Switching to Green

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SWITCHING TO GREENA RENEWABLE ENERGY GUIDE

FOR OFFICE AND RETAIL COMPANIES

SAMANTHA PUTT DEL PINO

October 2006


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MARGARET YAMASHITAEDITOR

HYACINTH BILLINGSPUBLICATIONS DIRECTOR

MAGGIE POWELLLAYOUT

Each World Resources Institute report represents a timely, scholarly treatment of a subject of public concern. WRI takes responsibility for choosing the study topicsand guaranteeing its authors and researchers freedom of inquiry. It also solicits and

responds to the guidance of advisory panels and expert restated, however, all the interpretation and ndings set fortthose of the authors.

Copyright 2006 World Resources Institute. All rights reserved.

ISBN 1-56973-636-7


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C O N T E N T S

Acknowledgments ......................................................................................

Introduction .................................................................................................

The Business Case .......................................................................................

Green Power Delivery Options ....................................................................Procurement Strategies ................................................................................

The Purchase of Green Power .....................................................................

Greenhouse Gas Accounting for Green Power ...........................................

Resources ....................................................................................................


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A C K N O W L E D G M E N T S

The valuable feedback and insights of several people andorganizations contributed to this publication. The authorgratefully thanks Jennifer Hensley, Dan Lieberman andRebecca Zimmer for their comments, and Andrew Aulisi,Nancy Kiefer and Sheri Willoughby at the World ResourcesInstitute. The technical expertise of Jim Sullivan and DerikBroekhoff also is appreciated.

The author thanks Hyacinth Billings, Maggie Powelland Margaret Yamashita for assistance in turning thedraft paper into a complete publication. This guide would

not be possible without the generous suMerck Fund, the Oak Foundation, Johnsand the S.C. Johnson Fund. The author individuals and organizations that particcontribute to, the Green Power Market Group upon whose work this document

Finally, the author offers special thank

and John Larsen for their signicant conwork and Craig Hanson and Jennifer Lasupport and insights.


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I N T R O D U C T I O N

tricity generation. In 2030, 177.13 million able electricity are expected to be generatepercent of the total electricity generation.

Although many types of green power arto procure, the overwhelming amount of iavailable can make this confusing to do, enewcomers. Accordingly, this guide was d

through the clutter and provide the essentifor companies wanting to green their enis intended specically for ofce- and retanies and organizations, dened as those thmanufacturing operations. Examples incluinstitutions; real estate, retail, law, and pubuniversities; and nonprot organizations. of this guide do not need an energy backgderstand the information. To begin, gure

steps for purchasing green power, each of described in detail.

More than 70 percent of electricity in the UnitedStates is generated using fossil fuels such ascoal, oil, and natural gas. 1 The environmentalimpacts from this generation are considerable, rangingfrom air and carbon pollution to the myriad consequencesof mining and drilling for fuel. Obtaining energy fromclean, renewable resourcesgreen powercan provideboth environmental and economic value, and a growing

number of American companies are making the switch.

In recent years, the market for green power in the UnitedStates has grown exponentially, a good example beingwind power. In 1989, U.S. wind farms generated 2.1million megawatt-hours (MWh) of renewable electricity, 2 and in 2005, wind farms in 31 states 3 generated 14.6 millionMWh of renewable electricity, 4 an increase of 595 percent.According to the U.S. Energy Information Administration,

the 55.15 million MWh of renewable energy generation in2005 was equal to 1.5 percent of the countrys total elec-


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The guide draws heavily on the lessons and publicationsof the Green Power Market Development Group (see box1) whose members include many of the largest corporateusers of renewable energy.

THE DEFINITION OF GREEN POWER Green power, also referred to as renewable energy, canbe used to generate both heat and electricity. The WorldResources Institute (WRI) views green power as energygenerated from resources that are commonly accepted ashaving a relatively low impact on the health of humans,animals, and the ecosystem. These energy sources include

Solar

Wind

Biomass

Landll gas Geothermal

Some types of certied hydropower 6

Unlike fossil fuels, these resources do not contribute toemissions of carbon dioxide (CO 2 ), which causes globalwarming. Although power derived from nuclear energyis not polluting, it is not considered a green power sourcebecause it is not renewable and spent nuclear fuel car-ries environmental and health risks. In addition, somehydropower projects can have signicant adverse envi-ronmental impacts on water quality, river ows, and shpopulations and thus are not considered green. Oneway to ensure that green power meets strict environmentalstandards is by purchasing a product that has been certi-ed through a program such as Green-e (see box 2).

BO X 2 GREEN-E CERTIFI

The nonprot Center for Resource Solutithe Green-e certication program, which way for consumers to quickly identify ensuperior electricity products. Green-e cerelectricity products that meet the programenvironmental and consumer protection sFor example, Green-e certies only newfrom facilities put online since 1997 and certify renewables that were mandated byConsequently, companies know their dolla real difference. Green-e also requires thproviders disclose information about theicustomers in a standardized, easily comp

BO X 1 THE GREEN POWEDEVELOPMENT G

Convened in 2000 by the World ResourceGreen Power Market Development Groupcommercial and industrial partnership debuilding corporate markets for green powtransforming energy markets to enable co

to diversify their energy portfolios and reon climate change by developing 1,000 mof new, cost-competitive green power by energy to power 750,000 homes. The Gropartners are Alcoa, Dow Chemical CompFedEx Kinkos, General Motors, IBM, In& Johnson, NatureWorks LLC, Pitney BoStarbucks.

