Guide to
Purchasing Green Power
Renewable Electricity, Renewable Energy Certificates
and On-Site Renewable Generation
U.S. Department of Energy
Energy Efficiency and Renewable Energy
Federal Energy Management Program
SEPA
GREEN
POWER
PARTNERSHIP
World Resources Institute
Sustainable Enterprise Program
•m-
Center for Resource Solutions
Green-e Renewable Energy
Certification Program
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This guide can be downloaded from:
www. eere. energy. gov/femp/technologies/renewable_purchasepower.cfm
www.epa.gov/greenpower/buygreenpower.htm
www.thegreenpowergroup.org/publications.html
www.resource-solutions.org
Office of Air (6202J)
EPA430-K-04-01S
www.epa.gov/greenpower
September 2004
ISBN: 1-56973-577-8
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Summary 1
Chapter 1: Introduction 2
Chapter 2: The Definition of Green Power 4
Chapter 3: The Benefits and Costs of Green Power 5
The Benefits 5
The Costs 6
Chapter 4: Options for Purchasing Green Power 9
Renewable Electricity Products 9
Renewable Energy Certificates (RECs) 10
On-site Renewable Generation 11
Chapter 5: Steps to Purchasing Green Power 13
Identifying Key Decision Makers 14
Gathering Energy Data 14
Choosing Green Power Options 15
Chapter 6: Procuring Renewable Electricity and Renewable Energy Certificates 16
Developing Criteria for Screening Suppliers and Products 16
Collecting Product Information 17
Creating a Procurement Plan 18
Chapter 7: Planning an On-site Renewable Generation Project 21
Screening the Technologies 21
Obtaining Resources and Assistance 21
Creating a Project Plan 22
Anticipating Possible Barriers 23
Installing and Operating an On-site Renewable Generation System 24
Chapter 8: Capturing the Benefits of the Purchase 25
The Environmental Benefits 25
Internal Promotion 25
External Promotion 26
Chapter 9: Conclusion 27
Chapter 1 0: Resources for Additional Information 28
Glossary 34
Appendix A: Green Power Considerations for Federal Agencies 37
Guide to Purchasing Green Power
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' he Guide to Purchasing Green Power is intended for
organizations that are considering the merits of buy-
ing green power as well as those that have decided to
buy it and want help doing so. The Guide was writ-
ten for a broad audience, including businesses, government
agencies, universities, and all organizations wanting to diver-
sify their energy supply and to reduce the environmental
impact of their electricity use.
The Guide provides an overview of green power markets
and describes the necessary steps to buying green power.
This section summarizes the Guide to help readers find the
information they need.
Chapter 1 describes the concepts of renewable energy and
green power and discusses their differences from traditional
energy sources. This section also summarizes recent changes
in electricity markets.
Chapter 2 defines three types of green power products:
renewable electricity, renewable energy certificates, and on-
site renewable generation. Renewable electricity is generated
using renewable energy resources and delivered through the
utility grid; renewable energy certificates (RECs) represent
the environmental, social, and other positive attributes of
power generated by renewable resources; and on-site renew-
able generation is electricity generated using renewable
energy resources at the end-user's facility.
Chapter 3 summarizes the benefits and costs of purchasing
green power. Benefits include a financial hedge against vari-
ous risks, improving relations with organizational
stakeholders, helping the environment, and bolstering eco-
nomic development and security. Conversely, green power
may be more expensive than traditional power and present
new contracting challenges.
Chapter 4 describes in detail the three main green power
products, including the alternative renewable electricity
products, the details of RECs transactions, and the technolo-
gies that can be used to harness on-site renewable resources.
Chapter 5 outlines the general steps needed to prepare to buy
green power: identifying the key decision makers, gathering
energy data, and choosing the specific green power options
available to the purchaser's facilities.
Chapter 6 discusses the steps to procure renewable electricity
or renewable energy certificates: developing screening crite-
ria, collecting product information, and drawing up a
procurement plan.
Chapter 7 describes the steps to establish an on-site
renewable energy system: screening the technologies best
suited to the purchaser's site, obtaining technical and finan-
cial assistance, creating a project plan, anticipating possible
barriers, and installing and operating the on-site
generation system.
Chapter 8 explores ways of taking advantage of
promotional opportunities after buying green power.
This section covers promotion both inside and outside
the organization and options for quantifying the
environmental benefits of the purchase.
Chapters 9 and 10 of the Guide conclude with a list of
resources offering more information about all aspects of green
power. Because electricity from renewable resources is rela-
tively new and may be generated in a variety of ways, many
institutions are working to facilitate the development of
green power markets. Several of these organizations' pro-
grams—the U.S. Department of Energy's Federal Energy
Management Program (FEMP), the U.S. Environmental
Protection Agency's Green Power Partnership, the
Sustainable Enterprise Program of the World Resources
Institute (WRI), and the Green-e Renewable Energy
Certification Program administered by the Center for
Resource Solutions—worked together to write this purchas-
ing guide. More information about these programs is
available from the Web sites listed in chapter 10, Resources
for Additional Information.
Finally, the appendix to the Guide discusses considerations
specific to federal agencies that buy green power, particularly
the procurement regulations that cover the purchase of
green power.
Guide to Purchasing Green Power
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J
' oday the energy sources used to create electricity dif-
fer in many ways, including in their environmental
impacts. In the United States, conventional means of
electricity generation use fossil or nuclear fuels—
forms of power generation that impact human health and the
environment through air emissions and other effects. Despite
advances in pollution controls over the last 30 years, conven-
tional power generation is still the nation's single largest
source of industrial air pollution.
Electricity markets are changing, however, offering cleaner
ways of producing power and giving many consumers the
ability to choose how their power is generated. One of these
choices is power from renewable sources that is marketed as
green power. Innovative organizations are encouraging the
use of these new sources of green power and, at the same
time, are reducing their own impact on the environment.
In some parts of the United States, the deregulation of elec-
tricity has enabled consumers to choose the provider of their
electric power and thus to buy green power from their chosen
supplier. In regulated markets, too, hundreds of utilities now
offer their customers the opportunity to purchase green power
through "green-pricing" programs. Even in areas where con-
sumers cannot buy green power directly, renewable energy
certificates (RECs) are available in every state to allow con-
sumers to support green power.
While no form of electric power generation is completely
benign, electricity generated from renewable resources
such as solar, wind, geothermal, small and low-impact
hydropower, and biomass has proved to be environmentally
preferable to electricity generated from conventional energy
sources such as coal, oil, nuclear, and natural gas. The Guide
to Purchasing Green Power focuses on electricity generated
from renewable energy resources, both delivered through the
grid and generated on-site. Although renewable energy can
also be used for heating needs or for transportation fuels, the
Guide does not address those applications.
By buying green power instead of conventional power,
consumers can reduce the environmental impact caused
by their use of electricity and fossil fuel. For instance, on
average, every kilowatt-hour (kWh) of renewable power
avoids the emission of more than one pound of carbon diox-
ide. Because of the sheer quantities of energy involved,
consumers of a large amount of electricity may have an enor-
mous environmental impact. If the typical commercial
facility switched to 100 percent renewable power or used
RECs to offset emissions, this could amount to thousands of
tons of emissions avoided each year.
A wide range of organizations have purchased green
power: federal, state, and local governments; universities;
businesses; nonprofits; and individual consumers. By
purchasing green power, these organizations are both helping
the environment and meeting their own environmental
goals. The many other benefits to buying green power range
from financial benefits to public relations and even national
security. As of the end of 2003, nearly 1,650 megawatts
(MW) of new renewable generating capacity had been added
to meet the United States' demand for green power. This
capacity is enough to meet the annual electricity needs of
more than 500,000 houses.
Leading organizations are finding that green power is an
effective part of a strategic energy management plan to
achieve environmental, financial, and other goals. Successful
energy management plans are often a "portfolio analysis" that
considers options such as energy efficiency, load management,
power purchases, on-site generation, and nonelectric (ther-
mal) energy needs. As with any investment portfolio, the best
mix of these options depends on the particular situation.
Because buying green power is still relatively uncommon
in today's energy markets and because these markets offer
a wide range of choices, the Guide is intended for organiza-
tions that have decided to buy green power but want help in
figuring out how to do it, as well as for organizations that are
still considering the merits of buying green power.
2
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Chapter 1
The Guide to Purchasing Green Power addresses the following
commonly asked questions:
• What are renewable energy and green power? (p. 4)
• What benefits will my green power purchase bring? (p. 5)
• How do I make a business case for buying green power?
(p. 5)
• What is the cost of green power? (p. 6)
• What are the options for purchasing green power? (p. 9)
• What is the importance of product certification and
verification? (p. 9)
• What are the best ways of buying green power? (p. 16)
• How should an organization choose a green power
product? (p. 13)
• What are the steps to installing on-site renewable
generation? (p. 21)
• What is the best way of telling the organization,
employees, and community about the benefits of green
power? (p. 25)
Guide to Purchasing Green Power
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The of
Renewable energy is derived from natural sources that
replenish themselves over short periods of time.
These resources include the sun, wind, moving
water, organic plant and waste material (biomass),
and the earth's heat (geothermal). This renewable energy can
be used to generate electricity as well as for other applica-
tions. For example, biomass may be used as boiler fuel to
generate steam heat; solar energy may be used to heat water
or for passive space heating; and landfill methane gas can be
used for heating or cooking.
Although the environmental impacts of renewable energy are
generally minimal, these power sources still do have some
effect on the environment. For example, biomass resources
are converted to electricity through combustion, which emits
some air pollutants. Hydroelectric dams can flood the sur-
rounding land and impede the passage of fish. Compared with
conventional power, however, renewable power generally
avoids, or at least significantly reduces, the adverse environ-
mental impacts of conventional electricity generation.
The term green power is used in a number of different ways. In
the broadest sense, green power refers to environmentally
preferable energy and energy technologies, both electric and
thermal. This definition of green power includes many things,
from solar photovoltaic systems to wind turbines to fuel cells
for automobiles.
Although renewable resources do more than generate
electricity, green power is most commonly used in a narrower,
marketing, sense to refer specifically to electricity from renew-
able resources. In the context of the Guide to Purchasing
Green Power, the term green power refers to electricity
products that include significant proportions of electricity
generated from energy resources that are both renewable
and environmentally preferable.
In the Guide, green power includes the following three
products:
• "Renewable electricity" is generated using renewable
energy resources and is delivered through the utility
grid.
• "Renewable Energy Certificates" (RECs) represent the
environmental, social, and other positive attributes of
power generated by renewable resources.
• "On-site renewable generation" refers to electricity
generated using renewable energy resources at the
end-user's facility.
Note that the terms green power, environmentally preferable,
and renewable energy may be used in slightly different ways,
which differ primarily according to the varying assessments of
the environmental impacts of harnessing specific resources
and of the relative significance of each impact. The exact
definitions of these terms, while always important, take on
added significance when dealing with state and federal
government requirements or determining eligibility for
government and utility incentives. For more discussion of
how each of the organizations that collaborated on this
document defines green power, please refer to their Web sites,
listed in Chapter 10.
To help consumers more easily identify green power
products, the "Green-e" Renewable Energy Certification
Program is working to build market-based, consensus
definitions for environmentally-preferable renewable electric-
ity and renewable energy certificates. The Green-e program,
administered by the non-profit Center for Resource Solutions
(CRS), certifies and verifies renewable electricity products in
competitive power markets, as well as utility green pricing
programs and in national markets for RECs. Further details
about Green-e certification are available from the Green-e
Web sites listed in Chapter 10.
The Definition of Green Power
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The of
Green power can help many organizations meet environmen-
tal, financial, stakeholder relations, economic development,
and national security objectives.
Environmental
• Avoid environmental impacts. Green power and
renewable energy avoid most of the environmental
impacts associated with traditional power generation,
helping protect human health and the health of
the environment.
Financial
• Provide a hedge against risks posed by
« Electricity price instability. Purchasing electricity
generated by renewable energy resources creates a
financial hedge against unstable or rising fossil fuel
prices by diversifying a consumer's energy portfolio.
Wind, geothermal, hydro, and solar energy are not
subject to the rise and fall of fuel costs. For these
reasons, renewable electricity can offer a fixed price
over the long term.
« Fud supply disruptions. On-site renewable generation
can reduce the risk of disruptions in fuel supplies
resulting from transportation difficulties or interna-
tional conflict.
« Additional environmental regulation. To address global
climate change and regional air quality issues, feder-
al and state regulations have been proposed that
would effectively increase the price of conventional
electricity. But green power would be largely unaf-
fected by these regulations, resulting in more stable
prices over the long run.
« Electricity blackouts. Organizations that need highly
reliable power usually use on-site power generation,
such as diesel engines and gas turbines, for their
facilities in the event of a power outage. On-site
renewable generation can provide this backup power
without fossil fuel emissions. Some renewable
sources, however, require battery storage or other
backup devices for essential electrical services during
an outage.
of
IBM has a longstanding corporate energy management
program that is intended to improve the environment and
reduce energy costs. The energy managers at IBM's Austin,
Texas facility furthered both these goals by signing up for
Austin Energy's GreenChoice® program in 2001. Under
GreenChoice, the normal fossil fuel charge on the customer's
bill is replaced by a green power charge for the amount of
green power that the customer chooses to buy. Unlike the
fossil fuel charge, which fluctuates over time, the green
power charge is fixed until 2011. As it turned out, Austin
Energy's fuel charge for conventional power spiked in 2001
and IBM saved $20,000 in its first year in the program. With
the fuel charge having increased again in 2004, IBM expects
to save over $60,000 per year. Moreover, the cost stability
provided by this contract made it easier to manage the facil-
ity's energy budget.
Stakeholder relations
• Meet organizational environmental objectives.
Reducing an organization's environmental impact
is one of the main motivations for buying green power.
For example, buying green power can help meet green-
house gas reduction targets. If an organization is
interested in ISO-14001 certification for environmental
performance, a program for reducing energy-related
emissions will be an important part of this certification
process.
• Demonstrate civic leadership. Being among the
first in a community to purchase green power is a
demonstration of civic leadership. It makes a statement
that an organization is willing to act on its stated
Guide to Purchasing Green Power
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Chapter 3
environmental or social goals. These purchases also
demonstrate an organization's responsiveness to its cus-
tomers, the majority of whom favor renewable energy
(see chapter 10 for more details).
Generate positive publicity. Buying green power
affords an opportunity for public recognition and public
relations that advertising and media relations cannot
buy. Companies that are in the public eye need to
be responsive to the concerns of environmentally
conscious customers, shareholders, regulators, and other
constituents. Groups promoting green power, such as
the EPA's Green Power Partnership, provide assistance
in reaching broad audiences to convey the benefits of
green power purchases.
