1652195266957 B 0210 Green Power4

The Surges of Green Power

Feb. 2, 2010

The climate may be right for renewable energy and power, but building owners pay a premium for it

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.

Case Study:

University of California at Santa Cruz
Percentage of Green Power: 100 percent
Power Source: Wind RECs
Green Energy Consumption: 1 mWh (average on each of 10 UC campuses)

The Objective: “The entire UC system, which consists of 10 campuses, is dedicated to reducing carbon emissions by generating a total of 10 megawatts per year,” says Aurora Winslade, sustainability manager for the Santa Cruz campus.

The REC Connection: UC Santa Cruz doesn’t pay for its Renewable Energy Certificates (RECs). Students do, having voted to charge themselves an annual $9 assessment to fund the purchase, which amounts to $90,000 to $100,000 per year, according to Winslade.

The campus purchases Wind RECs from Norcross, GA-based Sterling Planet, which operates wind farms in Texas, North Dakota, and Oklahoma.

Although Winslade likes the program, she laments that REC providers aren’t certified in the way organic farmers are. Although no decisions have been made, she says the university may instead buy Power Purchase Agreements (PPAs).

Advice to Owners: “Before seeking alternatives to fossil fuels, be sure you’re operating as energy efficiently as possible,” says Winslade. “On-site generation of green energy is ideal, but cost prohibitive for many companies. PPAs may be the next best thing. One advantage is that ownership of the generator often reverts to the purchaser after contracts with the provider expire.”

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 Goodwill
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.

Case Study:

Kohl’s Department Stores, Menomonee Falls, WI
Percentage of Green Power: 71 percent
Power Sources: Solar, wind, and biomass RECs; on-site solar; landfill gas
Green Energy Consumption: 19 million kWh from on-site solar; 600 million kWh from RECs

The Objective: In December, Kohl’s announced it was the first retailer to make a commitment to net-zero emissions of greenhouse gases. The initiative targets emissions at all Kohl’s U.S. stores, distribution centers, and corporate offices, as well as emissions resulting from business travel.

The REC Connection: “We continue to increase our purchases, and hope to reach 100 percent green power in the coming year,” says Ken Bonning, Kohl’s executive vice president of planning and logistics. The 600 million kWh purchased by Kohl’s accounted for half its purchased electricity last year – the equivalent of eliminating carbon dioxide emissions from 79,000 passenger vehicles. A portion of the RECs are applied to Kohl’s LEED locations, where an additional 35 percent of power is generated by landfill gas.

Solar Star: With 79 locations in six states, Kohl’s is the largest generator of solar power among retailers. Depending on the location, the solar panels generate 20 to 50 percent of store electricity. In California, where Kohl’s plans to convert 50 facilities to solar, state rebates – along with federal tax credits – cover from 50 to 60 percent of installation costs.

“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 (see below).

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.

Case Study:

Whole Foods Market, Austin, TX
Percentage of Green Power: 100 percent
Power Sources: On-site solar power and fuel cells; wind RECs
Green Energy Consumption: 776 million kWh from wind RECs

The Objective: “Whole Foods uses a comprehensive alternative energy approach – including RECs, solar power, and hydrogen power – to reduce its reliance on fossil fuels,” says Media Relations Specialist Liz Burkhart. “We recently contracted to add rooftop solar panels to more than 20 locations, bringing our total to more than 30 stores nationwide. We hope to install solar at 70 or so locations, or close to a quarter of our stores.”

The REC Connection: About 90 percent were purchased from a Big Spring, TX-based wind farm built and operated by Chicago-based EC&R North America. The balance was purchased from suppliers throughout the United States and Canada. Environmental benefits are equivalent to removing more than 72,000 cars from the roads per year, or planting nearly 3.6 million mature trees.

Hydrogen, Too: Stores in Glastonbury, CT, and Dedham, MA, employ on-site hydrogen fuel cells, says Burkhart. “We’re currently adding them to other facilities.”

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.

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