More information about the Group and itincluding publications, case studies, backinformation on green power technologiesgreen power marketplace, can be found awww.thegreenpowergroup.org.
http://www.thegreenpowergroup.org/http://www.thegreenpowergroup.org/


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the added advantage of improving locathus may enhance a companys local co

Customers . Purchasing renewable eparticularly benecial to some busincompanies. For example, Whole Food

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TABLE 1 SOME OF THE U.S. ENVPROTECTION AGENCYPOWER PARTNERSHIP PARTNERS

CompanyGreen PowerUsage (kWh)

Whole Foods Market 463,128,000

Starbucks 150,000,000HSBC North America 124,544,000

University of Pennsylvania 112,000,000

World Bank Group 106,762,000

Safeway 87,000,000

FedEx Kinkos 54,690,033

Duke University 54,075,000

White Wave Foods 49,500,000Staples 49,497,588

Tower Companies 41,000,000

Northwestern University 40,000,000

Source:U.S. Environmental Protection Agency, GrPartnership, Top 25 Partners, June 2006, http://wgreenpower/partners/top25.htm.

T H E B U S I N E S S C A S E

The demand for green power from states to individ-uals to businesses is growing. Twenty-two statesand the District of Columbia have passed legislation(known as Renewable Portfolio Standards) requiringutilities to generate a specied percentage of their powerfrom renewable sources. 7 In addition, utilities in thirty-four states offer a green power option to householdconsumers, 8 and the list of municipal, commercial, and

industrial users of renewable energy continues to grow.Many of them belong to the U.S. Environmental ProtectionAgencys Green Power Partnership, which now has morethan 600 members that use more than 5.5 billion kWh of renewable energy annually. 9

Several notable ofce- and retail-based companies andorganizations, as well as universities, are on this growinglist of green power purchasers (see table 1). These com-

panies and organizations have a variety of reasons forwanting a clean and sustainable energy future, includingreducing greenhouse gas (GHG) emissions to reachclimate change goals; building stronger relationshipswith customers and employees; lowering or stabilizingoperating costs; and securing their energy supply.

Reducing greenhouse gas emissions. Fossil fuelbasedenergy contributes to both air and carbon pollution.

More and more companies now understand thedangers of climate change and have responded witha corporate strategy, which includes establishing anemissions reduction target. Energy is a signicantsource of greenhouse gas emissions for most ofce-and retail-based companies, so switching to renewableenergy can help them reach their emissions reduction
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in the United States and Canada, which helpsdifferentiate Whole Foods Market from itscompetitors and aligns its mission of environmentalstewardship with its customers values.

Employees. Strong companies value theiremployees, and purchasing renewable energymay enhance employee relations. A recent KPMGsurvey of 1,600 of the worlds largest companiesfound that approximately half believed thatmotivating their employees is a major driver of corporate social responsibility (CSR) activities. 10 Buying green power can be one elementof a comprehensive CSR strategy. A strongcommitment to green power and CSR can helpmake employees feel better about their employerand, in turn, may help the company attract andretain high-quality employees.

Lowering or stabilizing operating costs. Fossil fuels arenot renewable sources so their prices can be volatile.Some companies, however, may be able to stabilizetheir energy costs by switching to renewable energy.For example, in 2001 IBM signed a ve-year contractwith its utility to provide wind-generated electricity ata xed price for its operations in Austin, Texas. At theoutset, even though the green electricity was slightlymore expensive than the utilitys conventional power,as the price of natural gas soared during 2001, the

cost of conventional power also roseexpensive than the utilitys wind-genBecause the price of natural gas has IBM expects to save more than $60,0through its xed-price contract.

As another example, Staples hosts so(PV) systems on the rooftops of two distribution centers (see case study BThese PV systems reduce the amoun

Staples must buy from its utility duriand most expensivehours of the dathe price it pays for the solar power icompany has a buffer against retail eincreases and can better forecast its fcosts.

Securing energy supply. Because the imports about one-third of its energyhostile political regimes in many of tproducing regions are causing Amermore and more concerned about eneIndeed, recent polls by the Pew Resethe People and the Press indicate thaAmericans give priority to reducing dependence on foreign oil. 12 By swenergy, companies can help build thenewer, alternative forms of energy anthe energy mix.


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G R E E N P O W E R D E L I V E R Y O P T I O N S

GREEN POWER DELIVERY OPTIOThe three methods of purchasing green pothrough retail green power programs, renecerticates (RECs), and on-site generationis a general description and the principal adisadvantages of each.

Retail green power programsBoth regulated and deregulated markets opower programs. In regulated markets, coparticipate in utility-sponsored green pricthat allow customers to buy green power bspecial rate for electricityusually a premmium helps the utility invest more moneyenergy and thus increase the amount of retricity produced, generally in the purchase(see gure 2). In deregulated markets, cusgreen power through either their utility orpower marketer.

