electricity labellike a list of food ingredi-entsthat provides information in a standard format andmakes product comparisons easier. This information is gen-erally available from the states public utility commission.Another source of public information is third-party certifiers,such as Green-e Energy, which can provide informationabout the products they have certified to meet minimumenvironmental standards.

The next step is estimating the cost of green power for theorganization and calculating the cost/benefit ratio. For helpfinding cost data, contact one of the organizations that spon-sored this guidebook (listed in Chapter 10, Resources forAdditional Information).

Creating a Procurement Plan

A procurement plan documents the project teams decisionsand addresses possible problems in buying green power. A

procurement plan can also help convince others in the orga-nization that purchasing green power is a wise choice.

The main audience for the procurement plan is the managerswho need to support the purchase decision. Their supportshould be secured as early in the process as possible. As soonas the team can show the costs and benefits of purchasinggreen power to the organization, they should present theirinformation to management. Expect managers to ask aboutthe products the organization would buy, their cost, and theirbenefits. Also find out whether management might limita green power purchase or whether they would buy moreaggressively.

Besides providing the information that management needsto make the decision, a procurement plan can also helpovercome resistance to green power within the organization.Some organizations have outdated perceptions of the reli-ability of renewable energy technologies, misunderstandingsabout using a variable resource, or worries about the cost.

As part of the procurement process, the project team willprobably need to educate others about these topics and thebenefits of green power. The organizations that sponsoredthis guidebook can provide helpful information to overcomethese misconceptions.

The scope and detail of the procurement plan will dependon the organizations needs and requirements, but it shouldaddress the following:

Scope of Procurement

Specify the amount of power that will be purchased (as a

fixed quantity, a fixed amount of money, or a percentage oftotal power use) and for which facilities. If this procurementis a trial that may lead to additional purchases in the future,spell out the criteria that will be used to judge the trialssuccess. Also discuss whatever is known at this point aboutfuture procurement phases.

Expected Benefits

Keeping in mind the general benefits outlined earlier in thisguide, list the particular benefits hoped for by buying greenpower for the organization. Wherever possible, these benefitsshould be linked to the organizations environmental goals.

Financial Considerations

The procurement plan should discuss cost. Cost has tradi-tionally been the primary concern with green power, butthere are an increasing number of financing models for pur-chasing green power that result in a cost benefit over thelong-run. Negotiating the right contract can have a big effecton the financial costs and benefits of buying green power.
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Several strategies are available to help minimize and managethe extra cost of green power:

Seek a fixed-price contract. Because its cost of fuelis predictable, renewable energy is often available at afixed price without any fuel-cost adjustments. Checkwith the supplier, particularly if the organization isconsidering a utility green-pricing program, to seewhether green power customers are exempted fromfuel-cost adjustments.

Buy green power for only part of the organizations

electricity use. Green power does not have to beused for all electricity consumption. For example, theorganization might buy green power for just 5 or 10percent of its electricity use. Buying 10 percent greenpower may add less than 1 percent to the organizationselectricity bill. Alternatively, some renewable electricityproducts cost less because they contain less than 100percent green power or offer lower-percentage options.

Make a longer-term purchase. Consider the contractslength in conjunction with the quantity and cost of

power purchased. A short-term contract (typically lessthan three years) might offer greater flexibility in thefuture but also might cost more. But a longer contract(e.g., 10+ years) can reduce the risk to the supplier,allowing it to offer a lower price than under a shortercontract. The right contract length is based on the par-ticular situation and products available.

Use a contract for difference. A contract for difference(CFD) is a financial agreement that allows renewablepower suppliers and purchasers to lock in stable power

prices and revenues by agreeing to pay the differencebetween the actual power price and an agreed-uponbenchmark or strike price. CFDs have tended tobe used most often for government and college anduniversity customers. Consult with your auditor tounderstand any associated accounting issues. To learn

more about the CFD model, visit .

Offset the cost with savings from energy efficiency.Reducing the total amount of electricity purchasedhelps make green power more affordable. When review-ing green power providers, organizations may find thatsome providers also offer energy efficiency services,with the goal of no net increase in their customerspower bills.

Use savings from competitive choices. Competitivechoices of either green power or commodity electric-

ity can lead to savings on energy costs, which can beused to buy green power. Or the extra cost of greenpower can be limited to the amount of savings fromcompetition. Be aware that switching to less expensiveconventional power can also mean dirtier power, soask the electricity supplier for information about theemissions from its product, and make sure those emis-sions do not cancel out the benefits of the green powerbought with the savings.

Specify a price cap or maximum total budget. Specifythe maximum price per kilowatt-hour or the total cost,or simply place a cap on the renewable portion of the

purchase. A drawback of this approach is that suppliersare likely to bid at or near the specified price cap. But ifthe organization is interested mainly in other aspects ofgreen power, such as environmental benefits or hedgevalue, this can be a good approach. Even if a price capis not the most important consideration, it is a goodidea to decide on the highest price the organization iswilling to pay for green power, as part of its internalprocurement planning.