Improve employee morale. Progressive action and
leadership on environmental issues like renewable ener-
gy may improve employee morale, which in turn can
reduce employee turnover, attract new employees, and
improve productivity. In a survey of 464 organizations,
sponsored by the National Wind Coordinating
Committee, improving employee morale was cited as
the third most important motivation for buying green
power.
Differentiate products or services. By purchasing green
power, a company may be able to differentiate its products
or services by, for example, offering them as "made with
certified renewable energy" or "climate neutral."
Purchasers of green power can also join their power
supplier to market their products together. In addition,
purchasers of products certified by the Center for
Resource Solutions Green-e program can display the
Green-e logo on their product packaging to indicate
the share of renewable energy used by the company or in
its production.
Demonstrating Leadership
On January 1, 2003, Dyess Air Force Base (AFB), Texas,
became the largest consumer of renewable electricity at
a single site in the nation. The base now purchases 100
percent wind-generated electricity for all its electrical needs,
resulting in approximately 80 million kWh of wind energy
generated annually. The Dyess energy managers decided to
make such a large purchase in order to demonstrate leader-
ship to other agencies in meeting the federal renewable
purchase goal. This builds on earlier, award-winning
improvements that the base made in energy efficiency and
water conservation.
Economic development and national security
• Stimulate local economies. Because renewable
resources are typically local, jobs are created to install
and operate renewable generation facilities. Renewable
power facilities also increase the local tax base and can
provide income for farmers and rural communities. The
renewable energy industry may be an important growth
opportunity in mature, postindustrial economies like
that of the United States.
• Increase fuel diversity. Renewable energy diversifies
the nation's fuel resources—a good way to manage
risk—and, because renewable resources are indigenous,
reduces its dependence on imported fuels.
• Reduce infrastructure vulnerability. The wide
distribution of most renewable energy resources
improves the robustness of energy systems by reducing
the country's reliance on a vulnerable, centralized
energy infrastructure.
• Market transformation. By purchasing green power
now, organizations can reduce long-term production
costs and transform markets for renewable energy
technologies. Most renewable technologies are not yet
produced in great volumes, but their production costs
should drop significantly as their production volume
increases, which in turn will attract more purchases.
The Costs
Green power may cost more than standard power sources, for
several reasons.
Price premiums
Renewable energy has usually been more expensive than
conventional power sources. These higher costs are largely
due to the relative immaturity of renewable technologies
and their concentration in niche markets, compared with
conventional energy sources. Chapter 6 of the Guide suggests
ways of minimizing these costs in conjunction with a
procurement plan. Nonetheless, despite the currently higher
prices, the cost of renewable energy is falling as the growing
demand justifies the expansion of manufacturing facilities
and reduces production costs. Figure 1 illustrates the
dramatic decline in the cost of wind power over the last
two decades, while figure 2 shows that several renewable
power technologies are now nearly cost competitive with
conventional sources.
The Benefits and Costs of Green Power
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Chapter 3
Figure 1: Wind Energy Costs Fall as Installed Capacity Increases
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Source: American Wind Energy Association, 2003.
Capacity figure for 2003 is an estimate. Cost figures are averages and will vary by project.
Figure 2: Cost Comparison of New Power Plants Using Renewable and Conventional Electricity Technologies
Capitol, Operation, mi
Gas Combined Landfill Gas Geothermal Wind
Cycle
Coal Gas Combustion Biomass
Turbine
Nuclear
Source: Energy Information Administration Annual Energy Outlook, 2004.
Solar technologies are not included because their costs are application specific.
Guide to Purchasing Green Power
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Chapter 3
The actual price for green power depends on a number of
factors, including the availability and quality of the resource,
the market price of conventional electricity, the availability
of subsidies to encourage green power, and the quantity and
terms of the contract. Generally, the price of green power
ranges from less than that of the standard power mix,
especially in competitive markets and where state subsidies
exist, up to one to four cents more per kilowatt-hour.
When the market price of conventional electricity is high,
purchasers of green power at a fixed price may actually save
money. Of course, when the market price of conventional
electricity drops, they will be paying a premium.
Green power may also be more difficult than conventional
power for an organization to purchase, causing transaction
costs in addition to any price premiums. Although organiza-
tions that are buying green power for the first time may need
to invest extra effort, these costs fall significantly over time as
the electricity purchasers gain experience. Following the
information and strategies provided in this guidebook, partic-
ularly chapter 6, should help reduce the contracting
challenges faced by new purchasers of green power. In addi-
tion, sample contract templates are publicly available to help
buyers avoid difficulties in signing a green power contract
(see chapter 10, Resources for Additional Information).
Some stakeholders may regard the purchase of green power
as a token effort or "green washing." Organizations can avoid
this criticism by buying green power as part of a broader
environmental management program. Another strategy to
improve the credibility of a purchase is to work with third-
party organizations for independent auditing, endorsement,
and minimum purchasing benchmarks.
The and Costs of Green Power
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for
Green power can be purchased in several different
ways. The main distinction among the options
depends on where the power generation equip-
ment is located: on the power grid or on-site at
the facility. For electricity delivered over the power grid, the
status of utility restructuring in that state will determine
whether an organization can buy green power from either the
existing utility or a competitive power supplier. Even if the
state has no green power marketers or the utility does not
offer a green power option, an organization can buy renew-
able energy certificates (RECs). For on-site renewable
generation, the renewable energy resources available at that
site (e.g., solar, wind, biomass) are the main factors determin-
ing the project's feasibility.
These options are not mutually exclusive. Some organizations
may want to first buy a green power product requiring less
financial commitment (such as an electricity product with a
smaller fraction of renewable content). Over time, this can
be supplemented by larger purchases or the installation of on-
site generation. As discussed later, RECs can be a good place
to start because of the ease and flexibility of the purchase.
Renewable electricity products—offered by either the utility
or the power marketer that provides the organization's
power—can be structured in several different ways. The
availability of each of these products varies according to the
facility's location and the electricity provider's offerings.
Although each product differs slightly, most renewable
electricity products fall into one of two types.
• Fixed energy quantity block. A block is a quantity of
100 percent renewable electricity, often 100 kilowatt-
hours (kWh), offered for a fixed monthly price. The
price is often expressed as a price premium above the
price of conventional power. Customers usually may
sign up for as many blocks as they wish, with the
monthly cost of these products based on how many
blocks they buy. This type of product is available in
some competitive markets but is more often found in
regulated utility green-pricing programs.
• Percentage of monthly use. Customers may choose
renewable electricity to supply a fixed percentage of
their monthly electricity use. In practice, this usually
results in the purchase of a blend of renewable and con-
ventional power. This is typically priced as a premium
on a cents per kWh basis over the standard rate or as a
fixed charge per kWh. The monthly cost for these prod-
ucts varies with energy use and the percentage of
renewable energy chosen.
Some renewable electricity products require a fixed monthly
fee to support a given amount of renewable generation
capacity, or even require contributing to a renewable energy
fund that finances renewable projects. These products can be
an effective way to assist the green power industry but do not,
however, result in a metered amount of renewable electricity
of
One of the major concerns with buying green power is ensur-
ing that purchasers get what they pay for. It can be difficult
to substantiate claims made about the quantity and charac-
teristics of the product purchased. Also, it is important to
ensure that two organizations are not claiming to have pur-
chased the same green power, or are double-counting the
same green power benefits. Moreover, purchasers may be
unable to ensure public acceptance of their purchase and
avoid criticism from external stakeholders without independ-
ent information about the product. Third-party certification
addresses these concerns by setting standards for green
power products in the following areas:
• Minimum levels of environmentally-acceptable
renewable resources,
• Overall environmental impact,
• Ethical conduct for suppliers, including advertising
claims and regular reporting.
Third-party certification usually also requires independent
verification by an auditor to document that green power pur-
chased equals green power supplied, and to verify other
resource claims. Visit www.green-e.org for additional infor-
mation about third-party certification and verification.
Guide to Purchasing Green Power
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Chapter 4
Figure 3: REC Transaction
Conventional
Power
Electricity
Consumer
being generated, which is necessary to quantify the environ-
mental benefits of the green power purchase. For this reason,
these products are not discussed further in this guide. Chapter
6 provides more details about implementing a renewable
electricity purchase.
A REC represents the environmental, social, and other
positive attributes of power generated by renewable resources.
These attributes may be sold separately from the underlying
commodity electricity (figure 3). For example, RECs repre-
sent the reduced emissions of renewable generation compared
with those of conventional generation. The actual power that
is sold is no longer considered "green" and is treated like any
other commodity electricity. In practice, REC transactions
can take many forms in addition to that shown in figure 3.
For more details about REC transactions, see chapter 10,
Resources for Additional Information.
Because RECs are sold separately from electricity, they can be
purchased from locations anywhere, enabling organizations to
choose renewable power even if their local utility or power
marketer does not offer a green power product. Although
theoretically there are no geographic constraints on buying
RECs, accounting systems to record and track the exchange
of certificates are not yet available everywhere. In addition,
the location of environmental benefits may be important to
some purchasers. A variety of REC products are available
from local and national sources.
Customers do not need to switch from their current electrici-
ty supplier to purchase certificates, and they can buy RECs
based on a fixed amount of energy (or carbon footprint)
10
Options for Purchasing Green Power
-------
rather than on their daily or monthly load profile. Because
certificates are independent of the customer's energy use, load
profile, and the delivery of energy to the customer's facility,
they provide greater flexibility than purchasing energy and
attributes bundled together as renewable power. One draw-
back to RECs is that they do not offer the same financial
hedge value that some other green power products provide.
Purchasing RECs for special events
RECs can offer flexibility by allowing a buyer to offset elec-
tricity used for special events, such as conferences, rather
than requiring long-term purchases. The Department of
Energy used this approach for the Labs for the 21st Century
annual meeting, where the conference organizers purchased
green power certificates equivalent to 100% of the energy
consumed at the meeting. Because special events inherently
generate a lot of publicity, the public and employee relations
benefit from this approach can be significant.
Price premiums for certificates may be lower than those for
renewable electricity products, for several reasons: (1) RECs
have no geographic constraints and therefore can provide
access to the least expensive renewable resources; (2) the
supplier does not have to deliver the power to the REG pur-
chaser with the associated transmission and distribution costs;
and (3) the supplier is not responsible for meeting the pur-
chaser's electricity needs on a real-time basis.
An alternative way to buy RECs is through a subscription, or
"future RECs," which involves an up-front purchase of RECs
to be generated in the future by a new renewable facility. The
advantage of this approach is that it promotes new renewable
facilities by providing up-front financial assistance for their
development and construction. In return, the purchaser
receives the RECs as they are generated over an extended
period of years. Compared to annually buying RECS close to
the time they are generated, the subscription method empha-
sizes the up-front payment for a future stream of RECs. The
additional risk of this approach is that the plant might not be
constructed, and buyers should investigate what remedy the
seller proposes in such an event. As with all products, inde-
pendent product certification and verification of the claims
made is an important aspect to consider.
For a company or institution with operations and offices in
multiple locations, purchasing RECs can consolidate the
procurement of renewable energy, thus eliminating the need
to buy renewable electricity for different facilities through
multiple suppliers. Chapter 6 provides more details about
purchasing RECs.
Chapter 4
On-site Renewable Generation
In addition to buying renewable electricity from a utility or
buying renewable energy certificates, organizations can
install renewable power generation at their facilities.
They can either buy the system outright or install a system
that is owned by another party and buy the electricity as it
is generated.
On-site renewable generation offers advantages such as
enhanced reliability, power quality, and protection against
price volatility, as well as a visible demonstration of environ-
mental commitment. In many states, electricity generated
with on-site renewable generation may be sold back to the
grid at the same price at which power is bought, through a
process called net metering. This arrangement may improve
the financial return for on-site renewable power systems,
although net metering is often limited to small installations.
On-site renewable energy technologies for power generation
include photovoltaic panels, wind turbines, fuel cells, and
biomass combustion. Large facilities sited near a municipal
landfill or sewage treatment plant may be able to use
recovered methane gas for on-site electricity and/or heat
production. The following describes each of these options in
more detail:
• Solar. Photovoltaic (PV) cells and modules can be
configured to almost any size from a few kilowatts up
to more than one megawatt. On-site photovoltaic
cells may be situated on schools, homes, community
facilities, and commercial buildings. Photovoltaic cells
can be made part of a building, displacing other build-
ing material costs, for example, roofing shingles or car
park shading.
• Wind. Wind turbines vary in size. A typical small
unit provides fewer than 25 kW, whereas large turbines
range from 500 kW to more than 3 MW. On-site appli-
cations are usually only possible in nonurban areas, and
often require zoning permits to exceed 35-foot height
restrictions (a tower for a 250 kW turbine is 130 feet
high with a blade sweep of 98 feet). Such installations
usually require approximately one acre of land per
turbine and wind speeds that average 15 mph at a
50-meter height. In addition, placing turbines near
tall buildings is inadvisable because the building may
create wind turbulence that can disrupt the turbines'
performance.
• Landfill and sewage methane gas. Methane gas derived
from landfills or sewage treatment plants may be used to
generate electricity. Methane gas also may be generated
using digesters that operate on manure or agricultural
wastes. The methane gas is then converted to electricity
Guide to Purchasing Green Power
11
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Chapter 4
using an internal combustion engine, gas turbine
(depending on the quality and quantity of the gas),
direct combustion boiler and steam turbine generator
set, microturbine unit, or other power conversion
technology. Most methane gas projects produce from
0.5 to 4 MW of electrical output.
Biomass. Biomass is plant material burned in a boiler to
drive a steam turbine to produce electricity. This system
is good for producing combined heat and power (CHP)
at facilities with large thermal loads. Biomass projects
are best suited to locations with abundant biomass
resources (often using waste products from the forest
industry or agriculture).
Fuel cells. Fuel cells are another way of producing
power. They emit essentially no air pollution and are
more efficient than other forms of generation. But they
cannot be considered a renewable resource unless they
operate on a renewably generated fuel, such as digester
gas or hydrogen derived from PV or wind power.
On-site generation case study
Car-maker BMW pipes methane gas 9.5 miles from a land-
fill to serve the electric and thermal needs of its
manufacturing facility in Greer, South Carolina. Rather than
invest in new internal combustion engines to generate elec-
tricity, BMW converted four turbines that previously ran on
purchased natural gas. By recovering the waste heat from
the turbines, the 5 MW combined heat and power project
satisfies 80% of the facility's thermal needs, as well as 25%
of its electricity use.