Retail green power offerings vary widelto program. Customers may buy up to 100power, often in a blend of various renewRetail green power usually is purchased equantity blocks or as a percentage of themonthly electricity use. One block is usuakilowatt hours (kWh) of renewable electriable for a xed monthly fee above the cosal electricity. Customers may buy as manywish, depending on how much of their elethey want to be green. The cost for custom

The United States is subdivided into a network of regional power pools, each of which is made up of one or more states (see gure 2). When electricity isgeneratedby either fossil fuels or renewable resourceselectrons physically ow along the path of least resis-tance into the nearest electricity grid or power pool.Electricity providers then distribute the electricity to con-sumers along local transmission lines (see gure 3). It is

not possible for customers to know whether the electronsthey receive were generated using fossil fuels or renew-able resources. But by buying green power, companiesincrease the amount of renewable energy that is generatedin the power pool. The purchaser signs a contract with arenewable energy provider or marketer ensuring that thesame quantity of renewable electricity that the customerpurchased is being generated and put into the systemand that the purchaser owns the environmental benets

of the renewable electricity.

MARKET CONDITIONSBefore procuring renewable energy, companies must learnabout the market(s) in which they operate and the variousgreen power delivery options available. The electricitymarkets of some states are regulated, which means thatjust one utility serves all consumers, at a set rate and in adened service area (usually a state or a portion of a state).

As of July 2006, seventeen states and the District of Columbia have deregulated their electricity markets. Thismeans that consumers in these states can shop aroundfor an energy provider and select the one that meets theirpricing or product needs. Therefore, companies wanting

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Advantages Simple transaction. Customers contract directly with

their utility or power marketer and simply pay apremium on their existing bill.

Local environmental benets. The power pool in

which the customer is located accrues the improvedenvironmental benets associated with thegeneration of renewable energy.

Stable rates. When a company buys renewablesfrom an electricity supplier, it may be eligible forthe cost stability of renewable fuels. Be sure to ask

Disadvantages Cost. Because local utilities run re

programs, they usually select locaenergy sources, which may resultdepending on the abundance of thresource. In addition, providing g

a central part of most utilities buthe transactions costs are higher f

Less geographic exibility. Custompower needs in multiple states magreen power too geographically lthey need to make several green p

FIGURE 2 U.S. POWER POOL SUBREGIONS


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Renewable energy certicates (RECs) / green tagsRenewable energy certicates (RECs), also known asgreen tags, green certicates, and renewable energycredits, are a relatively new but increasingly popularmethod of supporting green power. Renewable energygenerates two products: electricity and the technologyand environmental benets associated with renewableenergy generation (see gure 4). These benets aregenerally referred to as environmental attributes andmay include a reduction in the air pollution and particu-late matter that would have been generated by burningfossil fuels as well as a reduction of greenhouse gasemissions. The electricity and attributes can be soldtogether, in retail green power programs, or they canbe sold separately. RECs represent the technology andenvironmental attributes of renewable energy and allowcustomers greater exibility in greening their electricity.That is, customers can continue to purchase their electricity

the renewable resource used to generate thelectricity, the location of the generation, generation. Certication programs such aslabel (see box 2) are in place to audit RECensure product quality.

Figure 5 illustrates RECs in more detailpower facilities sell the electricity they gewholesale power market, where it is then electricity providers and sold to customereither directly to retail electricity providerparty REC suppliers. When retail electricielectricity plus RECs to a customer, the prsold is green power . If RECs are not sold aelectricity, the product being sold is convIn other words, the greenness of renewafollows the REC. If a company can claim the REC, it also can claim the environmenthe associated green power. The main diffretail green power products and RECs is tfrom which the customer buys the RECs (

Some companies and organizations haveRECs to meet their green power needs eitor partly, including Coca Cola, Duke UnivKinkos, Harvard University, National GeoHome Improvement, Nike, Staples, the Towthe U.S. Army, the World Bank, Whole Fostudy A), and the World Resources InstituEnvironmental Protection Agencys Green


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ship web site ( http://www.epa.gov/greenpower/partners/gpp_partners.htm) lists more than 600 members, many

of which are buying RECs.

Advantages Flexibility. RECs may be purchased from suppliers

anywhere in the country, giving customers anopportunity to shop around for the best availableprice or the resources or environmental attributesmost attractive to the buyer. For example,

companies with greenhouse gas reduction targetsmay want RECs sourced from carbon-intensiveareas of the country, as this will maximize thecarbon benet of their green power purchases.(For information about accounting for the carbonbenet of green power purchases, see p. 16.)

Disadvantages Multiple bills. If RECs are bought

party broker, the purchasers must to their utility or power marketer and another to the RECs broker telectricity. As a result, the RECs pas a new expense rather than a simthe electricity bill.

Communications. Even though Raccepted method of procuring greconcept still is new to some stakecompanies must be careful to despurchase accurately, by followingthe states attorneys general to enadvertising. 14 For example, a combought RECs sourced from wind
http://www.epa.gov/greenpower/partners/gpp_partners.htmhttp://www.epa.gov/greenpower/partners/gpp_partners.htmhttp://www.epa.gov/greenpower/partners/gpp_partners.htmhttp://www.epa.gov/greenpower/partners/gpp_partners.htm


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TABLE 2 RETAIL GREEN POWER AND RECS: MORE SIMILAR THAN DIFFERE

Similarities Differences

Renewable power facility generates and delivers electricity tothe wholesale electricity market.

Customer receives electricity from a mix of sources.

Emissions from dirty coal, oil, or natural gas plants areavoided.

With retail green power, the utility sells therenewable power generation, whereas withmarketer sells the greenness.

