The economy giveth and the economy taketh away. Owing to slowing investment, 2009 won’t be remembered as a stellar year for the advancement of green energy and power. However, White House efforts to harness alternative power may make 2010 a better year.
Such has been the story of green energy – a movement in perpetual advance and retreat, and more often subject to ink than action. New York City-based Ardour Capital Investments, for instance, reports that solar energy accounts for only 0.01 percent of U.S. generating capacity. Investors won’t see solar providers taking a place beside Exxon Mobil anytime soon.
Green power is challenged by the investments required for development and start-up. As a result, it has not yet established itself in voluntary markets as a cost-effective alternative. In fact, estimates indicate that wind power costs 50 percent more than power generated by coal. Among the reasons: Utilities must still invest in fossil fuels in case turbines stop spinning.
Although global investment in clean energy companies quadrupled from $38 billion to $155 billion between 2004 and 2008, investment in the second half of 2008 declined 17 percent from the first half, and 23 percent from the final 6 months of 2007, according to Global Trends in Sustainable Energy Investment 2009
. In Europe, state-mandated pricing has supplied a steady stream of government subsidies, but not without consumer complaints.
Europe’s carbon-emissions trading programs have influenced efforts in the United States. In the Northeast, states have launched the Regional Greenhouse Gas Initiative, the nation’s first cap-and-trade program, and California plans to implement a cap-and-trade program by 2011. Nevertheless, the U.S. carbon market largely remains voluntary, dominated by interests seeking to hedge their bets against emission-reduction rules.
For now, commercial customers comprise the fastest-growing segment of the voluntary market, according to Insights into the Renewable Energy Market, a survey by the San Francisco-based Center for Resource Solutions (CRS). From 2004 to 2008, the volume of renewable energy these customers purchased rose from 5,500 to 18,800 gWh. During the same period, Green-e Energy Certified commercial purchases almost doubled.
Price Volatility, Carbon
Emissions, and Consumer
Despite high prices for green power, providers argue that it offers a refuge from the potential price volatility of fossil fuels and a reduction in carbon-based emissions. And the good-citizen halo is a factor for consumer-oriented businesses like Santa Clara, CA-based Intel Corp., which derives nearly 50 percent of its energy from biogas, biomass, wind, geothermal, and small hydro. An EPA study of the nation’s top 50 green power purchasers – which include Dell, PepsiCo, Whole Foods Market, and Kohl’s Department Stores – shows that other consumer-friendly companies are investing in similar mixes of renewable energy.
“The goal – and it’s one many companies recognize – is to avoid becoming too dependent on any one energy source, as we did with fossil fuels,” says Aurora Winslade, sustainability manager with the University of California at Santa Cruz, which purchases 100 percent green power
For its part, Whole Foods relies on a combination of solar power and on-site hydrogen fuel cells, according to Media Relations Specialist Liz Burkhart. “We just contracted to add rooftop solar panels to more than 20 locations, bringing our total to more than 30 stores nationwide,” she says. The hydrogen cells generate 50 percent of electricity and heat, and 100 percent of hot water at some locations.
The retailer has also made substantial investments in Renewable Energy Certificates (RECs), most of which support the development of wind farms, according to Burkhart. The RECs are commodities representing the premiums above standard electric prices. Designed to subsidize a generator for each megawatt hour (mWh) of electricity it produces, RECs are priced in dollars per mWh, and they reflect the cost differential between renewable and fossil-based power. Customers often don’t use the energy that they’ve subsidized due to their geographic distance from the generator.
RECs may not be inexpensive, according to Green Power Network, which reports REC prices ranging from $5 to $90 per mWh, depending on the provider’s location, the type of power it provides, and local supply and demand. According to CRS, the average price of a solar REC in voluntary markets was $10 in 2008, and the average price of a wind REC was $8.42.
Should regulations require utilities and government facilities to purchase RECs, as many believe they eventually will, competition will likely raise prices. Not surprisingly, many buyers are locking in now.
A drawback for some buyers is that purchases made outside of compliance markets may not prompt more development of renewable power
. Without greater oversight of the industry, it’s buyer beware, says Winslade. Such concerns are prompting UC Santa Cruz to consider Power Purchase Arrangements (PPAs), long-term energy contracts that fund construction of independently owned power generators. Once the contract expires and the owner has made its profit, ownership of the generator often shifts to the energy buyer.
To minimize costs, the EPA’s Guide to Purchasing Green Power urges owners to engage in long-term, fixed-price contracts, ideally with providers who are available to consult on energy efficiency. Utilities and state energy departments usually know of any incentives available to buyers, who can also visit the Database of State Incentives for Renewable Energy at www.dsireusa.org.
Search early and often, as green energy is a moving target. It’s up to owners and facilities managers to keep up.
Chicago-based writer John Gregerson has more than 20 years of experience in the commercial buildings industry.