In this era of power reliability problems and national security
concerns, on-site renewable generation offers important
advantages over central-station and fossil-fueled power
plants. Moreover, on-site generation can be designed to pro-
vide backup power for critical loads when power from the
grid is interrupted, as well as when the renewable resource is
not available. This ability to operate independently of the
power grid is a great advantage, particularly at remote facili-
ties. Because renewable generation technologies tend to be
modular and used on a small scale, the on-site generation sys-
tem can be designed to enhance the redundancy and diversity
of a facility's energy supply.
On-site renewable generation has higher capital costs and
lower operating costs compared with installing fossil-fueled
generation. Although these costs may make the initial
investment in on-site generation more difficult to justify,
once that investment has been made, the annual budgets for
maintaining the system are much easier to justify (compared
with purchasing renewable electricity), which makes it easier
to sustain a commitment to renewable power.
An organization that installs its own generation capability
may have problems with the requirements for connecting to
the utility distribution system, commonly referred to as inter-
connection. Standardizing the interconnection rules may help
in the future, but in some cases, the rules for large generators
are unnecessarily burdensome for small installations. In
recognition of this problem—and to encourage on-site gener-
ation—a few states have simplified their interconnection
rules; in addition, national standards are being drawn up that
may ease interconnection. Net-metering laws, which allow an
owner of an on-site power system to sell electricity back to
the grid, usually provide more lenient interconnection rules
for small installations. Chapter 7 provides more details about
procuring an on-site renewable generation system.
12
The Benefits and Costs of Green Power
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Chapter 5
—- Illlllllllll
I '-I: ";" I
Steps to Purchasing Green Power
To buy green power, an organization first should
determine whether green power will help fulfill its
energy needs, identify the best products for its
particular situation, and decide how to procure
those products. Figure 4 describes the steps in this process.
The preliminary steps, described in this section, are the same
for all types of green power products. The final steps differ
for purchased green power products and on-site renewable
generation. These steps are explained in later chapters of
this guide.
Figure 4: Steps to a Successful Green Power Project
Renewable
Electricity
Renewable
Energy Certificate
On-site Renewable
Generation
T
T
Identifying Key Decision Makers
T
Gathering Energy Data
Choosing Green Power Options
Renewable
Flarlririlu R'C
On-site
Chapter 6<
i 4-
Developing Screening
Criteria
4
Collecting Product
Information
4
Drawing Up a
Procurement Plan
1
Screening the Technologies
I
Obtaining Resources
and Assistance
|
Creating a
Project Plan
i
Anticipating
Possible Barriers
4
Installing and Operating
the On-site
Renewable Generation
1
Capturing the Benefits
> Chapter 5
> Chapter 7
Chapter 8
Guide to Purchasing Green Power
13
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Chapter 5
Identifying Key Decision Makers Gathering Energy Data
The people in an organization who are interested in green
power may be high-level decision makers as well as staff from
the purchasing, facilities/energy management, environmental
health and safety, legal, corporate relations, and/or marketing
departments. Their interests and concerns need to be
addressed. Experience has demonstrated that not doing so
often leads to disagreements later in the process, whereas
including these interested people in the early planning stages
goes a long way toward addressing their concerns. These
departments (such as environmental or marketing) may also
contribute funds to help pay for green power.
It is important to designate a contact person who can draw
on expertise from throughout the organization. Which
departments are chosen to participate will probably depend
on the type of products being considered. It also is important
to involve senior management in the planning and decision
process. In some cases, the greatest advocate of buying green
power is an executive such as a CEO or president. With this
high-level support, buying and promoting green power is
much easier. Some organizations involve their employees (or
students, in the case of educational institutions) in selecting
the green power products.
At this early stage it is necessary to decide on the objectives
for purchasing green power.
• Why is the organization considering green power?
• What does it hope to get from it?
• What selection criteria are important to the
organization!
Is buying new generation more important than
maintaining the generation that has been in place for
many years?
Is independent certification and verification important
to the organization?
The organization should take an inventory of its energy use,
including both electricity and fossil fuels. Its monthly energy
use can be calculated from the utility bills for each facility or
business unit and for the entire organization. These data will
help (1) find where energy can be saved, (2) determine how
much green power to buy, and (3) evaluate the environmen-
tal impacts of the organization's electricity use. Monthly
electricity consumption data are the most important, while
peak demand and interval-meter data are useful if available.
The organization should study its consumption data over the
past year before specifying its requirements. Outside consult-
ants or organizations can help with these steps.
As mentioned earlier, green power can be considered part of
an energy portfolio that includes energy efficiency upgrades,
load management, combined heat and power, and green
power. The more an organization's energy requirements can
be reduced, the less green power it will need to buy to
achieve a given objective, which in turn makes green power
more affordable. Some organizations that have bought green
power have saved enough from energy efficiency upgrades to
enable them to pay the higher price of green power.
Many resources are available to help improve the energy effi-
ciency of buildings and equipment. A good starting point is
the ENERGY STAR Portfolio Manager, an online tool that
compares a building's energy usage with that of similar build-
ings. The ENERGY STAR Web site (www.energystar.gov)
also offers simple energy-saving tips and a directory of energy
services companies to provide additional assistance, such as a
facility energy audit.
An organization's annual energy consumption can be used to
calculate the emissions associated with its current use and
estimate the emissions that could be displaced by buying
green power. The EPA's Green Power Partnership offers an
online tool to help estimate emissions from an organization's
electricity use (www.epa.gov/cleanenergy/powerprofiler.htm).
Paying for green power
Catholic University of America (CUA) has been pursuing
energy conservation aggressively for the past eight years,
utilizing performance contracting with guaranteed savings.
Without an increase in its energy budget, CUA has still come
in under budget for six years. CUA decided to use some of the
savings to purchase 4 million kWh of wind power (the output
of one turbine) for a five-year period. This purchase supplies
nearly 12% of the university's total electricity, and the cost is the
equivalent of buying each student one soda per month.
14
Steps to Purchasing Green Power
-------
Choosing Green Power Options
The next step is finding the appropriate green power solu-
tions for the organization. Another goal of this step is
becoming familiar with the electricity markets in the organi-
zation's area and the available green power technologies.
The first decision is whether to generate power on-site and/or
to purchase power or RECs from outside vendors. The main
differences between these options are the ease and cost of
implementation, the need for capital investment, the ability
to hedge risk, and the length of time over which one realizes
the benefits. On-site renewable generation requires an up-
front investment (as part of either a financed project or a
capital appropriation), but the reduction in the consumption
of conventional energy can last for as many as 30 years.
Renewable electricity purchases and renewable energy certifi-
cates, however, require no up-front capital and are relatively
easy to procure, but they deliver benefits only for the term of
the purchase contract.
An organization's motivations for purchasing green power
will help decide which costs and benefits are most important
and thus which type of green power is most appropriate. For
example, an organization wanting to manage fuel price risk
may be more interested in buying fixed-price renewable elec-
tricity. An organization to which the reliability of its power
supply is most important may be more interested in on-site
renewable generation. These options can also be combined.
For instance, an organization might install on-site generation
to meet part of its electrical needs and purchase RECs to off-
set some or all of its remaining electricity usage. Likewise,
organizations with facilities in multiple locations must select
the appropriate green power product for each site.
The choice of green power options is determined partly by
the electricity market structure in the state in which the
facility is located. For renewable electricity, if the state's elec-
tricity market has been restructured, an organization can
probably choose both its supplier and the product it prefers.
Each state has different rules governing power marketers, and
the level of competition varies among the states. If the orga-
nization's state electricity market has not been restructured,
the local utility may offer a renewable electricity option
(sometimes called utility green pricing). Large electricity pur-
chasers may be able to work with their local utility or
electricity provider to tailor a product to meet their needs.
Chapter 5
Assembling a list of green power
products offered in a specific area
• Perhaps the most complete source of information is the
U.S. Department of Energy's Green Power Network
Web site (www.eere.energy.gov/greenpower).
• Many state governments, often the public utilities
commission, maintain a list of power marketers offering
green power products in their state.
• Organizations with facilities in several states should use
a national locator such as EPA's Green Power Locator
(www.epa.gov/greenpower/locator.htm) or the
Green-e "Pick your Power" locator (www.green-
e.org/your_e_choices/pyp.html). The latter is also
useful for locating certified products.
• Smaller facilities (such as retail stores) may find it
easier to have a single point of contact compiling this
information and making it available across the entire
organization. Larger facilities (such as factories or
research campuses) often have enough expertise to
gather information and negotiate contracts on their
own.
See Section 10 for more resources.
For on-site renewable generation, the organization should
assess the renewable energy resources available at its facility,
including the quality of wind and solar resources, the avail-
ability of biomass fuel or landfill gas, and siting constraints
(such as space limitations or shading from neighboring
buildings). The cost of conventional power at the facility
also is important to consider. The organization should read
over its utility's and state's interconnection rules to make
sure there are no obvious provisions that would prohibit
grid-connected, on-site generation. The goal at this stage is
to eliminate any renewable options that are clearly not
feasible for the organization.
Guide to Purchasing Green Power
15
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for
Products
To help select both the green power supplier and the product,
it is helpful to develop specific criteria for judging the alter-
natives. These criteria may be ranked, keeping in mind the
goals identified early in the process when the project team
was assembled.
For selecting green power suppliers, the following criteria may
be helpful:
• Reputation. A supplier's reputation is influenced by
factors such as how well it honors its commitments,
how easy it is to work with, and how well it is viewed
by the industry. Assessing a supplier's reputation may
require references and a perusal of the energy industry's
literature. Environmental groups also may have infor-
mation about the supplier.
• Financial strength. To research the financial health of a
power supplier, look at its Web site and perhaps its
annual report, SEC filings, and bond ratings.
11 Location. If buying green power from a local supplier is
important, call the supplier and find out where its head-
quarters and branch offices are located. Public utility
commissions' Web sites often have contact information
for registered retail suppliers.
• Product choice. Some suppliers offer several green
power products, varying in the amount of renewable
power, types of resources, and the like. If a supplier
offers a choice of green power products, this may enable
the organization to change the product it purchases in
the future without having to search for a new supplier
and negotiate a new contract.
• Social responsibility. Determining a supplier's social
values and commitment to environmental conservation
requires some research. The supplier's Web site is a good
place to start. Organizations should review the supplier's
annual report or environmental report, examine its
other electricity products, and review its other business
activities.
For green power products, consider the following criteria:
• Price. Green power prices may be quoted in total cents
per kilowatt-hour or in extra cents per kilowatt-hour
(incremental to the standard power rate). If the organi-
zation is in a regulated utility's service territory,
compare the price of green power with the price of con-
ventional power. In competitive markets, compare the
price of green power with that of electric service under
standard utility rates, that of electric service under the
lowest-price competitive alternative, and that of the
electric service that the organization is currently receiv-
ing. Also make sure to determine whether the price is
fixed over time or fluctuates with changes in standard
power rates (some utility green-pricing program partici-
pants are exempt from variable fuel charges).
11 Percentage of renewable energy. For a particular green
power product, the resource mix can range from 1 to
100 percent renewable power. When buying certificates
or block products, an organization can still calculate the
percentage of its energy use served by renewable power.
• Percentage of new or incremental renewable sources.
Although it is important to support existing renewable
generation, many experts argue that only new genera-
tion provides incremental environmental benefits.
"New" renewable resources refer to renewable facilities
that have been created specifically for the green power
market. Existing facilities presumably sold power into
the grid before a particular green power purchase and
would continue to do so. Therefore, purchasing power
from the existing facilities may not change the composi-
tion or the environmental impact of the region's
generation mix. Besides the direct impact of purchases
from new renewable sources, these purchases also create
the demand necessary for constructing additional
renewable resources.
16
Procuring Renewable Electricity and Renewable Energy Certificates
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Chapter 6
In some situations, however, buying power from existing
renewable generation facilities can provide support for
existing facilities that otherwise would have been under-
utilized or possibly even shut down, thus preventing their
displacement by dirtier nonrenewable plants. When the
demand for green power exceeds the supply, purchasing
from existing facilities can eventually lead to the installa-
tion of new renewable generation capacity.
In states that have adopted a renewable portfolio stan-
dard (RPS), electricity providers are required to include a
minimal percentage of renewable electricity in their stan-
dard product offering. Renewable electricity products
create additional environmental benefits only if the
power purchased is not already part of the provider's
minimal RPS requirement.
Renewable energy/resource mix. A renewable
energy/resource mix refers to the kinds of resources used
in the green power product. For example, is the product
generated from wind, biomass, solar, geothermal, or
hydro? Some resources have a greater environmental
impact than others do, with different associated costs.
Wind, solar, and geothermal power usually are the most
environmentally preferable energy sources. Each is
renewable and nonpolluting, with little impact on the
land or local habitats. Certain environmental groups
regard some types of hydropower, biomass, and munici-
pal solid waste as less desirable. Hydropower dams may
drastically alter river habitats and fish populations;
biomass facilities may emit significant quantities of
NOX; and burning municipal solid waste may release
heavy metals and other toxins into the environment.
It also is important to check the environmental charac-
teristics of any nonrenewable generation resources,
as they will contribute to the overall environmental
impact of the power purchased. One advantage of buying
Green-e certified power is that the certification requires a
product's nonrenewable resources to be, on average,
cleaner than those of the local system power.
Length of contract. Some buyers prefer a short-term
contract in case the market changes and better offers
come along. But an organization may be able to lock in
a lower price if it signs a multiyear contract. A longer-
term contract may also offer greater price stability.
When determining the value of price stability, be aware
of "typical" market fluctuations in power prices and how
the price of renewable electricity can vary. Finally, a
contract may include options for renewal, which can
offer flexibility in the future.
Third-party certification and verification. A green
power product can be certified and verified by an
independent third party. Such certification can
provide credibility and confirmation of the product's
environmental value. Visit www.green-e.org for more
information about certification.
Location of generation. In order to support the local
economy and to contribute local environmental
benefits, some organizations may prefer local or in-state
renewable generation. Some renewable electricity prod-
ucts, however, use resources located out-of-state, and
renewable energy certificates may be based on genera-
tion located nationally or even internationally.
Specific generation facility. Some green power
providers generate their power at a specific site, such as
a nearby wind farm. These products, such as the annual
output of one particular wind turbine, offer the benefit
of being more tangible because they are associated with
an identifiable generating facility.
A good place to start collecting information about specific
green power options is the many Internet sources listed in
this Guide. Be sure to collect enough information to answer
the decision criteria listed earlier. For useful comparisons, the
information should be as consistent as possible among suppli-
ers and among products. A good way to find consistent
information is through an exploratory letter or a request for
information (RFI) addressed to specific suppliers.