Electricity and the greenness of renewabgeneration appear on the retail green powebill/invoice. The RECs customer must pay

On-site generationSome companies may be able to install tectheir own facilities to generate electricity renewable resources. For non-manufacturthese opportunities are most likely to be thof solar photovoltaic (PV) panels, solar wgeothermal heat pumps. Some companiesinstalled wind turbines, although this typetechnology is usually less feasible for ofcOne of the main reasons is that urban areamany of these companies are locatedaresites for wind technology. In some cases, cbuy the technology themselves or allow ato install the technology on its property anelectricity that is generated (see case studya company using on-site green power sellRECs, it cannot claim to be using green pothe greenness of renewable energy follo(see Renewable Energy Certicates on pgreen pricing programs or RECs, howeverable power generation means that the purchwill receive the actual electricity generated energy technology.

CASE STUDY A

WHOLE FOODS MARKETS RECORD-SETTINGPURCHASE OF RECS

In early 2006, Whole Foods Market, the worlds leadingnatural and organic foods supermarket, announced alandmark purchase of renewable energy certicates(RECs), making Whole Foods Market the countrysleading corporate purchaser of RECs. Whole FoodsMarket bought more than 458,000 megawatt-hours(MWh) of RECs from wind farms to offset 100 percent of the electricity used in all of its stores, facilities, bakeries,commissaries, distribution centers, regional ofces,and national headquarters in the United States andCanada. This purchase also avoids more than 700 millionpounds of carbon dioxide pollution, roughly equivalentto removing 60,000 cars from the road or planting more

than 90,000 acres of trees.The World Resources Institute facilitated the purchasingprocess for Whole Foods Market, and the RECs weresupplied by Renewable Choice Energy. Whole FoodsMarkets selection of RECs enabled it to meet its greenpower needs and to complete the transaction much moreeasily than if it had tried to buy a separate green powerproduct for each of its facilities operating in differentmarkets around the country.


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Advantages Reliability. If a facilitys power is derived from an

on-site source, the facility may be wholly or partlyprotected against any periodic power outages onthe grid. This may be desirable if the facility (e.g.,hospitals and data centers) is highly dependent ona reliable power source. Note, however, that manyon-site systems do not operate continuously. Forexample, solar PV is an intermittent resource that

Lower electricity cost.Companies

generated on-site to help meet therather than relying solely on electthe gridcan lower the cost of thespecially if they use an on-site sopeak and most expensive times

Image. On-site power sources, sucovered with solar PV panels, comcompanys environmental commi

visible way.

Disadvantages Cost. The up-front capital cost of

renewable power technology maybut it sometimes can be offset by state incentives. For more informProcurement Strategies.

Availability. Only limited types oenergy technology are practical fobased companies. Companies maby the availability of the renewabsun, wind) in their locale.

Interconnection. Rules covering thof on-site power generators to thebe problematic and burdensome, states have simplied their intercorules. Information about interconeach state (as well as renewable eopportunities) can be found in theState Incentives for Renewable Eavailable at www.dsireusa.org.

Utility charges. Some utilities chacharges or exit fees to customeof their energy needs through on-but remain connected to the grid fpower. These fees can be excessivmake some on-site power optionsunfeasible.

BOX 3 EXAMPLES OF HOW COMPANIES DESCRIBE RECS

In 2003, Pitney Bowes started purchasing renewableenergy certicates (RECs) equivalent to10 percent of the electricity consumed annually by the companyshome ofce facilities. The RECS are being generated byprojects that produce electricity from wind and landll

gas.The American Psychological Association will buyrenewable energy in the form of renewable energycerticates (RECs) equivalent to13,000,000 kWh peryear.

NatureWorks, LLC is matching 100 percent of itsannual electricity consumption with renewable energycerticates (RECs) from wind farms in the Great

Plains.This FedEx Kinkos facility is greening up 100 percentof its electricity supply by purchasing renewable energycerticates from wind farms in the Pacic Northwest.

Staples is buying 46 million kWh per year of renewable energy certicates (RECs). Ten percent of the RECs are generated from wind farms in the GreatPlains and 90 percent are generated by projects that

produce electricity from biomass and landll gasresources.

Note:Key words are italicized.
http://www.dsireusa.org/http://www.dsireusa.org/


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CASE STUDY B

THE SOLAR SERVICES MODEL

When evaluating options for on-site power generation,companies interested in solar PV may decide not to choosesolar PV because of its high capital cost and nancial rate of return.

One way to overcome the disadvantages of solar PV is

through a nancing approach known as the solar servicesmodel. Under this arrangement, the customer hosts an on-site generation system and buys its power but does not ownthe PV equipment. By eliminating up-front capital expensesto the host customer, this innovative business modelcould signicantly increase large U.S. corporations andinstitutions use of PV technology. A solar nancier and/ordeveloper such as SunEdison would instead nance, design,install, own, and operate a PV system.

Staples is one of the rst major corporations to use thesolar services model. In 2004, Staples signed contractswith SunEdison, LLC to purchase 10 years worth of solarelectricity from two 280-kW on-site solar PV projects at twoof its distribution centers in California, which serves about 10percent of each facilitys load.

The gure shows how the solar services model worked forStaples. The project developer, SunEdison, arranged the

nancing, design, equipment supply, and constboth sites. In return, Staples signed a ten-year, power purchase agreement (PPA) with SunEdioption of renewing it in ve-year intervals. HuCapital (now TD Banknorth), a nancial lendein renewable energy projects, provided construsenior-term loans, and a Goldman Sachs afliathe equity. The PV units were manufactured anBP Solar.

