6 essential elements of successful utility renewable programs
Editor’s Note: This is Part I of a two-part series. Part II will discuss program types and trends in more depth, as well as highlight recent developments and key challenges. Watch for it Aug. 1.
Corporate demand for renewable energy is no longer a fringe issue talked about on the sidelines of the clean energy industry — it is a mainstream phenomenon, and growing quickly.
As of 2016, 71 companies out of the Fortune 100 had set a clean energy or sustainability target, and these companies aren’t just talking the talk. By mid-2018, corporate buyers had signed contracts for over 11 gigawatts (GW) of projects since 2014, and put in hundreds of installations onsite.
These numbers sound impressive, and they are. But the potential is much greater — 450 GW, if half of commercial and industrial (C&I) customers made the switch to renewable energy — and progress would be much faster if not for significant policy headwinds. Many companies are in states that are not allowed to choose the provider or the source of their energy other than their local utility. These customers cannot switch to renewable energy unless the utility offers a voluntary renewable energy option of some kind.
What’s available today? Utility renewable energy offerings start with renewable energy certificate (REC) purchase programs. These programs charge customers a set price per kilowatt-hour (kWh) in exchange for matching a portion of the customer’s use with RECs, which represent the renewable attributes separate from the electricity produced. They’re a valuable tool for residential and small business customers but are not well suited to the large C&I crowd, which is seeking greater value, clearer impact and the opportunity to hedge energy costs and even save money, in exchange for making a longer commitment and accepting more complexity or risk.
In response to growing C&I demand, utilities have introduced a variety of offerings under the umbrellas of “green tariff” or “renewable energy tariff” programs.
Broadly speaking, these options allow customers of vertically integrated utilities to purchase renewable energy from an off-site renewable energy project, with the project contracted and managed by the utility and paid for on the customer’s utility bill. To date, over 1 GW of projects have been signed under green tariffs, with 500 more megawatts under negotiation. This should be considered a significant success, given that the first programs were approved in Virginia, North Carolina and Nevada only five years ago.
This is what’s happened with green tariffs: While some programs have met customer needs at a competitive price, others have gone unused. In some cases, a program is able to meet the needs of certain customers but is either inaccessible or unattractive to others.
So, what does success look like? At a high level, the goal is the same as in the school cafeteria: affordable, appealing and varied options for customers to choose from. The team that supports Advanced Energy Economy’s Advanced Energy Buyers Group took a look at what’s worked and what hasn’t across the country. It all boils down to six essential elements of a successful utility renewable energy offering.
To meet the needs of corporate purchasers, utility programs should:
- Avoid adversely affecting nonparticipating customers: In corporate procurement of renewable energy, nobody’s asking for a free lunch. Companies are willing to pay their way to ensure that other customers are not affected by their voluntary purchases. The last thing they want is the blame for a tariff that is good for them, but at the expense of other, typically smaller, customers.
- Match program pricing to actual market prices and program costs: Similarly, when it comes to resource costs, administrative fees, system costs and other fees, companies are looking to pay what they owe, neither more nor less.
- Allow for competitive project selection: A competitive selection process keeps project costs down and supports the development of a healthy market for renewable energy.
- Facilitate development of new, additional renewable energy: Access to renewable energy that is new and additional to that already required of utilities is a threshold requirement for many customers, who consider this the measure of their sustainability commitment.
- Allow a range of corporate customers to participate: The list of companies committed to renewable energy runs the gamut from big box retailers to main street markets, from technology giants to university campuses, from manufacturing facilities to hotel chains. Meeting the requirements of such a wide range of customers means avoiding narrow eligibility parameters, such as provisions allowing only new customers to participate, setting load requirements based on non-aggregated (single site) load, or restricting eligibility to customers with high and/or consistent load.
- Include varied or flexible offerings to meet the needs of different customers: Given the range of customer needs and preferences, a one-size-fits-all solution is almost certainly impossible. To meet the needs of all customers, utilities should provide multiple offerings to meet different customer needs.
Of course, every state faces different considerations, and it’s unlikely that any two programs will be exactly alike. But utilities that follow these elements and consider input from a range of customers in the process of designing solutions are likely to meet success.