In many states, competing electricity suppliers are required to
provide an electricity label—like a list of food ingredients—
that provides information in a standard format and makes
product comparisons easier. This information is generally
available from the state's public utility commission. Another
source of public information is third-party certifiers, such as
Green-e, Environmental Resources Trust, or Climate Neutral
Network, which provide information about the products they
have certified to meet minimum environmental standards.
All Green-e certified products give standardized product con-
tent labels to prospective customers.
The next step is estimating the cost of green power for the
organization and calculating the cost/benefit ratio. For help
finding data, contact one of the organizations that sponsored
this guidebook (listed in chapter 10).
Guide to Purchasing Green Power
17
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Chapter 6
Creating a Procurement Plan
A procurement plan documents the project team's decisions
and addresses possible problems in buying green power. A
procurement plan can also help convince others in the organ-
ization that purchasing green power is a wise choice.
The main audience for the procurement plan is the managers
who need to support the purchase decision. Their support
should be secured as early in the process as possible. As soon
as the team can show the costs and benefits of purchasing
green power to the organization, they should present their
information to management. Expect the managers to ask
about the products the organization would buy, their cost,
and their benefits. Also find out whether management might
limit a green power purchase or whether they would buy
more aggressively.
Besides providing the information that management needs to
make the decision, a procurement plan can also help over-
come resistance to green power within the organization.
Some organizations have outdated perceptions of the reliabil-
ity of renewable energy technologies, misunderstandings
about using an intermittent resource, or worries about the
cost. As part of the procurement process, the project team
will probably need to educate others about these topics and
the benefits of green power. The organizations that sponsored
this guidebook can provide helpful information to overcome
these misconceptions.
The scope and detail of the procurement plan will depend on
the organization's needs and requirements, but it should
address the following:
Scope of procurement
Specify the amount of power that will be purchased (as either
a fixed amount of money for renewable purchases or a
percentage of total power use) and for which facilities. If this
procurement is a trial that may lead to additional purchases
in the future, spell out the criteria that will be used to judge
the trial's success. Also discuss whatever is known at this
point about future procurement phases.
Expected benefits
Keeping in mind the general benefits outlined earlier in this
guide, list the particular benefits hoped for by buying green
power for the organization. Wherever possible, these benefits
should be linked to the organization's environmental goals.
Financial considerations
Cost is usually the primary concern with green power, so the
procurement plan should make a point of discussing it.
Several strategies are available to help minimize and manage
the extra cost of green power:
• Buy green power for only part of the organization's
energy use. Green power does not have to be used for
all energy needs. For example, the organization might
buy green power for just 5 or 10 percent of its electricity
use. Buying 5 percent green power may add less than 2
percent to the organization's electricity bill.
Alternatively, some renewable electricity products cost
less because they already are blended with conventional
electricity.
• Make a longer-term purchase. Consider the contract's
length in conjunction with the quantity and cost of
power purchased. A short-term contract (typically less
than three years) may offer greater flexibility in the
future but also may cost more. But a longer contract
can reduce the risk to the supplier, allowing it to offer a
lower price than under a shorter contract. The right
contract length is based on the particular situation and
products available.
• Seek a fixed-price contract. Because its cost of fuel is
predictable, renewable energy is often available at a
fixed price without any fuel-cost adjustments. Check
with the supplier, particularly if the organization is
considering a utility green-pricing program, to see
whether green power customers are exempted from
fuel-cost adjustments.
• Offset the cost with savings from energy efficiency.
Reducing the total amount of electricity purchased
helps make green power more affordable. When
reviewing green power providers, organizations may
find that some providers also offer energy efficiency
services, with the goal of no net increase in their
customers' power bills.
Reducing the cost of green power
In 2003, the University of Pennsylvania doubled its already
large purchase of green power to 40 million kWh. In addi-
tion to doubling its purchase, Penn extended its earlier
commitment term from 3 years to 10 years. Both of these fac-
tors may have reduced the price they pay for green power.
Penn also has paid for its significant commitment through
savings from aggressive energy conservation. For example,
over the past few years, Penn has reduced its peak electric
demand by 1 8%.
18
Procuring Renewable Electricity and Renewable Energy Certificates
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Chapter 6
• Use savings from competitive choices. Competitive
choices of either green power or commodity electricity
may lead to savings on energy costs, which can be
used to buy green power. Or the extra cost of green
power can be limited to the amount of savings from
competition. Be aware that switching to less expensive
conventional power can also mean dirtier power, so
ask the electricity supplier for information about the
emissions from its product, and make sure those
emissions do not cancel out the benefits of the green
power bought with the savings.
• Specify a price cap or maximum total budget. Specify
the maximum price per kilowatt-hour or the total cost,
or simply place a cap on the renewable portion of the
purchase. A drawback of this approach is that suppliers
are likely to bid at or near the specified price cap. But if
the organization is interested mainly in other aspects of
green power, such as environmental benefits or hedge
value, this can be a good approach. Even if a price cap
is not the most important consideration, it is a good
idea to decide on the highest price the organization is
willing to pay for green power, as part of its internal
procurement planning.
• Use incentives for buying green power. A few states
offer incentives that reduce the cost of green power.
In almost all cases, these incentives are paid directly
to the power marketer, so the incentive will already be
factored into the price quoted and does not need to be
requested separately. The power marketers and the
state's energy department will know about any green
power-purchasing incentives that are paid directly to
the purchaser. For more information about available
incentives, visit the Database of State Incentives for
Renewable Energy at www.dsireusa.org.
Even with these cost reduction techniques, green power often
is more expensive than standard power. To justify this extra
expense, it is important to consider the benefits of green
power. After weighing all the benefits, many organizations
decide that green power is an inexpensive way to help
achieve various organizational goals.
Procurement methods
The best way to buy power depends on the green power
options available to the organization as well as its procure-
ment rules. Generally, the greater the load that the
organization can bundle together in one purchase, the more
attractive it will be to a supplier.
The following explains typical ways to buy green power.
Federal agencies must work within the procurement rules
applicable to the federal government, which are explained
further in appendix A.
• Negotiate with the utility. Buying power is simple,
though the choices are fewer, if the organization is
served by a utility in a regulated market with only one
supplier. If the local utility offers green power, the
organization can collect information by visiting the
utility's Web site and calling to discuss its interest.
Perhaps the only issue is the quantity the organization
wants to buy, but it may be able to negotiate a slight
price break if it is making a large purchase. If the utility
does not offer green power and the organization is a
large, highly visible customer, it may be able to encour-
age the utility to offer green power by promising to buy
a large amount. Likewise, the organization may be able
to persuade the utility to seek third-party certification if
its product is not currently certified.
• Call several sellers. An organization can keep the
procurement process relatively simple by calling the few
green power providers active in its area. An off-the-
shelf product may meet its needs. If the organization
wants something different and only one or two green
power suppliers are in the area, it can call them to
discuss the options and let them know the organization
would be interested in a proposal. After a discussion,
the organization may be ready to negotiate directly with
one of the suppliers about product definition, certifica-
tion, price, and terms. Or if the organization is planning
a large purchase, the suppliers may be willing to tailor
something to its needs.
II Request proposals. Large companies, and public institu-
tions in particular, often issue a formal solicitation or
request for proposals (RFP). An RFP requires more time
and effort for preparation, evaluation, and negotiation,
but it may be more suitable for a large purchase and
when many green power options are available. With an
RFP, it is important to understand the organization's
own objectives and communicate them clearly in the
solicitation. Third-party certification and verification
can be specified in the RFP evaluation criteria.
RFPs can be as simple as a letter sent to selected suppli-
ers, describing the organization's objectives and asking for
a bid. This would be appropriate if just a few suppliers are
available. RFPs can also be more formal, casting a wider
net through a broadly advertised solicitation. This
requires more effort to prepare and evaluate responses.
Government agencies must follow the procurement rules
governing their agency.
uide to Purchasing Green Power
19
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Chapter 6
A two-step process is possible, too, in which the organi-
zation first issues a request for qualifications (RFQ) and,
based on the responses, sends a more detailed RFP to
those suppliers that meet its general qualifications. The
RFQ would be broadcast to a larger audience, not only to
find out who meets the organization's qualifications, but
also to gauge the amount of interest.
For large purchases, RFPs may be addressed to renewable
power generators (wholesale) as well as retail suppliers.
Buying directly from generators may lower the cost but
probably will require a longer-term purchase commit-
ment. The Green Power Partnership offers assistance to
partners putting together a green power purchase RFP;
FEMP provides the same service for federal agencies. For
RECs, the World Resources Institute provides guidelines
and a sample contract for an RFP (www.thegreenpower-
group.org/credits.html).
RFP procurement
The State of New Jersey is buying 10% of its energy load (54
million kWh/year) from new wind facilities in Pennsylvania.
This purchase is consistent with a number of state environ-
mental policies, but was complex because of the many
agencies involved and tight state budgets. To find a supplier,
New Jersey issued an RFP that gave greater weight to Green-
e certified products and lower emissions, resulting in a
wind-only purchase.
Special considerations for RECs
Certificates can be bought from REG marketers or sometimes
directly from renewable energy generators. Several environ-
mental brokers are active in REG markets, offering another
approach to procurement that is increasingly being used by
large purchasers. Brokers do not own the certificates but rely
on their knowledge of the market to connect buyers and sell-
ers for a small fee. They can help negotiate deals that take
into account an organization's unique interests.
Several issues need to be addressed when buying certificates.
The attributes that the certificate represents should be clearly
stated in a contract. If the organization plans to claim credit
for these attributes, the contract should express in writing
that the purchaser will receive title to them. If attributes like
a reduction in carbon emissions have been sold separately to
another party, then the exceptions should be clearly stated.
The organization should make sure that the attributes it buys
have not been double-sold and claimed by another party.
Green-e certification can help ensure that the benefits
promised by the supplier are actually realized. In addition,
RECs have separate markets, depending on whether the
certificates will be used to comply with the state's renewable
policy requirements or for voluntary reasons. Prices in
voluntary markets are generally well below those in
compliance markets.
An organization may want to buy certificates only from
renewable energy generators or marketers that meet its speci-
fications, so the same selection criteria mentioned earlier in
this chapter should still be considered in the procurement
process. In fact, because certificates can come from any
geographic area, the location where the certificate was
generated, and therefore where the environmental benefits
are likely to accrue, can be an important factor to consider.
20
Procuring Renewable Electricity and Renewable Energy Certificates
-------
•
an
Depending on the size of the system, on-site power
projects tend to take more steps than do power
purchases because they require more external
coordination with the organization's utility, local
governments, and contractors. For this reason, it is helpful to
enlist outside technical expertise and not underestimate the
length of time needed for a project like this. The following
steps, along with the resources listed in chapter 10, can help.
In the end, the renewable system will generate power and
other benefits for many years to come.
the
Based on work done in the first steps (chapter 5), the organi-
zation should have a good idea of its energy needs and the
renewable resources available at its site. The next step is to
perform a screening analysis to find those options best suited
to the site. This screening should evaluate the options being
considered, comparing the cost-effectiveness of the organiza-
tion's current energy situation with that of a renewable power
system. This screening should be based on the financial
assessment methods that the organization would normally use
for any capital investment, such as life-cycle cost, rate of
return, and simple payback. The analysis should account for
state and federal financial incentives, interconnection rules
(e.g., insurance requirements or standby charges), and net-
metering laws that may apply to the facilities. The result of
this screening will be a specific technology that meets the
organization's energy needs.
For on-site renewable power, bundling energy efficiency with
renewable power is a common practice. The organization's
site-specific situation (e.g., whether the generation system is
connected to a grid, the facility's load shape, the utility's rate
structure) determines the appropriate efficiency measures to
include. At this point, it is a good idea to consider whether
energy efficiency projects should be implemented together
with the renewable generation technologies being considered.
An economic analysis must consider the approximate size of
the renewable power system that the organization hopes to
install. The size can be driven by the load to be served by the
system, the organization's capital budget, or physical con-
straints at the site (such as rooftop area for PV systems or the
rate of biomass fuel production). One option is to install the
system incrementally, purchasing what the organization can
afford now and adding more capacity over time. The modular
nature of PV technology makes it especially suited to this
approach, although wind can also be installed in somewhat
larger modules. A contractor or utility representative can
help choose the right-size system. The organization can also
use one of the software tools listed in chapter 10.
The economic analysis should also decide whether the on-site
power system will be used to provide backup power during
utility grid outages. If so, the system must be designed to
disconnect from the utility grid when a power outage occurs.
The organization also must decide whether the system will
include energy storage or backup generation, in order to pro-
vide power when renewable resources are not available. This
analysis will be affected as well by whether the renewable
generation will be part of a combined heat and power system
(applicable to systems involving fuel combustion, such as
landfill gas and biomass).
Assistance
If the organization chooses to own and operate an on-site
power system, it has much to learn, but excellent information
resources are available. Before making a purchase, the
organization's project team should study the technology and
understand what it wants and what questions to ask, in order
to be able to write a procurement specification. At this point,
it would be wise to call on outside experts who can help with
the technical and financial aspects of a renewable power
project. Technical assistance may be available through the
local utility, the state energy office, energy service providers,
energy service companies, consultants, manufacturers, and
equipment vendors. In addition, FEMP offers technical
assistance to federal agencies.
The financial details are usually what make or break a power
project, so the project should collect information about
incentives that could make the project more cost-effective.
Some state programs may also require that only certified
installers install systems. Many states offer financial incen-
tives specifically for customers that install qualified renewable
Guide to Purchasing Green Power
21
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Chapter 7
Using Incentives to Finance an
On-Site Generation System
The City of Portland, Oregon used a variety of funding mech-
anisms to pay for a $1.3 million methane-powered fuel cell.
Portland received a $200,000 grant from the U.S. DOE and
a utility rebate of $247,000 (essentially returning a green
power premium that the City had earlier paid). To finance
the remainder, it entered into a lease-purchase arrangement
with Western Bank, which was able to qualify for a
$224,000 state tax credit because it owned the facility.
Western Bank returned much of the tax credit to the City in
the form of advantageous lease terms.
generation systems. These incentives may take the form
of direct payments (rebates), competitive solicitations,
consumer financing, or lower taxes (either sales or property
tax). In addition, the federal government offers an invest-
ment tax credit for solar and geothermal energy systems,
among other incentives for renewable energy. For more
information, visit the Database of State Incentives for
Renewable Energy at www.dsireusa.org. The state energy
office, local utility, or renewable-energy equipment vendor
will also have information about which incentive programs
apply to its situation.
Utility rate impacts should also be investigated carefully.
The organization should check with the local utility to see
whether on-site generation would lower its demand charges
or generate electricity at a time of day when prices are higher.
Facilities with their own generation systems sometimes also
qualify for reduced "self-generation" rates.
