Ten Things You Should Know About Green Power Markets


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Ten Things You Should Know About Green Power Markets

  1. 1. Blair Swezey Principal Policy Advisor National Renewable Energy Laboratory [email_address] Ten Things You Should Know About Green Power Markets NREL Energy Analysis Seminar May 11, 2006 Washington, D.C.
  2. 2. What is “Green Power?” <ul><li>The term generally refers to voluntary purchases of renewable energy by electricity customers. </li></ul><ul><li>(“voluntary purchase market”) </li></ul><ul><li>Generally includes all renewable energy sources, but products often exclude large hydro and waste-to-energy. </li></ul><ul><li>(what do customers want?) </li></ul><ul><li>Project vintage requirements. </li></ul><ul><li>“ New” versus “existing” renewables content delineations. </li></ul><ul><li>The Green-e program has developed minimum product standards through consensus stakeholder processes. ( www.green-e.org ) </li></ul><ul><li>“ Green power” products have been sold for >10 years. </li></ul>
  3. 3. #1 <ul><li>Anyone can buy green power. </li></ul>
  4. 6. Renewable Energy Certificates (RECs) <ul><li>What is a REC? </li></ul><ul><ul><li>A REC represents the attributes of renewable energy sold separately from the commodity electricity </li></ul></ul><ul><ul><li>RECs are also known as green tags, green tickets, renewable energy credits, tradable renewable energy certificates (TRCs) </li></ul></ul>Renewable Energy Generation Renewable Energy Attributes Commodity Electricity
  5. 7. #2 <ul><li>More than 2,000 MW of new renewable energy capacity is being supported through voluntary green power markets. </li></ul>
  6. 8. New Renewables Capacity Supplying Green Power Markets, 2004 100.0 455.0      100.0 2,233.3      Total 6.9 31.3      0.4 8.5      Small Hydro 0.0 0.0      1.6 35.5      Geothermal 0.1 0.4      0.4 8.1      Solar 12.9 58.8      6.1 135.6      Biomass 80.1 364.5      91.6 2,045.6      Wind % MW Planned % MW in Place Source
  7. 9. New Renewables Capacity Supplying Green Power Markets, Annual Trend
  8. 10. #3 <ul><li>Green power premiums have been declining. </li></ul>
  9. 11. Utility Green Power Premiums (Nationwide)
  10. 12. Average Premium for the “Top 10” Programs
  11. 13. #4 <ul><li>Some utility customers are now paying less for green power than for the standard power mix. </li></ul>
  12. 14. Top 10 Utility Green Power Programs by Lowest Price Premium Charged Note: as of December 2005 0.91 Wind Eugene Water and Electric Board 10 0.90 Landfill gas Wabash Valley Power Association 9 0.78 Wind, biomass, solar PacifiCorp 8 0.70 Landfill gas Clallam County Public Utility District 6 0.70 Wind, landfill gas Austin Energy 6 0.50 Wind Western Farmers Electric Cooperative 5 0.33 Wind Avista Utilities 4 -0.25 Wind OG&E Electric Services 3 -0.45 Wind Edmond Electric 2 -0.67 Wind Xcel Energy 1 Premium (¢/kWh) Resources Used Utility Rank
  13. 15. #5 <ul><li>Increasingly, non-residential customers are driving green power market growth. </li></ul>
  14. 16. Non-Residential Purchasers <ul><li>Federal agencies are responding to established purchase goals. </li></ul><ul><ul><li>Executive Order 13123 called for 2.5% renewable energy by 2005. </li></ul></ul><ul><ul><li>EPACT 2005 calls for 3% from 2007-2009, 5% from 2010-2012, and 7.5% by 2013 and thereafter. </li></ul></ul><ul><li>State government purchases are helping build the market. </li></ul><ul><li>(“lead by example”) </li></ul><ul><li>Municipalities are using green power purchases to meet sustainability goals. </li></ul><ul><li>Colleges and universities being driven by student initiatives. </li></ul><ul><li>For businesses, green power purchases help meet sustainability goals, and provide a branding opportunity. </li></ul>
  15. 17. Environment <ul><li>“ We are committed to achieving substantial reductions in CO 2 emissions through… such off-site means as purchasing green power and trading carbon emissions credits .” Johnson & Johnson </li></ul><ul><li>(3 rd largest U.S. Green Power Purchaser) </li></ul><ul><li>“… announced today that it has committed to purchase wind energy certificates… The purchase is part of a multi-faceted…strategy to reduce greenhouse gas emissions…” </li></ul><ul><li>Starbucks </li></ul><ul><li>(6th largest U.S. Green Power Purchaser) </li></ul>
  16. 18. Branding
  17. 19. Green-e Product Labeling Initiative (“Made with Certified Renewable Energy”)
  18. 20. #6 <ul><li>The U.S. Air Force is the nation’s top green power purchaser, buying more than one billion kWh annually. </li></ul>