Procurement Methods

Organizations can purchase green power in several differentways, depending on the options available as well as the orga-nizations procurement rules. Generally, the greater the loadthat the organization can bundle together in one purchase,the more attractive it will be to a supplier.

The following explains typical ways to buy green power.Federal agencies must work within the procurement rulesapplicable to the federal government, which are explainedfurther in the Appendix.

Price Hedging With RenewablesSouthern New Hampshire University (SNHU) has foundan innovative financial arrangement to stabilize its energybudget while also reducing its carbon emissions. The uni-versity has entered into a 15-year renewable energy hedge

agreement with wind farm owner, Iberdrola Renewables.The hedge is structured as a contract-for-differences financialswap under which the parties agreed to a strike price andduration for the agreement. SNHU continues to buy powerfrom its current supplier, and Iberdrola Renewables continuesto sell into the local electricity spot market. The energy salesare then analyzed. If the sales income received by IberdrolaRenewables is greater than the strike price, IberdrolaRenewables pays SNHU the difference between the incomeand strike price. If the income is less that the strike price, thenSNHU pays Iberdrola Renewables the difference. The hedgehas stabilized the cost of the 15-million kWh of electricityused by the university annually. If energy costs increase evenmodestly over the 15 years, SNHU could save an average

of $1.2 million per year for both electricity and natural gas.
http://www.epa.gov/grnpower/events/mar31_webinar.htmhttp://www.epa.gov/grnpower/events/mar31_webinar.htmhttp://www.epa.gov/grnpower/events/mar31_webinar.htmhttp://www.epa.gov/grnpower/events/mar31_webinar.htm


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Call several sellers. An organization can keep theprocurement process relatively simple by calling a fewgreen power providerseither REC marketers, utilities,or other electricity providers that may be available tothem. An off-the-shelf product may meet its needs. Ifthe organization wants something different, it can ask

for an informal proposal. After a discussion, the orga-nization may be ready to negotiate directly with oneof the suppliers about product definition, certification,price, and terms. Or if the organization is planning alarge purchase, the suppliers might be willing to tailorsomething to its needs.

Negotiate with the utility. Buying power is simple,though the choices are fewer, if the organization isserved by a single utility in a regulated market. If thelocal utility offers green power, the organization cancollect information by visiting the utilitys Web site andcalling to discuss its interest. Perhaps the only issue is

the quantity the organization wants to buy, but it maybe able to negotiate a slight price break if it is making alarge purchase. If the utility does not offer green powerand the organization is a large, highly visible customer,it may be able to encourage the utility to offer greenpower by promising to buy a large amount. Likewise,the organization may be able to persuade the utility toseek third-party certification if its product is not cur-rently certified.

Request proposals. Large companies and public insti-tutions, in particular, often issue a formal solicitation orrequest for proposals (RFP). An RFP requires more time

and effort for preparation, evaluation, and negotiation,but it might be more suitable for a large purchase andwhen many green power options are available. With anRFP, it is important to understand the organizationsown objectives and communicate them clearly in thesolicitation. Third-party certification and verificationcan be specified in the RFP evaluation criteria.

RFPs can be as simple as a letter sent to selected suppli-ers, describing the organizations objectives and askingfor a bid. RFPs can also be more formal, casting a widernet through a broadly advertised solicitation. The latterrequires more effort to prepare and evaluate responses.Government agencies must follow the procurementrules governing their agency.

A two-step process is possible as well, in which theorganization first issues a request for information (RFI)and, based on the responses, sends a more detailed RFPto those suppliers that meet its general qualifications.The RFI would be broadcast to a larger audience, notonly to find out who meets the organizations qualifica-tions, but also to gauge the amount of interest.

For large purchases, RFPs may be addressed to renew-able power generators (wholesale) as well as retailsuppliers. Buying directly from generators might lowerthe cost but probably will require longer-term purchasecommitment. Buyers will still need to work with aretail supplier to integrate the wholesale contracts, so

active engagement with your preferred retail supplierwill be important. In addition, for RECs there havebeen instances where market-setting purchasers usingthe RFP process have yielded higher prices in the shortterm due to the large purchase size. In this case, buy-ers planning to make a large purchase may elect not toissue a public RFP but rather contact specific suppliersindividually in the market.

EPAs Green Power Partnership offers assistance topartners putting together a green power purchase RFP,and the Department of Energys (DOEs) Federal EnergyManagement Program (FEMP) provides the same ser-

vice for federal agencies. For RECs, the DOE GreenPower Network maintains an online listing of greenpower RFPs that can be used as models at .

Use an electronic auction. Electronic auction plat-forms (also known as electronic procurement ore-procurement) allow for real-time transparent bid-ding and reverse auctions to drive bid prices lowerthan mi

Documents

13.Purchase Green Power