Green Power’s Future is Now

June 1, 2007
No matter where your buildings are located, you have the opportunity to make an impact by incorporating green power into your energy mix

Vying for dominance against the conventional, tried-and-true (and sometimes damaging) energy technologies that make up 98 percent of the national grid today, green power has its work cut out for it.

Although its advancements have been tremendous in the past decade, green power is still nowhere close to becoming mainstream. Some experts think that's due to upfront costs and some think it's because traditional energy sources are still fairly inexpensive. Other experts believe it hasn't caught on more quickly due to lack of familiarity and knowledge. (Lack of knowledge isn't your excuse, is it?)

Even though green power isn't widespread just yet, there is good news: The green-power industry is maturing like crazy. U.S. businesses are starting to view renewable energy as a way to achieve lower (or at least stable) operating costs and reduce emissions. With the effects of carbon emissions being broadcast constantly, some organizations are starting to operate under the assumption that mandatory controls on greenhouse gases will surface and are putting goals into place now in anticipation of carbon restrictions.

"Businesses didn't really have a lot of choice before. Green power allows organizations to align where their energy comes from with their environmental values. It provides a great opportunity to support future renewable energy options and plays an active role in shaping that future," says Eric McDaniel, senior associate, Portland, OR-based Green Building Services Inc.

What Makes Green Power Green
"One measure people like to use to determine if power is green is whether greenhouse-gas emissions are produced - if it's not polluting the air, it must be green. If that's the only measure you use, then large hydropower (which has negative impacts) would be considered green; so would nuclear power, which no one would ever characterize as green power," says Patrick Nye, director of sales, Bonneville Environmental Foundation, Portland, OR.

According to the Washington, D.C.-based World Resources Institute (WRI), green power constitutes energy sources that are universally accepted as having a relatively low impact on human, animal, and ecosystem health. Green power encompasses renewable energy sources like solar (PV and thermal), wind, biomass, and geothermal. The term is ordinarily used to denote electricity from renewable resources.

Ways to Buy Green Power
There are three ways to make use of green power in your facility: 1) by purchasing grid-connected green power from participating suppliers, 2) by installing or hosting on-site generation (wind turbines, solar panels, etc.), or 3) by purchasing renewable energy certificates (RECs). One option doesn't rule out the other; you can mix and match these three to come up with a green power plan.

Delivered via a utility, going with option No. 1 (purchasing grid-connected green power) means that you're relying on your local utility to offer a voluntary green power option. Green power is available in both regulated and deregulated electricity markets; however, not all utilities and not all deregulated states offer green power. In deregulated markets, providers can set themselves apart by offering customers the option to purchase green power. "In the case of purchasing green power through a utility, you basically check a box on your utility bill and opt to pay a little bit more per kilowatt-hour for green energy," explains Nye. According to the U.S. Department of Energy's Energy Efficiency and Renewable Energy program, more than 50 percent of retail customers in the United States have the option to purchase green power directly from an electricity provider. More than 600 regulated utilities offer green power (which is oftentimes referred to as "green pricing" in regulated markets).

Option No. 2 (installing on-site green power equipment) allows you to produce your own power by placing electricity-generating equipment on or near the building being served (either by buying the system outright or by using a system owned by another party and buying the electricity as it's being produced). In many cases, on-site generation may be eligible for "net metering" (where excess electricity turns the electricity meter backwards, giving the owner credit for electricity generation and allowing it to be sold back to the grid).

"On-site generation tends to be the most expensive option and varies according to the specifics of the building. But, lots of buildings are now paying attention to on-site generation, especially [due to interest in] LEED and integrated design," says Nye. Peruse your utility and state's interconnection rules to confirm that there aren't any stipulations prohibiting grid-connected, on-site generation. You should also evaluate the available renewable-energy resources in your area (the quality of wind and solar sources, the availability of biomass fuel or landfill gas, etc.) to determine if on-site generation is really a viable option.

Option No. 3 (purchasing RECs) is the most widely available and most extensively applied power option. Also referred to as "green tags" or "TRCs" (tradable renewable certificates), RECs segregate renewable energy into two products: 1) generic commodity energy, and 2) environmental attributes. Green tags symbolize the environmental attributes created by the generation of a unit of electricity (one credit usually equals one megawatt-hour). Represented in certificate form, these environmental attributes may be bought and sold either bundled with commodity electricity or unbundled from commodity electricity. When you buy an REC, what you're paying for, essentially, is the addition of clean, renewable energy generation to the electrical grid. Purchasing an REC offsets the release of emissions generated as a result of building operation. Your organization will still churn out the same amount of emissions; your REC purchase will step up renewable-energy production.

RECs work nicely for organizations that are located in states where green power isn't offered through the utility. "An REC can be purchased separately from the underlying electricity, also allowing a customer to claim these environmental benefits and financially support renewable power projects in circumstances where local renewable resources are limited (i.e. purchasing renewable energy certificates from a wind farm in one state and using them to green a company's operations in another state)," explains Diane Profir, project manager, Washington, D.C.-based World Resources Institute. RECs can be purchased in just about any amount and are available from organizations other than electricity providers. The organization that's selling you an REC takes your dollars and uses them to support renewables coming into the energy system. The electricity you're drawing from the grid is replaced by electricity from renewable resources.

