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  • Writer's pictureAli Ahmed

Not All Renewables Are Created Equal

Renewable energy installation continues to rise and become an increasingly significant portion of our global electricity supply. In 2016, US solar installations doubled over the previous year; over 50% of new electricity generation has been renewable energy over the past 3 years; and small scale solar capacity has doubled in the past 2 years.

But for corporate consumers looking to participate in the renewable energy market and capture the benefits of using renewable energy, it's not easy to determine the best option.

There are four potential options for the corporate energy consumer looking to buy renewable energy:

  1. On-site generation Construct a renewable energy system on your own property to generate power for the facility and send any excess power to the utility grid. This system could be purchased outright or through a lease or power-purchase agreement to minimize first costs.

  2. Utility renewable contract Contract with a utility provider for renewable energy using an existing or negotiated rate structure. Programs are available in many states and countries, even those which are not "deregulated."

  3. Off-site Power-Purchase Agreement (PPA) Enter into a PPA with a provider to purchase the renewable energy from a renewable energy facility located elsewhere, sometimes on a different electric gird. These are typically long term contracts (15+ years) with set pricing and escalators.

  4. Renewable Energy Certificates (RECs) Purchase RECs or other offsets to reduce your carbon footprint

Each of these choices has very different benefits for the consumer, and differing levels of complexity. On-site generation is usually the best in delivering clear benefits of reducing carbon, hedging against electricity price fluctuations, and making a statement to both internal and external stakeholder about a companies sustainability values. However, on-site installations are not always technically or financially viable, particularly for companies with limited space or leased facilities. Utility renewable contracts are not always available depending upon the local market, and although are easier to contractually execute (with just a change in how the utility calculates your monthly bill), may have prohibitive costs. PPAs are difficult to contract, although becoming easier by the day, and RECs have no NPV, but are simple to purchase and currently very inexpensive.

To navigate this process, the consumer needs to consider all these factors, and then rank them against the goals of the organization:

  • Feasibility/Availability

  • Contracting complexity

  • Operational complexity

  • Carbon impact

  • Hedging value

  • NPV

A consultant, who acts as a consumer advocate in this process, can help distinguish and quantify the available options and simplify the decision process. Since some players in this market generate their revenue by having their client select a specific option, and sometimes even a specific supplier, it's important to ensure your consulting partner is unbiased to the four options and will even recommend not entering the market if the conditions are not right.

To learn more, there are a growing number of organizations dedicated to helping companies with evaluation and execution of one or more of these options such as the Business Renewables Center, the Solar Energy Industry Association (SEIA), the American Wind Energy Association (AWEA), as well as many state and federal programs (check out the Database of State Incentives for Renewables & Efficiency).

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