Commercial, industrial, and institutional (C&I) commitments to clean power and sustainability have seen magnificent growth in recent years. As a result, electricity markets have adapted to serve this emerging league of increasingly sophisticated energy buyers. All buyers of renewable electricity — utilities, homeowners, and C&I purchasers — currently have four means to obtain this electricity:
Option #1: Offsite Power Purchase Agreements
Large-scale renewable energy projects that are not physically collocated with the purchaser’s facilities are referred to as offsite. The predominant way that buyers purchase renewable electricity from these projects is via a power purchase agreement (PPA), which locks in a fixed price for power with the project owner over a specified duration.
PPAs have received considerable attention over the past several years from C&I buyers, as they allow these large users of electricity to purchase renewables at considerable scale. For many C&I buyers, though, an offsite PPA is not within reach.
Generally, this is due to the buyer’s creditworthiness or energy load size (although smaller PPA tranches, via aggregation plays/syndicates, are rapidly becoming more available). While this is the case in locations such as the US and Mexico, in certain global markets, such as states within India, opportunities for PPAs at a smaller scale may exist.
Option #2: Onsite Power Purchase Agreements/Distributed Generation
Another common form of renewable electricity purchasing is via onsite installation, generally solar photovoltaics (PV). This mechanism is particularly attractive to buyers with many decentralized centers of operations (such as retailers, banks, fast food chains, etc.) or a large rooftop footprint (although ground-mounted PV is also used by C&I organizations).
Onsite projects are not for every C&I buyer. There can be siting concerns, capital expenditure constraints, or operational risk that buyers may choose to bypass. In addition, most C&I purchasers won’t be able to use onsite generation to achieve more than a fraction of their overall electricity demand due to the smaller scale of these projects.3
Option #3: Energy Attribute Certificates
The generation and distribution of renewable electricity is a complicated process. As renewables are sold onto the electric grid in the spot market, it is nearly impossible to trace them. To compensate, in 1999, projects in the state of California began producing a certificate of generation to accompany renewable electricity supply. These “birth certificates” are known as renewable energy certificates (RECs) and have become the standard method for tracking and trading renewable electricity around the world.
RECs are used in both compliance (regulated) markets and by voluntary purchasers to achieve their goals. They can be bundled with retail electricity via green utility purchasing programs or “unbundled” and sold as a separate commodity.
Over time, with the development of new global markets, a variety of certificates have been created. The term Energy Attribute Certificate (EAC) refers to this class of established and emerging green power commodities, regardless of the country of origin.
EACs have a relatively low barrier of entry for most C&I purchasers. EACs are easy to obtain, represent zero carbon electricity generation, and—when sourced from a reputable provider and third-party certified—are highly reliable. Most renewable electricity purchasers will, at one point, use some volume of EACs to meet their goals.
Option #4: Utility Green Power Programs
Largely viewed as a response to the growing C&I demand for greater energy
choice and clean energy options, centralized utilities have begun to offer green
power options in the form of green tariff and subscriber programs. Concerned
by the trend of environmentally conscious consumers replacing traditional
utility generation supply with directly-sourced renewable options, many utilities
have begun to pivot away from providing only large-scale, conventional energy
generation by offering green power solutions. Though limited by geographic
location of the utility, this attempt to capture the growing audience of corporate
energy buyers asking for renewable options signals a meaningful shift in the way
electric power is bought and sold.
It can be difficult for organizations to fully realize their goal using one solution or technology; we recommend a portfolio approach that ramps to the final goal using a variety of cleantech solutions.
To gain a better understanding of how your company can address its energy goals and minimize risk using a portfolio approach, we invite you to download our eBook: Activate an Efficient and Sustainable Future