Creating a Project Plan
Once the organization has decided on a specific technology,
it is time to conduct a detailed feasibility study. This study
will quantify all the costs and benefits of the project to evalu-
ate its cost-effectiveness. The study should be based on inputs
that are as specific as possible to the organization's situation,
such as quoted prices from vendors.
If the project appears feasible, the project team can then
decide on a plan to have the renewable power system
financed, built, and installed. Financing is a critical aspect
of the project, and it should account for any federal and
state incentives for which the organization's system is
eligible. Make sure that the system is designed to meet the
requirements of the incentive program.
In addition, some renewable resources, such as biomass, will
probably require air permits from the local air resources
control board. The project plan should account for the time
and expense of acquiring these permits. As with any other
type of facilities project, the team must secure the necessary
land-use and building permits and variances required for the
project. The team also will need to apply for interconnection
with the local electric utility (for grid-connected systems),
which can be a complex and time-consuming process.
Procurement strategy
Purchases for on-site generation differ from power purchases.
In many cases, an organization may buy, own and operate its
own generation equipment. In some circumstances, though,
it can enter into a power purchase agreement to buy the
electricity generated by a renewable energy system installed
on its property without actually owning the system. This
approach may not be widely available in states that allow
electricity to be purchased only from a qualified utility.
The procurement options for on-site generation generally fall
into the following categories:
• Act as the general contractor. If the organization
has design engineers on staff, they can draw up the
specifications and then solicit bids for equipment and
installation. This arrangement works well if the organi-
zation wants to do some of the work in-house. Keep
in mind, however, that if the organization has no
experience with renewable energy systems, it runs the
risk of ending up with a poorly performing system.
• Hire a general contractor for a turnkey system. An
organization probably will use an RFP to select an
equipment manufacturer, a system designer, or a system
installer to help design the system to its needs, to buy
the materials, to arrange for installation, and to com-
mission the system. Note that some companies
(particularly in the PV industry) are vertically integrat-
ed, from manufacturing, to design and installation, to
operations and maintenance.
• Hire an energy services company (ESCO). The ESCO
will be responsible for design, installation, maintenance,
and financing. This differs from a turnkey project in
that ESCOs typically work under performance con-
tracts, meaning that they are paid according to how
well the project is carried out. Usually this is through
energy savings, but success can also be based on the
amount of power generated or the system's reliability.
ESCOs also often provide at least part of the project
financing, which can be very helpful for organizations—
such as government agencies—with very limited capital
budgets. Usually, ESCO projects need to be large,
or part of a larger contract, in order to justify the
transaction costs.
22
Planning an On-site Renewable Generation Project
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Chapter 7
Buy power from an independently owned system.
When considering on-site green power, some companies
decide not to install solar PV systems because of the
high capital investment, maintenance costs, and finan-
cial returns that fall short of company standards. To
overcome these barriers, an organization can host an
on-site generation system and agree to buy the power
without actually owning the equipment. This approach
is known as a services model, and it can greatly simplify
the process of installing on-site renewable power. As
with other types of green power purchases, make sure
that the contract also transfers the environmental and
other benefits of the green power, in order to claim full
credit for the organization's purchase.
Procuring On-Site Generation
Through a Services Model
In 2004, Staples initiated a solar services project for its loca-
tion in Rialto, CA. The project developer, SunEdison, Inc.,
arranged for financing, design and construction of a 260
kW solar array. In return, Staples signed a 10-year power
purchase agreement (PPA) with SunEdison, with the option to
renew for 5-year intervals. The solar PV system will provide
benefits of peak load shaving and reduced GHG emissions.
Further, Staples will avoid all capital and maintenance costs.
The price for power in the contract is competitive with local
commercial rates, and the PPA has a fixed cost structure that
acts to hedge against price volatility in retail electricity.
Choosing a vendor
When choosing a vendor, it generally is a good idea to get
more than one bid, so the first step is to find several possible
vendors for a given project. The Web sites for the major trade
groups in this area—the Solar Energy Industries Association
and the American Wind Energy Association—offer informa-
tion about their members' expertise and interests, and
chapter 10 lists more sources.
When choosing a vendor, the organization should obtain
comparative information from the companies it is consider-
ing, usually through either a request for qualifications (RFQ)
or a request for proposals (REP). An REP is appropriate if the
organization already has a detailed system design and simply
wants a vendor to implement that design. An RFQ is better
for comparing vendors' qualifications and experience, to
select one to both design and implement the system. Because
the design of on-site renewable systems tends to be site spe-
cific and because design details are often resolved differently
by different vendors, the RFQ approach often leads to the
system best tailored to the organization's needs.
Some factors to consider when choosing a provider of on-site
generation are the following:
• Experience. The vendor's experience and familiarity
with the type of system the organization is considering
is extremely important. Also determine the vendor's
experience with interconnection issues (if the system
will be connected to the grid). A quick way to judge
a vendor's experience is the length of time it has
been in business and the number of similar systems it
has installed.
• Performance history. It is very important to check
references from previous customers, preferably for
systems similar to the one the organization is
considering. Another important factor is whether
there are any judgments or liens against the vendor,
which would indicate problems with previous projects.
• Licenses and certification. To be eligible for state
incentives, some states require that the system be
installed by a licensed contractor, whereas other
states certify installers that have received the relevant
training. As with any other capital project, licenses
and certification are an indicator of a contractor's
qualifications.
• Liability and professional insurance. If any problems
arise with the system during installation or operation,
it is important that the contractor have adequate
insurance to protect the purchasing organization from
liability. The contractor should also be responsible for
any problems with interconnecting to the grid.
Anticipating Possible Barriers
When implementing a renewable generation project, the
organization must work with various entities to obtain per-
mits, connect to the utility system, and perform other
activities external to the facility. Some of these steps will
end up requiring more time, effort, or money than originally
anticipated and may pose barriers that must be overcome.
Generally these barriers fall into two categories: technical
and regulatory. Most technical barriers pertain to the local
utility's electrical interconnection requirements. Other
technical barriers are fuel availability and storage; space
limitations; power-quality impacts; fire, safety, and zoning
requirements; and operations and maintenance issues.
Regulatory barriers pertain mainly to the required permits
and approvals, such as air emissions permits, utility standby
charges, exit fees, regional transmission charges, and
land-use permits.
Guide to Purchasing Green Power
23
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Chapter 7
Often the contractor for the project can be made responsible
for overcoming these barriers as they arise. If this seems like
a good option, the project team should explore it with the
contractor when writing the RFP and reviewing the
proposals. The FEMP guide to distributed energy resources
offers many tips for resolving any problems that may arise
when implementing a renewable power project.
Installing and Operating an
On-Site Renewable Generation
System
Once the organization's on-site generation system has been
designed, it is time to put the contracts in place and begin
construction. As with any capital project, it is important to
stay involved during the construction to resolve any problems
that might arise.
When the construction has been completed, the project team
should monitor and verify the system's energy performance.
Does everything work as planned? What is the system's actual
energy production? If it is not as estimated, what can be done
to improve the system's performance ? Information about
system performance is useful in communicating the benefits
of the project to internal and external audiences.
Measurement and validation generally proceed in two steps.
The first is the post-construction evaluation (or commission-
ing), in which a contractor's work is inspected and the system
is tested to make sure that it meets regulatory and design
specifications. The second step is monitoring and verifying
the system's performance over a longer period, such as the
first year of operation (although continuous monitoring is
necessary to catch any performance problems that arise). It is
important to plan for this stage at the early phases of the
project, in order to design a useful data acquisition system.
Finally, all renewable power systems require periodic mainte-
nance in order to perform as intended. The organization must
decide whether its staff has the expertise and time to do this
or whether it should contract with the equipment vendor or a
service company to maintain the system.
On-Site Photovoltaic System
Johnson & Johnson's corporate environmental goals include
a goal to reduce its energy-related emissions of carbon diox-
ide. To help meet these goals, the company opted to
purchase renewable power, specifically an on-site solar pho-
tovoltaic (PV) system at its Janssen Pharmaceutica facility in
Titusville, New Jersey. A state rebate eventually paid for 57%
of project costs, and additional federal incentives will allow
for accelerated depreciation of the equipment. Even with
these subsidies, the project did not rise to the company's min-
imum rate of return for capital expenditures. The solar PV
project had support from senior management, though,
because of its positive environmental benefits. This high-level
support was vital to project approval. Based on initial data,
the 500 kW system will generate about 500,000 kWh per
year and can handle about 10% of the facility's load at peak
times. Johnson & Johnson is evaluating numerous solar PV
projects in addition to the three systems it currently owns.
24
Planning an On-site Renewable Generation Project
-------
•
the of the
After buying or installing green power, the organiza-
tion should consider various promotional strategies
and marketing to generate measurable, positive
publicity and public relations benefits. To maxi-
mize the positive publicity, both inside and outside the
organization, the purchase of green power should be made
part of the organization's comprehensive environmental man-
agement efforts. The organization's achievements should be
significant and well documented so that claims made to the
public are credible.
When an organization highlights the benefits of its purchase
of green power, it is important that it know the quantity
of emissions avoided. These emissions can be greenhouse
gases (GHGs), primarily carbon dioxide, as well as other
significant pollutants that affect the environment and human
health, such as sulfur dioxide, nitrogen oxides, and mercury.
A buyer of green power can calculate its reduction of emis-
sions and count them toward an environmental or energy
goal. To help with these calculations, analysis tools are
available from the EPA Green Power Partnership
(www.epa.gov/cleanenergy/powerprofiler.htm) and the
World Resource Institute's Green Power Market
Development Group (www.thegreenpowergroup.org/gpat/).
The concern about climate change, and GHGs in particular,
has prompted many organizations to make a GHG emissions
inventory. An inventory is a detailed list of emissions by
source and type of greenhouse gas, usually expressed in metric
tonnes of carbon dioxide equivalent (CO2e).
An inventory serves many purposes, including
• Identifying opportunities for reduction and managing
GHGs.
• Participating in public reporting and voluntary
reduction initiatives.
11 Participating in mandatory government-reporting
programs.
11 Trading in GHG emissions markets.
• Providing recognition for early voluntary action.
Using an inventory to record changes in GHG emissions
sets the foundation for companies, organizations, and others
to benefit from buying green power in future climate change
policy frameworks. An inventory also allows organizations to
record their emissions information in an official registry with
a government agency. Several GHG registry programs have
been established to record GHG reductions, including the
California Climate Action Registry, Wisconsin's Voluntary
Emissions Reduction Registry, the U.S. Department of
Energy's 1605b Voluntary Greenhouse Gas Reporting
program, and the Regional Greenhouse Gas Registry being
developed by the Northeast States for Coordinated Air Use
Management.
For more information, see the GHG accounting
standards developed by the GHG Protocol Initiative at
www.ghgprotocol.org.
One of the benefits of buying green power is improving
employees' morale. To capitalize on this, companies and
organizations often choose to promote their purchase or
installation internally using the following methods:
• Include "energy news" in internal publications.
Internal publications, such as newsletters, are valuable
ways of communicating information to an organization's
employees, stakeholders, and affiliates and also helps
support the organization's mission, growth, and
development.
• Establish a staff adoption and recognition program.
Such a program encourages employees to buy green
power through an organization-wide program. A staff
adoption program should create incentives, provide
information, set milestones for staff purchases over time,
and recognize individual achievements.
Guide to Purchasing Green Power
25
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Chapter 8
External Promotion
Strategic external public relations maximize the positive
publicity surrounding an organization's purchase of green
power. In addition to the public relations benefits, the
purchase can motivate additional purchases by the general
public, the organization's customers, and its affiliates, thereby
extending the impact of the initial purchase.
• Construct a public relations plan. Construct a plan to
publicize to target audiences the organization's purchase
or installation. The plan should include strategies for
using existing distribution channels such as e-mail,
Web sites, and direct mail to promote the organization
and its commitment to renewable energy. An organiza-
tion can create special print materials and press releases
for distribution, and conduct e-mail campaigns that
distinguish it as an innovative leader. Retail companies
sometimes circulate special offers and coupons and even
host events—such as renewable energy celebrations—at
stores to attract new customers and communicate the
benefits of the organization's green power purchase.
• Use media contacts and press. An organization may
wish to write a press release describing its purchase,
and circulate it to local and national media outlets.
The organization can also research and contact local
environmental writers and publications to encourage
feature stories about the organization and its commit-
ment to improve the environment.
• Train staff to promote the organization's purchase.
Purchasers can instruct their staff about the details of
the organization's purchase and the best ways to high-
light it to customers in daily sales interactions. Also
teach them how to answer general questions about
renewable energy.
• Take advantage of all opportunities to promote the
purchase. Effective organizations use strategic business
engagements and speaking events as well as existing
interactions with the public to talk about the organiza-
tion's environmental commitment and promote its
purchase of green power. This may include marketing
the organization's purchase on its products and encour-
aging its suppliers and affiliates to follow its lead and
buy green power.
Using Green Power for Promotion
and Branding
Hayward Lumber powers part of its manufacturing facility in
Santa Maria, California with a 11 8 kW rooftop photovolta-
ic system. The PV system, which produces 45% of the facility's
electric load, now serves as a brand name—Solar Truss—for
the components that are produced at the plant. By branding
their trusses, Hayward Lumber is educating contractors and
architects that its trusses are built using renewable energy
Work with third-party organizations. Third-party
organizations can help provide credibility to green
power purchases that meet minimum purchasing bench-
marks. These organizations also offer publicity channels
that promote renewable energy and highlight environ-
mental commitment. All the organizations sponsoring
this guidebook help their partners and companies publi-
cize their achievements in buying green power.
Members of the EPA's Green Power Partnership and
those who purchase Green-e certified products can also
use these logos in their promotional activities.
Create marketing partnerships with green-power sup-
pliers. Offer retail customers the opportunity to sign up
for green power, and reward them with benefits such as
gift or discount cards, merchandise, or collateral prod-
ucts (e.g., T-shirts, hats) that tout the company's image
as an environmental leader.
26
Capturing the Benefits of the Purchase
-------
urchasers of electricity can have a significant impact
I on the way that power is produced, both now and in
the future. Businesses, governments, and nonprofits
have an unprecedented and increasing range of
options for buying green power. In those states that have
restructured their electricity markets, retail access allows
customers to choose their electricity supplier and, by
extension, how their electricity is produced. In regulated
markets, utility green-pricing programs enable customers to
support the addition of renewable energy to the grid without
leaving their current utility. Renewable energy certificates
and on-site renewable generation allow organizations every-
where to achieve the benefits of green power. Organizations
that act in their own—and society's—best interests can take
advantage of the strategies outlined in this guidebook to
help move the United States toward a more sustainable
energy future.