When purchasing green power from a utility isn't possible, Profir points out that RECs can offer several benefits to a building owner or facilities professional: lower cost (you can buy as few or as many as you want and base your decision on price), a wider selection of suppliers (both utility providers and third-party organizations offer green tags), a greater variety of options (you can select RECs based upon location, energy type, etc.), and simplified transactions (RECs aren't dependent on current energy use and, for a company with multiple locations, RECs eliminate the hassle of buying renewable electricity from multiple suppliers).

Depending on the type of resource you're interested in, RECs offer a wide assortment of price points. As Nye points out, RECs can also be a good way to support renewable energy sources that aren't available in your area. If your organization is interested in supporting solar power, for example, that type of power might be difficult to find from a local utility; an REC allows you to make that choice and invest in solar power. You can also choose based upon the location of the resource. "If I'm in Oregon and I'm interested in supporting a wind farm in Oregon, a green tag marketer is much better equipped to [offer] that vs. a utility," explains Nye. "Even if I sign up for green power through my utility and they say they're delivering wind power, the truth is that the electrons are all part of [the same] electricity grid (for instance, everything west of the Mississippi is part of the same grid); to say that a specific wind farm is sending its power directly to my building is inaccurate. My dollars are actually bringing more renewables into the overall grid, greening the grid for everyone. A green tag does that exact action a little bit more specifically."

The Price of Green Power
Since green power is becoming more prevalent, its technologies are more affordable. According to the WRI, for example, wind power is 80-percent less expensive than 2 decades ago - a good wind site can generate electricity at less than 5 cents per kilowatt-hour. In some cases, according to Nye, wind power can be equal with other forms of electricity generation in terms of cost. "When we saw a spike in natural gas generation a year ago, there was a point where wind was actually a better deal. That's probably the closest that renewables have [come] financially to commodity electricity generation. Wind is getting close to cost parity with natural gas." Direct use of landfill gas is becoming competitive with the cost of conventional fuels in many instances. The average cost of a photovoltaic panel has dropped by 80 percent in the past 25 years. And, as these prices keep plummeting, green power capacity will inevitably grow.

Even though green power typically boasts elevated first costs, options like solar, wind, and geothermal don't call for fuel purchases. Payments for electricity from these types of sources are unaffected by the ebb and flow of fossil fuel prices, presenting you with the opportunity to diversify your energy portfolio and guaranteeing cost stability amid fuel-price uncertainty. According to Profir, some companies are actually switching to renewable resources to reduce energy costs - something that most facilities professionals don't realize is even possible.

"People sometimes reject green power without knowing how much it really costs; it's a very quick calculation to get an estimate of what your costs for green power would be. There are numerous organizations that you can go to in order to get competitive pricing," says Ralph DiNola, principal, Green Building Services Inc., Portland, OR. Before you make a decision, get an estimate of what it will mean to the bottom line to transfer 50 percent of your power use (or any other amount) to green power.

"In deregulated markets where buildings can shop around for electricity purchases, you can work with suppliers to buy electricity that has a mix of green power in it (a 90/10 mix, for example) and come away with something that is price competitive with the incumbent utility," says Andy Noel, director of business development, Green Mountain Energy Co., Austin, TX. "Outside a deregulated market, it's likely an additional cost because green power is an addition to the normal electricity purchase. But, what will surprise people is that the additional cost is not nearly as much as they think."

Your Next Move
Before doing anything else, take a look at your building's recent energy-consumption data, including electricity and fossil fuels. (DiNola and McDaniel also suggest benchmarking your building's energy performance by using the ENERGY STAR® online tool to see how your building compares to similar building types in your region.) Once uncovered, this information will identify where energy can be saved (which should be your first step before initiating any kind of green power program), map out how much green power you might want to buy, and assess the environmental impacts of your electricity use. As DiNola explains, "If your building is an energy hog, you're going to have a better environmental impact by making the building more energy efficient first and then buying green power or RECs to offset your energy use; however, buying green power today provides immediate results if your retrofit work will take years to plan and execute." And, as Noel points out, it's counterintuitive to not do anything to reduce electricity use and just purchase lots of green power in an attempt to be sustainable. Energy conservation and the utilization of green power should be a package approach. By making every attempt to shrink energy requirements before you buy, you'll be as green as possible (and, green power will be more affordable since you have to buy less of it). Some organizations have saved enough money through energy-efficiency upgrades to make up for the elevated price of green power.

Once you've got a handle on your energy consumption, determine your motivation for using green power. Is it to reduce greenhouse-gas emissions? Is it to bolster customer relations? Is it to reap long-term savings? Is it to convey the organization's values to the public? The answer will help you decide on the type of green power and the method by which you obtain it. For example, if controlling fuel price risk is your No. 1 priority, you might want to check out fixed-price renewable electricity.

"After identifying your business case, map out [business] locations and understand what the electrical and thermal energy requirements are at these locations. Furthermore, of great value is to understand what the policies and incentives are at these locations (corporate tax breaks or rebates, investment subsidies, etc.)," explains Profir. Because of differences in incentives based upon location, a good renewable energy option in one region may not be the most economically viable option in another.

If buying green power from your utility is the way you want to go, but your utility doesn't offer it, ask it to provide a green power option and let the utility know that you're interested in buying if the opportunity arises. It's up to you to voice the types of products you're interested in - your encouragement could be just what the utility provider needs to take that leap.

Leah B. Garris ([email protected]) is senior associate editor at Buildings magazine.

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