The solar services model can be structured to mand transfer risk to those entities that can best For example, Staples can assign the rights to thfuture tenant or landlord, which allows Staplesits obligations if it vacates the property. In add

offers a performance guarantee that its array wcertain number of kilowatt-hours of electricityis condent of the performance of its equipmeUnited and Goldman Sachs receive a low-risk their investment through the sale of xed-pricea nancially stable rm and the monetization oenergy incentives including depreciation benefederal tax credit.


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P R O C U R E M E N T S T R A T E G I E S

G reen power often is bought at a premium overthe cost of traditional power, but a number of strategies can be used to minimize the additionalexpense.

Efciency upgrades. The cost of a companys energy islinked to how much it uses. Some companies help payfor their green power by implementing energy savingsprograms and then using the cost savings to buyrenewables. Although the overall energy purchasingbudgets remain the same, the environmental resultsare better because of lowered consumption and thepurchase of green power. See case study C.

Supplier switching . In deregulated markets, customershave the option to switch from one energy provider toanother. Switching to a less expensive energy suppliermay enable a company to buy green power with themoney saved. ( Note: Before switching to another supplier,nd out whether the companys current contract withits power provider includes a penalty for switching toanother provider before the contract expires.)

Percent purchased. A companys decision to procurerenewable energy does not necessarily mean that allof its energy must come from renewable sources.Many companies buy some of their energy from

conventional sources and some from renewable ones.This approach can help the company meet its goal of integrating green power into its portfolio of energysources while keeping the cost down.

Aggregate demand. Green power purchased in highvolumes typically costs less per kilowatt-hour than that

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CASE STUDY C

PARLAYING EFFICIENCY IPOWER: STAPLES EXPERI

OPTIMIZING GHG PERFO

When getting started in 2001 to meet its Gtarget of 7 percent below that years levelaggressively and systematically identiedbest-practice approaches to energy managcompany stores and distribution centers. Tranged from control technology retrots fand HVAC load to incorporating more greprinciples into new construction. Throughround of efciency measures, Staples reduconsumption by 12.3 percent per square fThis included 46,000 megawatt-hours in tand an additional 19,000 megawatt-hours with savings of $4.5 million and $2.0 millBy reducing its energy consumption, Stapthe indirect GHG emissions released wheproviders burn fossil fuels to generate powaverage emission factor for the United Staenergy efciency avoided more than 41,0GHG emissions over two years, equivalen8,000 cars off the road.

The effort to reduce emissions through enallowed Staples to use a small portion of saved from its efciency investments to bincluding RECs equivalent to 46,000 megeach year. Consequently, in 2003 Staples increase its use of renewable power from

f i l l i i


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companys purchase is large. For example, in 2003,

the Tower Companies joined Pepco Energy Servicesto develop a new product that would meet the TowerCompanies need for a less expensive green poweroption. See case study D.

Location and source of RECs. The cost of RECs canvary widely depending on the technology and thegeographic location of the source. For example, insome years, depending on a number of market factors,RECs sourced from wind may be less expensivethan RECs sourced from biomass. But in otheryears, landll gas may be the least expensive option.Depending on the companys priorities, it may be ableto meet its goals with a blended product. For example,the company may request that 10 percent of theRECs be sourced from wind or solar and 90 percentfrom landll gas. Finally, a particular renewableresource, for example, wind or biomass, may bemore abundant in some areas than others and thusless expensive. Sourcing RECs nationally rather thanlocally, considering blended products, and specifyingthat the underlying power generation is from theleast expensive source all are ways of reducing thecost of procuring green power. Up-to-date marketdata for RECs can be found by visiting the web site of Evolution Markets Inc. ( www.evolutionmarkets.com).

Energy Services Companies (ESCOs). Companies withfacilities in several locations may nd that workingthrough a third-party energy services company(ESCO) may help them lower the cost. For example,Citigroup found that contracting an ESCO to brokera green power deal for several of its facilities locatedin deregulated states simultaneously allowed it tosave staff time negotiating contracts as well as to savemoney by aggregating the green power demand acrossthe company. 15

Incentives.A number of incentives are available tocompanies to make some forms of renewable energymore economically feasible. Depending on the type of renewable energy, incentives may be in the form of taxcredits and deductions, grants, loans, net metering,or other programs. The incentives vary from state to

CASE STUDY D

A CORPORATE CUSTOMER TAK

In 2003, the Tower Companiesa major comresidential developer in the Washington, D.Crecognized for its green building designssgreen power for 25 percent of seven apartmannual load and for 50 percent of six large oload. Although this 16-million-kWh-per-yearst used by a private developer in the nationwas not a typical green power transaction.

When Tower rst expressed an interest in bpower, its retail electricity provider offered shelf product. The supplier, Pepco Energy Shad wholesale power contracts with severalthat were producing electricity from landllwas offering this landll gasbased green p

commercial and residential customers. But tprice charged for this electricity was too higbudget.

Working with the World Resources Instituteconsulting rm Think Energy, Tower requescreate a new, alternative green power offerinmeet Towers high-volume demand, but at aOne option was for PES to partner with a Rto source less expensive RECs that could sebasis of this new product. PES responded ba deal with the REC marketer Sterling Planagreed to supply RECs wholesale to PES frfueled power facilities in several states acroIn turn, PES rebundled these nationally souwith conventionally generated electricity toretail green power product. The cost of the Rbe incorporated seamlessly into the customeelectricity bill.