Guide to Purchasing Green Power 27
-------
of
11 Federal Energy Management Program (FEMP)
www.eere.energy.gov/femp
Green Power Network
www.eere.energy.gov/greenpower
FEMP Renewable Power Purchasing
www.eere.energy.gov/femp/technologies/
renewable_purchasepower.cfm
FEMP Distributed Power
www.eere.energy.gov/femp/technologies/derchp.cfm
• World Resources Institute home page
www.wri.org
11 GHG Protocol Initiative
www.ghgprotocol.org
• Green Power Market Development Group
www.thegreenpowergroup.org
11 Clean Energy
www.epa.gov/cleanenergy
• Green Power Partnership
www.epa.gov/greenpower
• Energy Star
www.energystar.gov
• Landfill Methane Outreach Program
www.epa.gov/lmop
• EGRID database
www.epa.gov/cleanenergy/egrid
• Power Profiler
www.epa.gov/cleanenergy/powerprofiler.htm
28
Resources for Additional Information
-------
Chapter 10
1 111 i I
III
R.)
The Green-e Renewable
Energy Certification Program is
the nation's leading voluntary
certification and verification
program, designed to help
businesses and households
compare and select clean
renewable energy options.
Green-e sets consumer
protection and environmental
standards for energy products and verifies that Green-e
certified products meet those standards. Energy products
that meet the Green-e standards are identified by the
Green-e logo.
Certification ensures the quality of renewable energy
products. All Green-e-certified products meet stringent
requirements for air emissions, energy from new renewable
facilities, and truth in advertising. These strict standards are
set through a collaborative process with environmentalists,
consumer advocates, marketers, and energy experts. Green-e's
annual verification process and marketing compliance review
ensure that providers meet these standards. By requiring these
consumer and environmental safeguards, Green-e builds
consumer confidence in renewable energy products, which
helps expand the market for high-quality products.
Green-e provides clear information about energy options to
enable purchasers to make informed decisions. Green-e works
with companies and organizations purchasing certified green
power to highlight their purchase and educate consumers
about the benefits of buying renewable energy. Green-e also
conducts public education and outreach campaigns in regions
across the nation to inform consumers about their options
and build demand for renewable energy. The Green-e Web
site, www.green-e.org, and toll-free number (888-63-GREEN)
are widely used resources that allow consumers to compare
certified products in any region and to select the superior
green power option that meets their needs.
Green-e also identifies products manufactured by companies
that buy certified green power, bringing renewable energy to
the attention of millions of diverse consumers across the
nation. Through Green-e's product labeling initiative, claims
such as "Made with Certified Renewable Energy" and "We
Buy Certified Renewable Energy" may now appear on
consumer products, accompanied by the Green-e logo and
Web site. These labels appear on products in grocery stores,
carpet labels, and even on bottles of wine in restaurants. The
initiative advances renewable electricity use as a new type of
environmental performance indicator for consumer products,
similar to other consumer labels for recycled products, organ-
ic food, fair trade practices, and energy efficiency.
Made with
Renewable
Energy
contents made
with 75% certified
renewable energy
www.green-e.org
Green-e is a program of the Center for Resource Solutions.
For more information, visit www.green-e.org or
www.resource-solutions.org.
29
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Chapter 10
Overview
Developing a strategic energy management plan:
ENERGY STAR for business: www.energystar.gov, follow the
links to "Business Improvement" then "Guidelines for Energy
Management".
Electricity restructuring:
FEMP's restructuring Web site:
pnnl-utilityrestructuring.pnl.gov.
Current state of green power markets:
Bird, Lori, and Blair Swezey. 2003. Estimates of Renewable
Energy Developed to Serve Green Power Markets in the
United States. Golden, CO: National Renewable Energy
Laboratory, February (www.eere.energy.gov/greenpower/
resources/tables/new_gp_cap.shtml).
Benefits of Green Power
Public support for renewable energy:
Farhar, Barbara C., and Ashley H. Houston. 1996. Willingness
to Pay for Electricity from Renewable Energy. Golden, CO:
National Renewable Energy Laboratory, September.
Motivations for purchasing green power:
Holt, E., R.Wiser, M. Fowlie, R. Mayer, and S. Innes.
2000. Understanding Non-Residential Demand for Green Power.
Prepared for the American Wind Energy Association and the
National Wind Coordinating Committee
(www.nationalwind.org/pubs).
Economic development and job creation:
National Wind Coordinating Committee. 2003. Assessing the
Economic Development Impacts of Wind Power. March
(www.nationalwind.org/pubs).
Environmental Law and Policy Center. Job Jolt: The Economic
Impacts ofRepowering the Midwest: The Clean
Energy Development Plan for the Heartland
(www.repowermidwest.org/Job%20Jolt/JJfinal.pdf).
Environmental benefits:
Serchuck, Adam. 2000. The Environmental Imperative for
Renewable Energy: An Update. College Park, MD: Renewable
Energy Policy Project (REPP), University of Maryland. April
(www.repp.org/repp_pubs/articles/envlmp/envlmp.pdf).
EPA's Global Warming Web site:
www.epa.gov/globalwarming.
Emissions credits:
Wooley, David R. 2000. A Guide to the Clean Air Act for the
Renewable Energy Community. College Park, MD: Renewable
Energy Policy Project (REPP), University of Maryland.
Issue Brief no. 15. February
(www.repp.org/repp_pubs/articles/issuebr!5/caaRen.pdf).
National Wind Coordinating Committee. 2002. Credit
Trading and Wind Power: Issues and Opportunities. May
(www.nationalwind.org/pubs/).
Renewable Energy Certificates (RECs)
Hamrin, Jan, and Meredith Wingate. 2003. Regulator's
Handbook on Tradable Renewable Certificates. San Francisco:
Center for Resource Solutions. May
(www.resource-solutions.org/RegulatorHandbook.htm).
EPA's Green Power Locator: provides links to retail and
wholesale marketers of renewable energy certificates:
www.epa.gov/greenpower/locator.htm.
The Green Power Network lists brokers and wholesale
marketers: www.eere.energy.gov/greenpower/markets/
certificates.shtml.
Green-e lists certificate marketers and brokers that offer certi-
fied products: www.green-e.org.
The World Resources Institute offers a sample REC
contract: www.thegreenpowergroup.org/
Sample_REC_Contract.doc.
Hanson, Craig, and Vince Van Son. 2003. Renewable Energy
Certificates: An Attractive Means for Corporate Customers to
Purchase Renewable Energy. Washington, DC: World
Resources Institute
(www. thegreenpowergroup .org/Installment5 .pdf).
Utility Green-Pricing Programs
Holt, Edward, and Meredith Holt. 2004. Green Pricing
Resource Guide. 2nd ed. Washington, DC: American Wind
Energy Association.
Lieberman, Dan. 2002. Green Pricing at Public Utilities: A
How-to Guide Based on Lessons Learned to Date. Center for
Resource Solutions and Public Renewables Partnership.
October. (www.resource-solutions.org/PRP.htm).
30
Resources for Additional Information
-------
Chapter 10
Green Power Product Lists
The Green Power Network maintains lists of products offered
in each state: www.eere.energy.gov/greenpower.
The EPA Green Power Partnership supports a Green Power
Locator: www.epa.gov/greenpower/locator.htm.
Green-e maintains a list of certified products offered in each
state: www.green-e.org/your_e_choices/pyp.html.
On-Site Renewable Generation
FEMP. 2002. Using Distributed Energy Resources:
A How-to Guide for Federal Facility Managers. Washington,
DC: U.S. Department of Energy, Federal Energy
Management Program. DOE/GO-102002-1520. May
(www.eere.energy.gov/femp/technologies/
derchp_resources.cfm).
Massachusetts DOER. 2001. Renewable Energy & Distributed
Generation Guidebook: A Developer's Guide to Regulations,
Policies and Programs That Affect Renewable Energy and
Distributed Generation Facilities in Massachusetts.
Massachusetts Division of Energy Resources. April
(www.state.ma.us/doer/pub_info/guidebook.pdf).
California Energy Commission:
www.energy.ca.gov/renewables/index.html.
Pennsylvania Department of Environmental Protection.
2003. Small Wind Electric Systems: A Pennsylvania
Consumer's Guide
(www.dep.state.pa.us/dep/deputate/pollprev/energy/wind/
small_wind_pa.pdf).
New York State Energy Research and Development Agency:
www.nyserda.org/energyresources/photovoltaics.html
and www.nyserda.org/energyresources/wind.html.
Government incentives for renewable
energy:
The Database of State Incentives for Renewable Energy
includes information about capital cost incentives as well as
net-metering laws: www.dsireusa.org.
Clean Energy States Alliance: www.cleanenergystates.org.
The American Wind Energy Association lists states' incen-
tives for small wind installations: www.awea.org, follow links
to "Small Wind Systems" then "State by State Information".
Bolinger, Mark, Ryan Wiser, Lew Milford, Michael Stoddard,
and Kevin Porter. 2001. Clean Energy Funds: An Overview of
State Support for Renewable Energy. Berkeley, CA: Lawrence
Berkeley National Laboratory. LBNL-47705. April
(http://eetd.lbl.gov/ea/EMS/reports/47705.pdf).
Interconnection with the utility grid:
In 2003 the Federal Energy Regulatory Commission (FERC)
issued standard procedures and a standard interconnection
agreement for the interconnection of generators larger than
20 megawatts. FERC also proposed a rule to apply to the
interconnection of small generators no larger than 20
megawatts: www.ferc.gov/industries/electric/indus-act/gi.asp.
California Rule 21: standards for interconnection of
distributed energy resources: www.energy.ca.gov/distgen/
interconnection/california_requirements.html.
Standards Board of the Institute for Electrical and Electronics
Engineers, Inc. (IEEE). Standard 1547: "Standard for
Interconnecting Distributed Resources with Electric Power
Systems": grouper.ieee.org/groups/scc2 l/dr_shared.
DOE Distributed Power program:
www.eere.energy.gov/distributedpower
FEMP Interconnection and Permitting Guide:
www.eere.energy.gov/femp/technologies/
derchp_ipg.cfm.
Larsen, C., B. Brooks, and T Starrs. 2000. Connecting to the
Grid: A Guide to PV Interconnection Issues. 3rd ed. Interstate
Renewable Energy Council
(http://irecusa.org/connect/library.html).
Measurement and verification of system
performance:
FEMP. 2000. M&V Guidelines: Measurement and Verification
for Federal Energy Management Projects, version 2.2. Section
VIII of these guidelines covers renewable energy projects.
(www.eere.energy.gov/femp/financing/
superespcs_measguide .cfm).
PVWATTS is a calculator to estimate the output from
photovoltaic solar installations. The model calculates
monthly and annual energy production in kilowatt-hours
and monthly savings in dollars.
See http://rredc.nrel.gov/solar/calculators/PVWATTS.
Guide to Purchasing Green Power
31
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Chapter 10
For more information about PV systems, see:
American Solar Energy Society: www.ases.org.
Solar Electric Power Association: www.solarelectricpower.org.
Solar Energy Industries Association: www.seia.org.
North Carolina Solar Center: www.ncsc.ncsu.edu.
California Energy Commission. 2000. Buying a Photovoltaic
Solar Electric System: A Consumer Guide. April
(www.energy.ca.gov/reports/500-99-008.PDF).
California Energy Commission. 2001. A Guide to Photovoltaic
(PV) System Design and Installation. June
(www.energy.ca.gov/reports/
2001-09-04_500-01-020.PDF).
Renewable energy trade associations:
American Bioenergy Association: www.biomass.org.
American Solar Energy Society: www.ases.org.
American Wind Energy Association: www.awea.org.
Biomass Energy Research Association: www.beral.org.
Geothermal Energy Association: www.geo-energy.org.
Geothermal Resources Council: www.geothermal.org.
Interstate Renewable Energy Council: www.irecusa.org.
Low Impact Hydropower Institute:
www.lowimpacthydro.org.
National Hydropower Association: www.hydro.org.
Solar Electric Power Association:
www. solarelectricpower.org.
Solar Energy Industries Association: www.seia.org.
Utility Wind Interest Group: www.uwig.org.
Windustry: www.windustry.com.
On-site renewable generation financial
analysis tools:
Each of the many available tools offers different features,
which should be examined closely to determine whether they
are appropriate to the particular situation.
ProForm
Developer: Lawrence Berkeley National Laboratory
Allows an integrated environmental and financial prefeasibil-
ity analysis of on-site renewable energy and energy efficiency
projects. http://poet.lbl.gov/Proform
RETscreen International
Developer: Natural Resources Canada's CANMET Energy
Diversification
Research Laboratory (CEDRL)
Assesses the economics of various renewable energy
installations, www.retscreen.net
RETFinance
Developer: Energy Analysis Team at NREL
Simulates a 30-year nominal dollar cash flow for renewable
projects, including earnings, debt payments, levelized cost-of-
electricity, after-tax internal rate of return, and debt service
coverage ratio (net operating income divided by total debt
service), http://analysis.nrel.gov/retfinance
Clean Power Estimator
Developer: Clean Power Research
Offers a quick cost-benefit analysis for photovoltaics,
solar thermal, wind, and energy efficiency for both
residential and commercial buildings.
www.clean-power.com/software.ht.
A version for California facilities is offered by the CEC.
www.consumerenergycenter.org/renewable/estimator.
Federal Renewable Energy Screening Application (FRESA)
Developer: U.S. Department of Energy, Energy Efficiency and
Renewable Energy
Compares opportunities for renewables and conservation at
federal facilities.
www.eere.energy.gov/femp/information/
download_software .cfm
Hybrid Optimization Model for Electric Renewables
(HOMER)
Developer: NREL
Compares the cost-effectiveness of off-grid renewables with
grid extensions or stand-alone generators.
www.nrel.gov/homer.
BBSSST
32
for
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Chapter 10
Real Options Analysis Center
Developer: NREL
Provides online models for the valuation of renewable energy
R&D and the valuation of distributed generation assets.
www. nrel .go v/realop tions
FATE-2P (Financial Analysis Tool for Electric Energy
Project)
Developer: NREL
A power plant project finance model for calculating the cost
of energy or the internal rate of return for alternative energy
projects.
Greenhouse Gas Resources
Hanson, Craig, and Janet Ranganathan. 2003. Corporate
Greenhouse Gas Emissions Inventories: Accounting for the
Climate Benefits of Green Power. Washington, DC: World
Resources Institute
(www. thegreenpowergroup .org/Installment3 .pelf).
U.S. Department of Energy's voluntary GHG registry:
www.eia.doe.gov/oiaf/1605/fmtvrgg.html.
U.S. Environmental Protection Agency's Climate Leaders, a
voluntary government-industry partnership:
www.epa.gov/climateleaders.
