Customer access to clean energy has increased dramatically in the past 15 years, as technology cost reductions, electricity market deregulation, and financial creativity have combined to produce more accessible renewable products for end-users. Energy managers now have a wealth of tools at their disposal. The most recent product class is the offsite solar PPA, a category that OneEnergy pioneered with our Purpose-Built SolarTM product. This product represents the fourth major way that large electricity buyers can access the benefits of renewables. It’s the most flexible and satisfying yet, and appeals to a broad range of end-users, from universities to corporations, from manufacturers to municipalities and other government agencies.
Let’s briefly recap the history of customers’ renewable energy options, as well as their pros and cons:
2001: The Renewable Energy Certificate (aka “REC”, or "Green Tag")
In 2000, the Bonneville Environmental Foundation and EPA’s Region 10 office completed the first retail REC transaction. In the "old" days, prior to the invention of the REC, customers were at the mercy of their utility. If the local utility didn't offer a renewable energy option, customers were out of luck. The REC, a tracked and verified certificate that represents the carbon reduction created by adding one megawatt-hour (MWh) of metered renewable electricity to the grid, allows customers to circumvent the utility and support renewable energy in a meaningful way. The REC is now the accounting standard for nearly all U.S. renewable energy transactions, and many utilities operate REC-based green power programs for their customers.
Generally speaking, large end-users of electricity appreciate the simple, elegant, and cost-effective nature of a REC transaction. However, because the REC product does not include the underlying electricity, the REC is unable to deliver the fixed-price benefits of renewable energy to a customer.
2007: The Rooftop Solar Lease (onsite solar project)
Sunrun, most industry insiders contend, invented the residential lease product in 2007, relieving homeowners from the burden of large, upfront cash payments for solar panels. Since then, the product has been enhanced many times over and made available to commercial and institutional electricity customers. The solar lease, both residential and commercial, remains a primary financing method for on site solar projects in the U.S., offering customers value and flexibility.
Nonetheless, for many customers that have large electricity loads, shading issues, or aging roofs, or for customers that don’t own their facilities, the onsite solar lease is an impractical or incomplete solution.
2010: The Corporate Wind PPA (offsite wind PPA)
When Google completed the first purchase of wind electricity from an offsite project (a project located remotely from any Google facilities), it became FERC-registered to do so - a burdensome and resource-intensive process for all but the most well-heeled companies. Since then, project developers and energy marketing companies have worked diligently to make wind PPA opportunities more accessible to a broader range of organizations and customers. Institutions like Microsoft, Yahoo, Mars, Amazon Web Services, and The Ohio State University have completed transactions, but, as this list implies, wind PPAs are typically large in size and most appropriate for very sophisticated buyers with large electricity loads. Nonetheless, because the PPA is an actual purchase of electricity (or a financial hedge that achieves the same end), the wind PPA allowed – for the first time – customers to manage their long-term electricity costs.
Remember, while wind power and solar plants have upfront capital costs, the marginal costs for generating the renewable electricity are zero. This means that the projects can sell their power at a known, fixed price for the life of the project, an offer that fossil fuel plants are incapable of matching.
2014: Purpose-Built SolarTM (offsite solar PPA)
In the summer of 2012, OneEnergy Renewables began crafting a way for the National Aquarium in Baltimore to access the fixed-price benefits of renewable energy. National Aquarium had explored the potential for rooftop solar, but given the unique architecture of their building it simply wasn’t feasible. Even if it had been an option, the available rooftop space would only have allowed National Aquarium to address a small portion of their total electricity load. They wanted to do something more meaningful.
After clearing various technical, economic, and accounting hurdles, OneEnergy devised a way to deliver the fixed-price power from its 4.3-MW solar project in Cambridge, MD, to the National Aquarium’s Baltimore facility, a distance of 50 or so miles, as the crow flies. The resulting offsite solar solution addressed the Aquarium's needs and represents a new way for end-users to access fixed-price power from offsite solar projects. The customers’ commitment to purchasing the power allows us to finance and build a new project on their behalf.
Though this power product is similar to a wind PPA, in many respects, the offsite solar PPA holds significant advantages. First, because solar is modular in nature, projects can be scaled up or down to suit the power requirements of various customers (i.e. you don’t have to be Google to implement). And because sunlight is readily available in numerous markets (as opposed to strong wind resources required by large wind projects), OneEnergy Renewables can build projects in strategic grid locations that offer the best economics for both project and customer. Finally, because solar projects are relatively easy to site and permit, we can build the projects nearer to customers’ facilities.
A Portfolio Approach
Renewable power products continue to improve over time, and each product offers particular benefits to customers. Which products are most appropriate for your organization depend very much on your individual profile: your location, your electricity load, your financial position, and your real estate). Fortunately, a portfolio approach makes tremendous sense for most organizations. The most savvy organizations:
1) implement as many efficiency measures as possible to reduce energy consumption and budget;
2) purchase fixed-price solar or wind PPAs to serve as fiscally prudent hedges on long-term electricity prices (generally 10%-40% of total consumption);
3) purchase inexpensive RECs to green the remaining portion of their power portfolios.
There you have it: an economic portfolio approach to green 100% of your electricity supply, reduce energy price risk and budget volatility, and build brand value with customers, employees, and other important stakeholders. Let us know how we can help create a customized plan for your organization!