Author: Amy Haddon has extensive experience in renewable energy communications and providing business insights based on market trends.
Corporate purchasing of renewable energy is on the upswing, thanks in no small part to historic low prices in both wind and solar. However, the price of renewable energy is only one variable impacting an organization’s choice to buy green power. For many, the very real concern about a clean environment is a highly motivating factor. Many companies have made public commitments to either reduce their carbon emissions or buy renewables. These pledges help to green the grid in order to stem the impacts of global warming and reduce the harmful human health and environment impacts of fossil fuel-based power generation.
One way that organizations are buying renewables is via a power purchase agreement, or PPA. In a PPA, the buyer commits to be a long-term off-taker of the power generated by a wind or solar development. Historically used by utilities, PPAs are now one of the most sophisticated ways that commercial buyers are acquiring their green power. Last year, these buyers added more than 3.4 gigawatts of new renewables to the North American grid.
Energy demand is only expected to grow as the development of the information age continues. It is widely postulated that the only way to meet this demand without further hastening global warming is by keeping fossil fuels in the ground. PPAs can help in this endeavor by accelerating renewable energy penetration.
Currently, renewables (including large-scale hydropower) account for approximately 16% of the national grid. This number is rapidly growing. Consider, for example, that in January of this year, 100% of the new power added to the grid was from renewables. Renewables also outstripped coal and natural gas installations in 2015. Projections from the U.S. Energy Information Administration (EIA) predict that renewable generation in the U.S. will continue to grow substantially over the next three decades while coal experiences simultaneous, rapid decline. Global predictions are similar. However, it’s worth noting that these predictions depend on the level of grid penetration; commercial buyers could potentially accelerate these predictions beyond what is currently forecast by EIA.
It’s predicted that natural gas will make up much of the grid shortfall as a result of coal’s demise. Thanks to ever-greater accessibility to North American shale reserves, natural gas prices have also reached historic lows. However, the hydraulic fracturing (“fracking”) required to reach these reserves comes with its own set of problems, including an increased incidence of man-made earthquakes. And, unlike wind and solar, which are infinitely available, shale oil and gas are finite, meaning that prices may inevitably rebound.
Renewables produce far fewer greenhouse gas emissions than conventional coal or natural gas generation. The International Panel on Climate Change (IPCC) reports that even life-cycle emissions are minimal in renewable generation. For example, wind emits an average of only 0.02 to 0.04 pounds of carbon dioxide equivalent (CO2e) per kilowatt-hour (kWh) and solar an average of 0.07 to 0.2. Contrast this to the 0.6 to 2 pounds of CO2e/kWh for natural gas and 1.4 to 3.6 pounds for coal.
Renewables are also associated with other environmental benefits. Not only are wind and solar effectively carbon free, they do not have to incinerate any dirty fuels or waste products to generate power. The act of incineration produces copious amounts of greenhouse gases (GHGs) and other harmful pollutants. The Lawrence Berkeley National Laboratory (LBNL) and the National Renewable Energy Laboratory (NREL) found that the use of renewables saved between $2.6 and $9.9 billion in human health and environment benefits in 2013 alone by reducing pollutants, particulates, and GHGs. These health and environment benefits are greatest in the eastern half of the U.S. and Texas.
The LBNL and NREL report also estimates that greater renewable energy usage in 2013 prevented as many as 290 emergency room visits for asthma, 310 hospital admissions for respiratory and cardiovascular complications, 560 non-fatal heart attacks, and 64,000 work days missed. Likewise, the Department of Energy’s Wind Vision report found that growing wind power could have an enormous positive impact on public health and environment. Through 2050, wind can prevent up to 21,700 premature deaths, over 10,000 asthma-related emergency room visits, and nearly 2.5 million missed school days. The cumulative savings for this improved health exceed $100 billion.
Extractive fuels also rely heavily on fresh water stores during the extraction and incineration processes. This is bad news for water-stressed regions across the U.S. Use of renewables, on the other hand, reduced national water withdrawals and consumption by 830 billion gallons and 27 billion gallons, respectively, in 2013 according to the LBNL/NREL report. This is equivalent to a savings of 8,420 gallons of withdrawal and 270 gallons of consumption per megawatt-hour of new renewable energy used in 2013 for state compliance—which does not even include the metrics of any projects that were supported by voluntary purchasers via PPA. The largest water reductions were drought-stricken California and Texas, thanks to California’s solar boom and Texas’ wind explosion.
While natural gas will at least temporarily continue its growth, low prices shouldn’t be the only motivator behind commercial renewable purchasing. Extractive fuels are still subject to price volatility, whereas renewables not only provide relatively stable costs over time, but also have the power to dramatically impact human health and environment.
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