Steps to Purchasing Green Power

To buy green power, an organization first should determine what green power products will help fulfill its electricity needs and decide how to procure those products. Here are the steps in this process.

The preliminary steps described in this section are the same for all types of green power products. The final steps differ for purchased green power products (renewable energy certificates [RECs] and utility-supplied) and on-site renewable generation. .

1-Setting Goals

The first step in any type of green power purchase is to set goals about what the objectives are for purchasing green power, 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 the organization?
• Are independent certification and verification important to the organization?

These questions are best considered as part of the organization’s overall energy or environmental management process. Such a process is an ongoing effort to improve the energy and environmental performance of the organization, usually driven by goals set by the organization’s top-level leaders. The goals for a specific purchase of green power then flow from, and are greatly informed by, these overall goals.

2-Identifying Key Decision-Makers

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

the chief financial officer involved in and supportive of the decision. In addition, other departments, such as marketing or environment, health, and safety, may also contribute funds to help pay for green power.

Designating a contact person who can draw on expertise from throughout the organization is an important step. The departments chosen to participate will probably depend on the type of products being considered. It also is important to involve senior management in the planning and decision process. In many cases, the greatest advocate of buying green power is an executive such as a chief executive officer or president. With this high-level support, buying and promoting green power is much easier. Some organizations involve their employees (or students, in the case of educational institutions) in selecting the green power products.

3-Gathering Energy Data

The organization considering green power should take an inventory of its energy use, including electricity and thermal. Its annual electricity use can be calculated from the utility bills for each facility or business unit and for the entire organization. These data will help: 1) compare the organization’s energy performance against peer facilities’ energy performance and understand energy use patterns and trends; 2) determine how much green power to buy; and, 3) evaluate the environmental impacts of the organization’s electricity use. Monthly electricity consumption data are the most important, while peak demand and interval-meter data are useful if available. Each organization should study its consumption data over the past year before specifying its requirements in order to have a complete and accurate picture of energy use. Outside consultants or organizations can help with these steps.

As mentioned earlier, green power can be considered part of an energy portfolio that includes energy efficiency upgrades, load management, and combined heat and power. The more an organization’s energy requirements can be reduced, the less green power it will need to buy to achieve a given objective, which in turn makes green power more affordable. Some organizations have saved enough money from energy efficiency upgrades to enable them to pay for their green power purchases.

Many resources are available to help improve the energy efficiency of buildings and equipment. A good starting point is the ENERGY STAR Portfolio Manager, an online tool that compares a building’s energy usage with that of similar buildings. The ENERGY STAR Web site offers simple energy-saving tips and a directory of energy services companies to provide additional assistance, such as a facility energy audit.

Calculating an organization’s annual electricity use can determine the quantity of emissions associated with that use and help estimate the emissions that could be prevented by buying green power. EPA offers an online tool to help estimate emissions from an organization’s current conventional electricity use at .

4-Choosing Green Power Options

The next step is finding the appropriate green power solutions for the organization. Another goal of this step is becoming familiar with the electricity markets in the organization’s area and the available green power technologies.

The first 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. These models are discussed in more detail in Chapter 7, Planning an On-site Renewable Generation Project.

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.

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. 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.

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.

When considering green power options, it is useful to consider the motivations of 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:

•5-Financial metrics.

The return on investment (ROI) of projects is of paramount importance.

•6-Marketing value.

The ability of projects to improve a company’s brand value or image is a key factor in decision-making.

7-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.

It is also important to anticipate barriers to making a purchase, so that the process can be structured to overcome these barriers. The same WRI-Climate Group survey found that the most common barriers to wider investment and greater deployment of low-carbon technologies include:

8-Cost of the technology.

• Insufficient financial performance.
• Availability of financing.
• Lack of staff capacity and knowledge.
• Inadequate baseline energy data against which to demonstrate improved performance.
• Lack of a streamlined decision-making process.

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