By proactively engaging its electricity supplable to receive green power that met its requMost important, the cost of the green powernationally sourced RECs was lower than thaexisting product. By responding to Towers strengthened its relationship with a major cu
http://www.evolutionmarkets.com/http://www.evolutionmarkets.com/


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T H E P U R C H A S E O F G R E E N P O W E R

to be green. You should be able to decompanys electricity use from montbills. If your company conducts a reggas (GHG) inventory, this also will bof this information. If you are buyingfor more than one location, you musyour information by location or billipercentage of your monthly use is toneed to separate your data by month

Establish a list of potential provider

As with any purchase, it is smart to sStart by developing a short list of popower providers, which will depend you select. For example, if you are inretail green power offerings, you shoutilities or power marketers serving y

RECs purchasers may consider provinside or outside their region, dependgoals. The U.S. Department of EnergEnergy Efciency and Renewable Eneere.energy.gov/greenpowe r/) is anresource for information about each pricing programs, utilities, and poweoffering retail green power products,list of REC marketers. Be sure to see

whose products have been certied tenvironmental and consumer protectSee Certication.

Request information

To determine the best available pricebl

Before you actually purchase green power, youshould review your companys goals to make sureyou understand its reasons for wanting to buy it,as this may affect the type of renewable power you buy orfrom whom you buy it. For example, if your company isconcerned about local air quality or benets to the localcommunity, then you should explore local green poweroptions. If your company is more interested in ndingthe cheapest possible green power, a nationally sourcedproduct may be best. Some companies want to reducetheir emissions of greenhouse gases and therefore toprocure their renewable energy from carbon-intensiveregions in order to capture the greatest carbon benet. Acompany interested in broadly advertising its green powerpurchase may wish to source it from a resource that itsaudience will easily recognize, for example, wind power,or from a provider with the marketing skills to help itpromote its purchase.

Once you understand your companys goals and thegreen power options available, unless you are pursuingon-site generation options (see box 4), you can begin thefour-part process of actually buying it. First, you shouldknow what data you will need. Second, you should establisha list of potential providers. Third, you should requestinformation from your potential providers and evaluatetheir responses. Fourth, once you have selected a providerand agreed on a price, you will have to sign a contract.When shopping around for green power, remember tolook for products that have been certied to meet strictenvironmental and consumer protection standards, suchas through the Green-e certication program (see box 2).
http://www.eere.energy.gov/greenpowerhttp://www.eere.energy.gov/greenpower


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REC customers, especially those purchasing a highvolume, may be best served by drawing up a Requestfor Proposals (RFP) to gather relevant informationfrom multiple suppliers. Some elements to include inan RFP are

Volume. How many RECs do you want to buy eachyear? Request information for multiple quantities.

Contract duration. Specify the number of years forwhich you want to buy RECs and ask whether thereis a discount for a long-term purchase.

Type of renewable resource. State whether you wantyour RECs to be sourced from a particular typeof renewable resource. Likewise, let potentialproviders know if this is not a priority.

Geographic preference. If the location of therenewable resource is important, for example,f l l l b

the environmental integrity of the p

verify that the power was actually grenewable facility and that the RECone customer.

Vintage. State whether you want thegenerated in a particular year. If the be recorded in your companys greeinventory, it may be important to sea particular year.

Delivery start date. Specify the date delivery of the RECs should begin.

Ideally, ask all the providers to whom yoRFP to send the information to you in a spas it will help you compare the responses More information about RFPs can be founGreen Power Market Development Groupwww.thegreenpowergroup.org/pdf/ElemeRFP.pdf.

Once you have received the informationlected providers, compare each response. ations for evaluating potential suppliers dgoals. For example, if you plan to publicizpower purchase, the providers ability to hpublic relations may be a factor in your de

Sign a contract

Once you have chosen your green powyou must sign a contract to receive theor RECs. You can negotiate many of itsexample, if your goal is to buy RECs ayour annual electricity use and you bason historical electricity use informationknow your actual annual electricity usethe year, you may want to true-up yo

you used more electricity than anticipahave to buy additional RECs to meet ycan negotiate the price of the additionayour REC supplier and specify this in t

Remember to follow your companys sreview of contracts. You should check

BO X 4 TIPS FOR PURSUING ON-SITERENEWABLE ENERGY POWER GENERATION

The procurement process for on-site green powergeneration is more complicated than buying retail greenpower or RECs. You must analyze your electricity load anddetermine which types of on-site green power generationare appropriate for the facility. For ofce- and retail-basedcompanies, on-site options are most likely to be solarphotovoltaics (PV) panels or solar or geothermal heaters.You will need to evaluate the available incentives, zoningrules, permit requirements, interconnection rules, andnet-metering opportunities. Generally, for most ofce-and retail-based companies, the most cost-effective andefcient method of procuring an on-site green powersystem is to hire a general contractor or an energy servicescompany (ESCO) to handle the analysis, system design,installation, commissioning, and nancing. Some of thecomplexities of on-site green power procurement can beavoided through innovative methods such as the solarservices model described in case study B.
http://www.thegreenpowergroup.org/pdf/Elements_of_a_REC_RFP.pdfhttp://www.thegreenpowergroup.org/pdf/Elements_of_a_REC_RFP.pdfhttp://www.thegreenpowergroup.org/pdf/Elements_of_a_REC_RFP.pdf


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G R E E N H O U S E G A S A C C O U N T I N G

F O R G R E E N P O W E R

METHODOLOGY To calculate GHG emissions from electmust determine how much electricity thmultiply it by an appropriate emission f