  19. 21. Top 20 U.S. Green Power Purchasers (as of March 20, 2006) 1. U.S. Air Force (1.07 billion kWh) 2. Whole Foods Market (463 million kWh) 3. Johnson & Johnson (306 million kWh) 4. U.S. Environmental Protection Agency (259 million kWh) 5. U.S. Department of Energy (160 million kWh) 6. Starbucks (150 million kWh) 7. HSBC North America (125 million kWh) 8. University of Pennsylvania (112 million kWh) 9. The World Bank Group (107 million kWh) 10. IBM Corporation (94 million kWh) 11. Safeway Inc. (87 million kWh) 12. U.S. GSA / Region 2 (76 million kWh) 13. City of San Diego, CA (65 million kWh) 14. NJ Consolidated Energy Savings Prog. (55 million kWh) 15. AMD / Austin, TX Facilities (52 million kWh) 16. WhiteWave Foods (50 million kWh) 17. Staples (49 million kWh) 18. Austin (TX) Independent School District (48 million kWh) 19. Mohawk Fine Papers Inc. (45 million kWh) 20. The Tower Companies (41 million kWh) Source: EPA Green Power Partnership
  20. 22. #7 <ul><li>The nation’s most successful utility green pricing program has a customer participation rate of nearly 15%. </li></ul>
  21. 23. Top 10 Utility Green Power Programs by Customer Participation Rate Note: as of December 2005 4.6% Central Electric Cooperative 10 4.7% Moorhead Public Service 9 4.8% Silicon Valley Power 8 4.9% City of Fairbank 7 5.3% Portland General Electric 6 5.5% Sacramento Municipal Utility District 5 6.0% Holy Cross Energy 4 6.3% Montezuma Municipal Light and Power 3 12.6% Lenox Municipal Utilities 2 13.6% City of Palo Alto Utilities 1 Rate Utility Rank
  22. 24. Utility-Provided Program Benefits (2004) 19% 16% Other 65% 51% Plaques or recognition Top 10 All Utilities 23% 35% 23% 15% 19% 65% 73% 69% 61% Newsletters (program updates) 9% Fuel-cost exemption 12% Discounts/promotions 15% Efficiency products 19% School programs 23% Tours to project sites 49% Business recognition 49% Window decals
  23. 25. Providing Fuel-Cost Protection to Green Power Customers <ul><li>Adjust the “base” green power premium to reflect changes in renewable energy costs vis-à-vis conventional supplies (or “avoided cost”) </li></ul><ul><li>Exempt green power customers from fuel-related rate adjustments </li></ul><ul><li>– Green power customers receive a credit on their bills </li></ul><ul><li>Substitute a separate rate (“green rate”) for the energy rate on customer bills </li></ul><ul><li>– Requires “unbundled” rate structure </li></ul><ul><li>– Utility might want longer term customer commitment to balance risks </li></ul>
  24. 26. Fuel-Price Adjustment Example Xcel Energy (Colorado)
  25. 27. “ Green Rate” Example Austin Energy
  26. 28. #8 <ul><li>Increasingly, renewable energy certificates (RECs) are becoming the “currency” of green power transactions. </li></ul>
  27. 29. U.S. Voluntary Green Power Sales 62% 6,210 3,840 Retail Total 162% 1,720 660 REC Markets 40% 2,650 1,900 Competitive Markets 43% 1,840 1,280 Utility Green Pricing Increase 2004 2003 (in millions of kWh)
  28. 30. Advantages of RECs <ul><li>Monetizes the value of the attributes separately from the commodity electricity. </li></ul><ul><li>Avoids issues of resource variability and load matching between the seller and the buyer. </li></ul><ul><li>Avoids renewable electricity deliverability requirements. </li></ul><ul><li>Can be sold across geographic boundaries. </li></ul><ul><li>Allows consumers to support renewables even if their suppliers don’t provide green power options. </li></ul><ul><li>RECs from small, distributed projects can be aggregated. </li></ul><ul><li>Can provide an additional revenue stream for renewable energy projects. </li></ul>
  29. 31. #9 <ul><li>Green power markets operate in combination with compliance markets, such as renewable portfolio standards (RPS) and emissions markets. </li></ul>
  30. 32. Renewable Portfolio Standards <ul><li>RECs are used in “compliance markets” (for RPS and fuel mix disclosure) as well as for voluntary purchase markets. </li></ul><ul><li>It is important to avoid double counting between voluntary and compliance markets. </li></ul><ul><ul><li>The concept of “additionality” is critical to the success of the voluntary green power market. </li></ul></ul>
  31. 33. Emissions Policies and Environmental Claims <ul><li>In general, REC buyers should have the right to claim all the environmental benefits. </li></ul><ul><li>For emissions subject to cap-and-trade rules, REC environmental claims may be inaccurate. </li></ul><ul><ul><li>No environmental claim can be made on capped emissions unless the renewable generator has been awarded an emission allowance and then retired that allowance. </li></ul></ul><ul><li>For emissions not subject to cap-and-trade, REC buyers should ensure that the environmental benefits have not been sold to another party. </li></ul>
  32. 34. #10 <ul><li>The federal government supports a significant amount of work on green power markets. </li></ul>
  33. 35. www.eere.energy.gov/greenpower
  34. 36. NREL Green Power Analysis Products
  35. 37. Other Federal Green Power Resources www.epa.gov/greenpower eetd.lbl.gov/EA/EMS/re-pubs.html www.eere.energy.gov/femp/technologies/ renewable_workinggroup.cfm Federal Agencies Renewable Energy Working Group