World Wildlife Fund's (WWF) Climate Savers:
www.worldwildlife.org/climate/projects/
climate_savers.cfm.
Climate Neutral Network: www.climateneutral.com.
States that have or are developing climate registries:
The California Energy Commission has summarized state
activities related to greenhouse gas inventories
www.energy.ca.gov/global_climate_change/
summary.html.
The California Climate Action Registry:
www.climateregistry.org.
Wisconsin Voluntary Emission Reductions Registry Advisory
Committee:
www.dnr.state.wi.us/org/aw/air/hot/climchgcom/.
New Hampshire:
www.des.state.nh.us/ard/climatechange/ghgr.htm
Guide to Purchasing Green Power 33
-------
ihis glossary defines some of the important terms used
in this guide. More definitions can be found at
www.epa.gov/cleanenergy/glossary.htm.
Annual consumption. Annual consumption refers to the
amount of electricity used by a consumer in one year and is
typically measured in kilowatt-hours (kWh). This informa-
tion can be acquired from your electricity bill or by
contacting your energy provider.
Carbon dioxide. Burning fossil fuels releases into the atmos-
phere carbon that has been stored underground for millions
of years. During the combustion process, the carbon in
these fossil fuels is transformed into carbon dioxide, the
predominant gas contributing to the greenhouse effect.
Increases in the emissions of carbon dioxide and other
gases, such as methane, due to the burning of fossil fuels
and other human endeavors, accelerate heat-trapping
processes in the atmosphere, gradually raising average
temperatures worldwide. Carbon dioxide is absorbed and
released at nearly equal rates by natural processes on the
earth, an equilibrium that is disrupted when large amounts
of carbon dioxide are released into the atmosphere by
human activities, such as the burning of fossil fuels.
Combined heat and power (CHP). Combined heat and power
(CHP) is an electricity generation technology, also known
as regeneration, that recovers waste heat from the electric
generation process to produce simultaneously other forms
of useful energy, such as usable heat or steam. On average,
two-thirds of the input energy used to make electricity is
lost as waste heat. In contrast, CHP systems are capable
of converting more than 70 percent of the fuel into
usable energy.
Commodity electricity. Commodity electricity is generic
electricity not associated with a particular power genera-
tion source.
Competitive markets. Until recently, most consumers received
generation, transmission, and distribution services from
one local utility company. As a regulated monopoly, the
utility was given an exclusive franchise to provide
electricity to consumers in a particular community. Rates
were set, and consumers had little choice but to pay the
rate for their area. In recent years, however, many states
have restructured their electricity industry and are now
allowing consumers to choose from among competing
electricity suppliers.
In states permitting retail competition, sellers of electricity
obtain power by contracting with various generation
sources and setting their own price. Consumers in these
states have the opportunity to choose their energy provider
and purchase products based on the price or type of power
supplied to their home or business. Some consumers are
exercising this choice and switching to accredited "green
power" resources. In states that have not restructured their
electricity markets, consumers interested in purchasing
renewable energy now have the option to participate in
green-pricing programs offered by their local utility.
Conventional power. Conventional power is power produced
from nonrenewable fuels such as coal, oil, natural gas, and
nuclear fuels. These fuels are a finite resource that cannot
be replenished once they have been extracted and used.
Distributed generation. Distributed generation refers to small,
modular, decentralized, grid-connected, or off-grid energy
systems located in or near the place where energy is used.
Electricity supplier. As states restructure their electricity
markets, more and more customers will be able to choose
from a range of energy suppliers that market different
types of power products, including green power from
renewable energy. Restructured local utilities offer
electricity products generated exclusively from renewable
resources or, more frequently, electricity produced from a
combination of fossil and renewable resources. In states
without restructured electricity markets, local utilities may
offer green-pricing programs, in which customers may elect
to have their utility generate a portion of their power from
renewable sources.
Energy efficiency. Energy efficiency refers to products or
systems using less energy to do the same or a better job
than conventional products or systems can. Energy
efficiency saves energy, saves money on utility bills, and
helps protect the environment by reducing the amount of
electricity (and associated environmental impacts) that
needs to be generated.
34
Glossary
-------
Glossary
Fossil fuels. Fossil fuels are the United States' principal
source of electricity. The popularity of these fuels is due
largely to their low cost. Fossil fuels come in three main
forms: coal, oil, and natural gas. All three were formed
many hundreds of millions of years ago before the time of
the dinosaurs, hence the name fossil fuels. Because fossil
fuels are a finite resource and cannot be replenished once
they have been extracted and burned, they are not con-
sidered renewable.
Global climate change. For most of human history, changes
in the earth's climate resulted from natural causes that
took place over thousands of years. But today, human
activities are beginning to affect our climate in serious
and immediate ways by rapidly adding greenhouse gases
to the atmosphere. These gases trap heat close to the
earth that would otherwise escape into space, intensify-
ing a natural phenomenon called the greenhouse effect.
Over the next century, scientists project that global
temperatures will rise two to six degrees Fahrenheit as a
result of rising concentrations of greenhouse gases.
Scientists also believe that this rate of global warming
will be unprecedented compared with that of the past
10,000 years. Global warming could result in a rise in sea
levels, changes in patterns of precipitation, more variable
weather, and many other consequences. These changes
threaten our health, agriculture, water resources, forests,
wildlife, and coastal areas. For more information on the
science and impacts of global climate change, visit the
EPA's Global Warming Web site (www.epa.gov/global-
warming).
Greenhouse effect. The greenhouse effect is produced as
greenhouse gases allow incoming solar radiation to pass
through the earth's atmosphere, while preventing part of
the outgoing infrared radiation from the earth's surface
and lower atmosphere from escaping into outer space.
This process occurs naturally and has kept the earth's
temperature about 59 degrees Fahrenheit warmer than it
would otherwise be. Current life on the earth could not
be sustained without the natural greenhouse effect.
Greenhouse gases (GHG). Gases in the earth's atmosphere
produce the greenhouse effect. Changes in the concen-
tration of certain greenhouse gases, due to human
activities such as the burning of fossil fuels, increase the
risk of global climate change. Greenhouse gases include
water vapor, carbon dioxide, methane, nitrous oxide,
halogenated fluorocarbons, ozone, perfluorinate carbons,
and hydrofluorocarbons.
Green power. Electricity that is generated from renewable
energy sources is often marketed as "green power," a term
that implies a smaller environmental impact from
electricity generation. The resources that qualify as green
power vary depending on the state or organization. For
more details, see chapter 2.
Green power marketers. Energy suppliers operating in states
that permit retail competition in the electricity markets
are usually referred to as green power marketers. This term
can also include utilities that offer green power options
under what are typically referred to as green-pricing pro-
grams.
Green power products. Green power products refer to elec-
tricity generated exclusively from renewable resources or
from a combination of fossil and renewable resources.
Green pricing. Green pricing is an optional service offered by
regulated utilities to allow customers to support a greater
level of utility investment in renewable energy by paying
a premium on their electric bill. Usually green pricing is
offered in areas that do not allow retail competition.
Interval meter. An interval meter is an electricity meter that
measures a facility's energy usage in short increments
(typically 15 minutes). These meters are useful for deter-
mining electricity demand patterns and participating in
real-time pricing programs.
Kilowatt-hour (kWh). A kilowatt-hour is the basic unit for
measuring the generation and consumption of electrical
energy. A megawatt-hour (MWh) of electricity is equal to
1,000 kilowatt-hours. A kilowatt and a megawatt are units
of generation capacity.
Low-impact hydropower. Low-impact hydropower is hydro-
electric power generated with fewer environmental
impacts, by meeting criteria such as minimum river
flows, water quality, fish passage, and watershed protec-
tion. These hydropower facilities often operate in a "run
of the river" mode, in which little or no water is stored
in a reservoir.
Net metering. Net metering is a method of crediting
customers for electricity that they generate on-site.
Customers generating their own electricity offset what
they would have purchased from their utility. If they
generate more than they use in a billing period, their
electric meter turns backward to indicate their net excess
generation. Depending on the individual state or utility
rules, the net excess generation may be credited to their
account (in many cases at the retail price), carried over
to a future billing period, or ignored.
Guide to Purchasing Green Power
35
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Glosssary
New renewable generation. New renewable generation
facilities are those built in the recent past or will be built
to meet the growing market demand for green power. For
Green-e certification, new generation must have come
online since the late 1990s (depending on the region; see
the Green-e Web site for more details).
On-site renewable generation. On-site renewable generation
refers to electricity generated by renewable resources
using a system or device located at the site where the
power is used.
Peak demand. Peak demand is the maximum power
consumption for a facility, measured over a short time
period such as 15 minutes or an hour.
Power marketer. A power marketer is an entity that buys
and sells power generated by others. A green power
marketer is an electricity supplier that offers a green
power product.
Renewable electricity. Renewable electricity is power
generated from renewable resources and delivered
through the power grid to end users.
Renewable energy certificate (REC). A renewable energy
certificate (REC), also known as a green tag or tradable
renewable certificate, represents the environmental, social,
and other positive attributes of power generated by
renewable resources. For example, RECs may represent
the emissions avoided by renewable power generation
compared with those of conventional sources. RECs can
be purchased separately from electricity service.
Renewable energy resources. Renewable energy sources,
such as wind, solar, geothermal, hydropower, and various
forms of biomass, are continuously replenished on the
earth. Some definitions also include municipal solid
waste as a renewable resource.
Renewable portfolio standard (RPS). A renewable portfolio
standard (RPS) is a regulatory mandate or target stating
that a minimum percentage or amount of each electricity
supplier's resource portfolio must come from renewable
energy.
36
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for
Purchasing green power means making a difference by
changing the way we select basic commodities. For
die federal government, the largest consumer of elec-
tricity in the United States with an annual electricity
bill of approximately $3.5 billion, the ability to make a differ-
ence is enormous. This appendix discusses considerations
specific to federal agencies that buy green power.
When green power first became available, federal agencies
were uncertain about what authority they could use to justify
paying a premium for these products. Now, however, this
uncertainty has largely been dispelled, for several reasons.
First, Executive Order 13123 (see text box below) clarifies
the federal government's interest in renewable energy by
directing agencies to "strive to expand the use of renewable
energy within its facilities and in its activities by ... purchas-
ing electricity from renewable energy sources." Second, as
directed by Executive Order 13123, through a collaborative
process, the Secretary of Energy set a goal for the federal gov-
ernment to meet the equivalent of 2.5 percent of its facilities'
electricity consumption with new renewable energy sources
by 2005.1 Finally, the authority for purchasing renewable
energy has been incorporated into the Federal Acquisition
Regulations (FAR, subpart 23.2), carrying the force of law
(see www.arnet.gov/far).
Sec. 204. Renewable Energy. Each agency shall strive to expand the use of renewable energy within its facilities and in its activities
by implementing renewable energy projects and by purchasing electricity from renewable energy sources.
Sec. 301. Annual Budget Submission. Each agency's budget submission to OMB shall specifically request funding necessary to
achieve the goals of this order.
Sec. 404. Electricity Use. To advance the greenhouse gas and renewable energy goals of this order, and reduce source energy use,
each agency shall strive to use electricity from clean, efficient, and renewable energy sources.
(b) Reduced Greenhouse Gas Intensity of Electric Power....Agencies shall consider the greenhouse gas intensity of the source of
the electricity and strive to minimize the greenhouse gas intensity of purchased electricity.
(c) Purchasing Electricity from Renewable Energy Sources.
(1) Each agency shall evaluate its current use of electricity from renewable energy sources and report this level in its annu-
al report to the President. Based on this review, each agency should adopt policies and pursue projects that increase
the use of such electricity. Agencies should include provisions for the purchase of electricity from renewable energy
sources as a component of their requests for bids whenever procuring electricity. Agencies may use savings from ener-
gy efficiency projects to pay additional incremental costs of electricity from renewable energy sources.
Sec. 406(c) Retention of Savings and Rebates. Agencies granted statutory authority to retain a portion of savings generated from
efficient energy and water management are encouraged to permit the retention of the savings at the facility or site where the sav-
ings occur to provide greater incentive for that facility and its site managers to undertake more energy management initiatives, invest
in renewable energy systems, and purchase electricity from renewable energy sources.
Sec. 605. Amendments to Federal Regulations. The Federal Acquisition Regulation and other Federal regulations shall be amended
to reflect changes made by this order, including an amendment to facilitate agency purchases of electricity from renewable energy
sources.
New renewable energy covers any renewable energy acquired by the federal government after 1990
(www. eere.energy.gov/femp/techno logies/renewable_fedrequire.cfm).
Guide to Purchasing Green Power
37
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Appendix A
As a result of these developments, a number of agencies have
successfully bought green power in most regions of the coun-
try. These purchases account for approximately 50 percent of
the total federal renewable energy use, with the remainder
consisting of on-site renewable power, thermal generation,
and biofuels (summarized in table A-l). Considering all
sources, as of July 2004 the federal government had fulfilled
more than 80 percent of its 2005 renewable energy goal. By
reading this guidebook and taking advantage of the technical
support provided by the Department of Energy's (DOE)
Federal Energy Management Program (FEMP), energy man-
agers are taking an important step in helping the federal
government achieve its renewable usage goals.
Agencies that are interested in participating in procurements
run by the General Services Administration (GSA), the
Defense Energy Support Center (DESC), or the Western
Area Power Administration (Western) should read the
section "Procurement Approaches to Renewable Electricity
and Certificates" in this appendix.
Federal Definitions of
Renewable Energy
In order to meet the federal 2005 renewable use goal,
Executive Order 13123 (sec. 710) and FAR subpart 2.1
define renewable energy as "energy produced by solar, wind,
geothermal, and biomass power." DOE's definition of biomass
resources, as defined under the Biomass Research and
Development Act of 2000, is "organic matter available on a
Table A-l: Federal Renewable Technologies and
Purchases, July 2004
Source
Biomass fuels
Biomass power
Biomass thermal
Green power purchases
Ground- source heat pump
Photovoltaics
Solar thermal
Wind
Total
Annual Energy
Contribution (GWh)
106
92
108
668
179
28
10
19
1210
Source: DOE/FEMP.
renewable or recurring basis, including agricultural crops and
trees, wood and wood wastes and residues, plants (including
aquatic plants), grasses, residues, fibers, and animal wastes,
municipal wastes, and other waste materials."
FEMP provides guidance on renewable resource definitions
and other issues relating to Executive Order 13123's renew-
able use goal on its Web site (www.eere.energy.gov/femp/
technologies/renewable_energy.cfm). Note that FEMP guid-
ance is subject to change.