Electricity used (kWh or MWh) = GHG emissionsThe emission factor applied will depe

pool subregion (see gure 2) where the is generated. Each power pool subregioemission factor, which takes into accouergy generated in that subregion. The U.S

Protection Agency provides a database, kof all power pool subregion emission factdownloaded from www.epa.gov/airmark

Retail green power and RECs. Most obased companies do not generate thebut instead buy it from a utility, powREC marketer. In this case, the greengenerated ows into the local power

quantifying the emissions avoided bygreen power depends on the types anconventional power used on the gridpower is produced. To calculate this,quantity of retail green power or REMWh or kWh) by the e-GRID emisse-GRID subregion where the renewa

Companies that procure renewable energy to helpmeet greenhouse gas (GHG) reduction targetsmust account for their renewable energy purchaseswhen they conduct their annual GHG inventories.Detailed guidance for ofce- and retail-based companieson developing a GHG inventory can be found in the WRIpublication Hot Climate, Cool Commerce: A Service Sector Guide to Greenhouse Gas Management,which is availablefor download at www.ghgprotocol.org. Developing a GHGinventory has many benets; for example, it identiesemission reduction opportunities and helps companiestrack their overall emissions to ensure that they are meetingtheir targets through projects like green power procure-ment.

The guidelines for accounting for the GHG benets of green power in corporate GHG inventories have beenevolving. The U.S. Environmental Protection Agencyoffers a draft set of guidelines through its Climate Leadersprogram ( www.epa.gov/climateleaders), w hich describethe types of RECs that qualify as green power. For ex-ample, the RECs must be new; that is, they must comefrom facilities that began operating after 1997. They alsodescribe RECs that do not qualify. For example, compa-nies cannot count RECs that are used to meet RenewablePortfolio Standards (RPS) in their inventory. These eli-gibility guidelines follow the standards developed by theCenter for Resource Solutions Green-e program. A brief overview of the GHG accounting guidelines for greenpower is provided here, but for more detailed informa-
http://www.epa.gov/airmarkets/egridhttp://www.ghgprotocol.org/http://www.epa.gov/climateleadershttp://www.epa.gov/climateleadershttp://www.ghgprotocol.org/http://www.epa.gov/airmarkets/egrid


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TABLE 3HYPOTHETICAL ACCOUNTING EXAMPLE OF THE CARBON BENEFIGREEN POWER AND RECS

STEP 1. Calculate Emissions from Conventional Energy UseEnergy used Emission factor (metric

tons of CO2 per MWh)e-GRID subregion whereconventional power is used

Total emissions

1000 MWH 0.63 FRCC = 630 metric tons of

STEP 2. Calculate Emissions Avoided Owing to Renewable Energy PurchaseRenewable energy

purchasedEmission factor (metric tons of CO2 per MWh)

e-GRID subregion whererenewable power is generated

Total emissions

30 MWH 0.89 ECOV = 26.7 metric tons o

STEP 3. Report Renewable Energy Purchase as a Negative Line Item in the Companys GHG InventoryEmissions source Emissions totalScope 2 (emissions from use of purchasedelectricity)

630 metric tons of CO 2

RECs/retail green power purchase 26.7 metric tons of CO 2Total NET emissions 603.3 metric tons of CO 2

Note: Scope 2 is GHG accounting terminology used to describe the emissions from using purchased electricity. More informatioin Hot Climate, Cool Commerce: A Service Sector Guide to Greenhouse Gas Accounting,which can be downloaded from www.gh

the green electricity is used and the subregion whereit is generated are most likely the same. In the caseof RECS, the underlying renewable energy may havebeen generated in a subregion different from thatwhere the purchaser is located. Either way, this valueappears as a negative line item in the companys GHGinventory (see table 3).

On-site green power generation. Accounreporting GHG emissions from on-sitegeneration for a GHG inventory is mucCompanies simply multiply the amounused from on-site generation by zero, bsite green power system produces no G
http://www.ghgprotocol.org/http://www.ghgprotocol.org/


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5. U.S. Energy Information Administration,

Outlook 2006, with Projections to 2030(WDepartment of Energy, 2006), reference ta

Note: These numbers are for the electric pThey include geothermal, solar thermal, sobiomass, and wind sources as renewables hydropower, municipal solid waste, combigeneration.

6. Low-impact hydropower is certied by theHydropower Institute, http://www.lowim

7. Pew Center on Global Climate Change, Wthe States? http://www.pewclimate.org/win_the_states/index.cfm (accessed on Aug

8. Pew Center on Global Climate Change, Wthe States? http://www.pewclimate.org/win_the_states/index.cfm (accessed on Aug

9. U.S. Environmental Protection Agency, GrPartnership, http://www.epa.gov/greenpowpartners.htm (accessed on August 14, 2006

10. KPMG Global Sustainability Services, K

Survey of Corporate Responsibility RepoKPMG, 2005). Available online at http://wRut2000)prod/Documents/9/Survey2005.

11. U.S. Energy Information Administration,Review, February 2006.

12. Pew Research Center for the People and thRespect for America Seen as Major ProbleAttitudes Now Driven by 9/11 and Iraq, pin association with the Council on Foreign(Washington, D.C., August 2004).

13. For approximately two-thirds of green poU.S. markets, the retail electricity provideor RECs from a local or regional renewabnearly all the remaining green power salesprovider sources locally or regionally genea wholesale REC marketer or broker and rwith local electricity to create green poweInstitute, Corporate Guide to Green PowerInstallment 6, Developing Next GeneraProducts for Corporate Markets in North

D.C.: World Resources Institute, Decembe14. The guidelines can be found at http://www

pdf/Green_Marketing_guidelines.pdf.15. World Resources Institute, Climate Northe

Purchasing Green Power in Competitive MExperience(Washington, D.C.: World Res2006)

RESOURCES Center for Resource Solutions/Green-e: The Center for

Resource Solutions (CRS) is a national nonprotorganization working to build a robust renewable energymarket by increasing the demand for and supply of renewable resources. CRS also administers the Green-eprogram, which certies renewable energy products toensure their environmental credibility.See www.resource-solutions.org.

Database of State Incentives for Renewable Energy (DSIRE):

DSIRE is a web database of up-to-date information aboutrenewable energy and energy efciency incentives offered bythe U.S. states and the federal government.See www.dsireusa.org.

Green Power Market Development Group: In the UnitedStates, the Green Power Market Development Group isa collaboration of twelve leading corporations and theWorld Resources Institute dedicated to building corporatemarkets for green power. In Europe, the group is convenedin partnership with the Climate Group. Business-centeredpublications on green power are available for download atwww.thegreenpowergroup.org.

Green Power Partnership:The Green Power Partnership is avoluntary program administered by the U.S. EnvironmentalProtection Agency to promote corporate renewable energyprocurement. See www.epa.gov/greenpower/. The siteincludes downloadable publications such as the Guide toPurchasing Green Power and the Communications Guide, whichhas ideas about crafting messages and outreach. The site also

has a Green Power Locator which provides state-by-stateinformation about green power procurement options.

Low Impact Hydro Institute:The Low Impact Hydro Instituteis a nonprot organization dedicated to reducing theimpacts of hydropower generation through the certicationof environmentally responsible, low impact hydropower.See www.lowimpacthydro.org.

NOTES1. U.S. Energy Information Administration, Annual Energy Review

2004, report no. DOE/EIA-0384 (2004) (Washington, D.C.:U.S. Department of Energy, 2005).

2. U.S. Energy Information Administration, Annual Energy Review2005 (Washington, D.C.: U.S. Department of Energy, 2006),table 8.2c.
http://www.lowimpacthydro.org/http://www.pewclimate.org/what_s_being_done/in_the_states/index.cfmhttp://www.pewclimate.org/what_s_being_done/in_the_states/index.cfmhttp://www.pewclimate.org/what_s_being_done/in_the_states/index.cfmhttp://www.pewclimate.org/what_s_being_done/in_the_states/index.cfmhttp://www.epa.gov/greenpower/partners/gpp_partners.htmhttp://www.epa.gov/greenpower/partners/gpp_partners.htmhttp://www.kpmg.com/NR/rdonlyres/66422F7F-35AD-4256-9BF8-F36FACCA9164/0/KPMGIntlCRSurvey2005.pdfhttp://www.kpmg.com/NR/rdonlyres/66422F7F-35AD-4256-9BF8-F36FACCA9164/0/KPMGIntlCRSurvey2005.pdfhttp://www.naag.org/issues/pdf/Green_Marketing_guidelines.pdfhttp://www.naag.org/issues/pdf/Green_Marketing_guidelines.pdfhttp://www.naag.org/issues/pdf/Green_Marketing_guidelines.pdfhttp://www.resource-solutions.org/http://www.dsireusa.org/http://www.thegreenpowergroup.org/http://www.epa.gov/greenpowerhttp://www.lowimpacthydro.org/http://www.awea.org/projectshttp://www.awea.org/projectshttp://www.lowimpacthydro.org/http://www.epa.gov/greenpowerhttp://www.thegreenpowergroup.org/http://www.dsireusa.org/http://www.resource-solutions.org/http://www.naag.org/issues/pdf/Green_Marketing_guidelines.pdfhttp://www.kpmg.com/NR/rdonlyres/66422F7F-35AD-4256-9BF8-F36FACCA9164/0/KPMGIntlCRSurvey2005.pdfhttp://www.epa.gov/greenpower/partners/gpp_partners.htmhttp://www.pewclimate.org/what_s_being_done/in_the_states/index.cfmhttp://www.pewclimate.org/what_s_being_done/in_the_states/index.cfmhttp://www.lowimpacthydro.org/


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ABOUT WRIThe World Resources Institute is an environmental think tank thatgoes beyond research to create practical ways to protect the Earthand improve peoples lives. Our mission is to move human societyto live in ways that protect Earths environment for current and

future generations.Our program meets global challenges by using knowledge tocatalyze public and private action:

To reverse damage to ecosystems. We protect the capacity of ecosystems to sustain life and prosperity.

To expand participation in environmental decisions.Wecollaborate with partners worldwide to increase peoples accessto information and inuence over decisions about naturalresources.

To avert dangerous climate change.We promote public and privateaction to ensure a safe climate and sound world economy.

To increase prosperity while improving the environment.Wechallenge the private sector to grow by improving environmentaland community well-being.

In all of our policy research and work with institutions, WRI triesto build bridges between ideas and actions, meshing the insights of scientic research, economic and institutional analyses, and practicalexperience with the need for open and participatory decision-making.

10 G Street, N.E.Washington, D.C. 20002, USA
http://www.wri.org/http://www.wri.org/


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10 G Street, NESuite 800Washington, DC 20002www.wri.org
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