Federal Motivations for Green
Power Purchases
Owing to the large volume of electricity consumed by the
federal government, even a slightly greater percentage of
green power can have a large benefit for the environment
and the overall green power market. In addition to the
benefits discussed earlier in this guidebook, green power
purchases by federal agencies provide benefits specific to
federal customers.
Benefits accruing directly to a federal agency from a renew-
able energy purchase include
• Compliance with federal goals. Executive Order 13123
and the resulting federal renewable energy directive
have three energy management goals: energy efficiency,
greenhouse gas reduction, and the use of renewable
energy. Purchasing green power or installing on-site
generation can help an agency meet all three of these
goals.
• Increased visibility. Presidential awards are given to
those agency energy management teams that strive to
comply with Executive Order 13123. Energy scorecards
for each agency are tallied to gauge the degree of com-
pliance. Members of the EPA's Green Power
Partnership also are eligible for awards.
• Accomplishment of an agency's organizational
mission. Many in the federal government understand
the government's overall mission to include a commit-
ment to environmental protection. Beyond that general
obligation, individual agencies, such as the EPA, have
the specific mission of protecting the environment.
Renewable energy purchases are one way to help fulfill
both goals.
• Demonstrate responsiveness and leadership. The
purchase of renewable energy represents a clear demon-
stration of the agency's responsiveness to its customers
(or citizens), the majority of whom, according to several
surveys, favor renewable energy. The federal govern-
38
Green Power Considerations for Federal Agencies
-------
Appendix A
ment has shown that it can be a leader in the area of
green power and renewable energy.
Social benefits of federal purchases include the following:
• National security. National security is one of the
principal responsibilities of the federal government. By
purchasing domestically produced renewable energy, all
federal agencies can contribute to the nation's energy
security. Because of the special role of government
facilities in national security, the use of distributed,
on-site power generation resources at these facilities
enhances the country's overall security.
• Market transformation. Given the size of the federal
government's utility bill, significant purchases of green
power by federal agencies would stimulate the overall
green power market. A strong federal demand would
demonstrate that switching to renewable energy was a
national priority, would call attention to green power's
societal and customer benefits, might increase the avail-
ability of renewable power products, and might help
reduce their cost. The size of the federal government
amplifies any benefits resulting from a purchase of
green power.
of to the
to
Executive Order 13123
Executive Order 13123 provides the fundamental authority
for federal agencies to buy green power. The goals of this
order have been incorporated into the FAR.
FAR Part 23
FAR part 23 seeks to minimize the environmental impacts of
federal purchases. Subpart 23.2 addresses energy and water
efficiency and renewable energy and has been modified to
incorporate much of Executive Order 13123. This subpart
states, "The Government's policy is to acquire supplies and
services that promote energy and water efficiency, advance
the use of renewable energy products, and help foster markets
for emerging technologies." Subpart 23.7 directs agencies to
contract for environmentally preferable and energy-efficient
products and services. "Environmentally preferable" is defined
by FAR subpart 2.101 to mean "products or services that
have a lesser or reduced effect on human health and the
environment when compared with competing products or
services that serve the same purpose. This comparison may
consider raw materials acquisition, production, manufactur-
ing, packaging, distribution, reuse, operation, maintenance,
or disposal of the product or service."
Cost Minimization and Best Value
The FAR has traditionally focused on minimizing the govern-
ment's costs by strongly favoring the procurement of the least
expensive goods and services, often leaving contracting offi-
cers little room to consider value. Procurement reform during
the 1990s, however, more closely aligned federal acquisition
procedures with the commercial sector's practices through a
stated preference for commercial products and the adoption
of commercial business practices.
In addition, the traditional focus on least cost procurement
has shifted to obtaining the best value (FAR part 1.102[a]).
In determining best value, contracting officers can consider
an array of factors besides cost, such as environmental and
energy efficiency (FAR part 8.404[b][2]). As formally defined
in the FAR (part 2.101), best value means "the expected out-
come of an acquisition that, in the Government's estimation,
provides the greatest overall benefit in response to the
requirement."
Specification of Requirements
Part 11 of the FAR, "Describing Agency Needs," states that
environmental objectives, including the purchase of products
and services that use renewable energy technologies, must be
considered when specifying requirements (FAR part
11.002[d]). Requirements for renewable energy should be
specific enough to limit the number of factors in competing
offers to be evaluated but general enough so as not to jeop-
ardize the product's status as a "commercial item." In general,
as the requirements become more specifically defined, the
importance of price relative to other considerations increases
(FAR part 15.101).
Commercial Items
In restructured electricity markets, the most direct path to a
renewable energy purchase is to make use of the "commercial
items" provisions in FAR part 12. Commercial items are
broadly defined as goods and services sold competitively in
the commercial marketplace in substantial quantities (FAR
subpart 2.101). Since an active competitive market reduces
procurement risks, agencies are strongly encouraged to favor
the purchase of commercial items, through both specific lan-
guage to that effect and the authorization to use less stringent
acquisition procedures.
With large volumes being commercially traded in public
markets each day, electricity is undisputed as a standard com-
mercial item. But as a specific type of electricity, renewable
Guide to Purchasing Green Power
39
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Appendix A
energy's status as a commercial item is slightly less certain.
Support for such a designation is aided by the ongoing
development of active renewable energy exchanges in
which commercial entities buy and sell renewable energy in
large quantities.
Even in the absence of an active renewable energy market,
agencies may specify a requirement for electricity (the stan-
dard commercial item) generated from renewable resources (a
specification in addition to the standard commercial item).
In most cases, the favorable contracting procedures afforded
to commercial items would still be applicable. While the
boundary between what is and is not considered a commer-
cial item is often case specific, in general an agency should be
wary of specifying any requirement beyond what is currently
commercially available.
In addition, certification efforts by state and nongovernmen-
tal organizations are helping establish renewable energy as a
commercial item by establishing a brand name. Third-party
certification provides additional value to the federal govern-
ment because of functions such as verification and annual
audits to ensure no double counting. When buying green
power for federal agencies, the GSA and DESC routinely
use the commercial item designation and require third-party
verification.
Innovative Purchase Opportunities
Even though the procurement of green power has become
common enough that it is generally not "innovative," in
some situations the methods just outlined do not apply, and
so innovative methods are needed to implement a purchase.
The Federal Acquisition Streamlining Act of 1994 and the
Federal Acquisition Reform Act of 1996 encourage contract-
ing officers to take initiative and pursue opportunities that
they believe to be in the best interests of the government
(FAR 1.102[d]).
to
Restructured/Competitive Markets
In a competitive market, agencies must use competitive
acquisition procedures to "shop" for renewable energy from a
variety of providers. Since an agency will be evaluating com-
peting offers, normal solicitation procedures must be
followed. Federal agencies should follow one of two solicita-
tion approaches: using designated contracting agencies, such
as the GSA, the DESC, or, in some cases, Western; or serving
as the contracting agency themselves. Although serving as
the contracting agency offers more control and flexibility,
the designated contracting agencies have gained significant
expertise in the area of competitive electricity power procure-
ment, including renewables.
Fully Regulated Markets
Where retail competition is not available, federal agencies
may be able to buy green power through a green-pricing
program offered by their local utility. If such a program exists,
agencies should find out the specific enrollment or sign-up
procedures. If a GSA areawide contract (AWC) is already in
place with this utility, the agency should complete the utili-
ty's green-pricing contract, as well as the AWC Exhibit A
contract. A competitive solicitation is not required, since it is
a utility service.
Renewable Energy Certificates
Federal agencies can buy green power through renewable
energy certificates throughout the country and in some
foreign locations. Since a variety of suppliers offer RECs,
normal solicitation procedures must be followed. Both GSA
and DESC have experience with REC procurements.
Using GSA or DESC
GSA Power Procurement Services
GSA has assisted many federal agencies in the procurement
of green power, and its ability to aggregate renewable require-
ments for many agencies may result in lower prices.
In restructured electricity markets, GSA helps identify federal
facilities that use large amounts of electricity in a manner
that is regarded favorably by the competitive energy service
providers. For these customers, GSA seeks specific prices for
those facilities and works with the facility managers to devise
strategies that may result in lower long-term electricity prices
in the restructured marketplace. Using these strategies, GSA
has also made significant progress in making renewable ener-
gy available at competitive market prices for both renewable
electricity and REC products. In addition, GSA is developing
a variable-priced REC product that may provide additional
financial value to purchasers.
One of the easier ways for federal agencies to buy green
power is through the GSA's federal supply schedules (FSS),
multiple award schedules. Green power and renewable energy
have been added to the federal supply schedule under three
different special item numbers (SINs). SIN 871-204 addresses
"Managing the Procurement and Use of Electricity," which
includes electricity from both renewable and nonrenewable
sources. SIN 871-203 addresses "Managing the Procurement
and Use of Natural Gas," which includes gas from both
renewable and nonrenewable sources. SIN 871-299 covers
40
Green Power Considerations for Federal Agencies
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Appendix A
New Products/Services. The last supply schedule would be
applicable to on-site generation resources that use renewably
generated methane gas (such as landfill gas). Renewable
energy certificates are also being added to the schedule under
SIN 871-204 and SIN 871-299.
Supply schedules have several features that make them
particularly well suited to serve the needs of those buying
electricity in a restructured market:
• Multiple award schedules (MAS) list competing
contractors offering comparable products and services.
MAS contracts are awarded to all companies offering
commercial items whose price has been determined by
the GSA to be fair. The use of MAS is considered a
competitive procedure under FAR 6.102[d] [3].
• Maximum order limitations have been removed and
replaced with maximum order thresholds, beyond which
an agency is required to seek a price reduction from the
contractor (FAR 8.404[3]).
• MAS contracts are priced on a most-favored commer-
cial customer basis, and a price reduction clause requires
the contractor to lower the agency's price in accordance
with any corresponding price reductions to its most-
favored commercial customer.
For the latest information on Federal Supply Schedules, go to
www.gsa.gov/energyservices.
For details on the schedules just described, go to www.gsaeli-
brary.gsa.gov and search for the special item numbers listed
above.
DESC Power Procurement Services
Under the DESC Electricity Program, solicitations may be
issued for competitive power and/or RECs in states that have
approved and implemented deregulation/restructuring and for
RECs in states that have not implemented retail access.
DESC:
Procures electricity for Department of Defense and
federal civilian activities.
Uses aggregation to attract market interest without
customer cross-subsidization.
Works with customers to identify risk preferences and
risk-mitigation plans.
• Tailors each solicitation to market conditions and
customer requirements.
• Conducts "best value" acquisitions.
• Competitively buys RECs in accordance with federal
acquisition regulations.
• Contracts for Economic Load Response Services.
• Uses various pricing methods: fixed price, index, and
Locational Marginal Pricing.
• Has more than six years of experience procuring power
for the federal government.
• Performs contract administration functions.
DESC's program uses commercial practices for its solicitations
and procurement strategy, which has been central to success-
fully engaging the market. In addition, DESC's program is
flexible enough to support unusual and/or "out of the box"
customer requests and requirements while complying fully
with applicable procurement regulations. To view ongoing
DESC solicitations or to find contact information for DESC's
electricity acquisition team, go to www.desc.dla.mil.
Western Green Power Products
Western offers two types of renewable products to federal
agencies. Facilities located in Western's 15-state western serv-
ice territory can buy renewable electricity directly from
Western even if they are not currently Western allocation
customers. Regardless of location, federal agencies can pur-
chase renewable energy certificates2 from Western. For more
information about these programs, see the Western's Web site
at www.wapa.gov/powerm/pmrenpro.htm.
Agency Procurement
If an agency does not deem it advantageous to request assis-
tance from the GSA, DESC, or Western, it may contract
separately for electric service. In this case, the purchase
should meet the requirements of FAR part 12 as described in
the section "Commercial Items."
These certificates are a type of REG but cannot be traded because they are available only to federal customers.
Guide to Purchasing Green Power
41
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Appendix A
Federal Assistance for On-Site
Renewable Generation Projects
On-site renewable generation projects face different issues
than do power purchases, which may hinder their implemen-
tation. To help federal agencies tap the renewable resources
that are available at their facilities, FEMP offers several pro-
grams to assist with on-site generation projects.
Renewable Resource Assessment
To help facility managers assess the quality of renewable ener-
gy resources at their location, FEMP is working with resource
assessment specialists to draw renewable resource maps for
several different renewable energy technologies (available on
FEMP's Web site).
The maps show where each renewable technology is cost-
effective for federal facilities under differing assumptions
about electricity prices and renewable system prices. For
example, the maps for solar water heating indicate that at
current electricity rates, more than 60 percent of the federal
facilities in the nation could install a cost-effective solar sys-
tem, whereas at electric utility rates of $0.10/kWh or more,
solar water-heating systems would be cost-effective for almost
any kind of federal facility.
Design Assistance and Training
FEMP can also help design renewable energy projects, espe-
cially those designated as Federal Energy Saver Showcases.
This design assistance includes reviewing plans and specifica-
tions, developing product specifications, sizing systems, and
drawing up guidelines for a project's costs. Some services are
available on a for-fee basis.
FEMP also offers two renewable-energy training courses:
• "Implementing Renewable Energy Projects" is an
overview of the technologies, covering costs and other
factors to consider when selecting a system.
• "Design Strategies for Low-Energy, Sustainable, Secure
Buildings" focuses on whole-building designs that inte-
grate daylighting, energy-efficient equipment, and
passive solar strategies for new federal buildings.
Funding Assistance
Financing can be a problem when appropriations for new
projects are limited. Once a year, FEMP announces a "call for
projects," in which federal agencies participate in a competi-
tive selection process for technical assistance on their
renewable energy projects. This funding is not for system pur-
chases, but FEMP does help some project teams acquire addi-
tional project financing if needed.
In its annual Distributed Energy Resources (DER) call for
projects, FEMP offers funds for technical assistance. Both on-
grid and off-grid renewable energy systems qualify as DER
technologies.
Agencies also may participate in FEMP's alternative financ-
ing programs, through which the contractor pays the up-front
costs of an energy efficiency or renewable energy project and
is repaid over the term of the contract from the agency's
guaranteed energy cost savings. Agencies can obtain financ-
ing for biomass fuels, geothermal heat pumps,
parabolic-trough solar collectors, and PV systems through
these contracting vehicles.
Facilitated Projects
FEMP also encourages agencies to facilitate large projects
that serve the needs of federal agency customers and that
count toward the federal renewable energy goal. An example
is a large renewable energy project on the tribal land of
Native Americans served by the Bureau of Indian Affairs.
Currently, the federal government has implemented 2 GWh
of facilitated renewable energy projects, and about 740 GWh
are pending.
Facilities in western states should contact the Bureau of Land
Management (BLM) about opportunities to collaborate on a
facilitated renewable energy project on federal land. FEMP
and BLM recently identified those federal lands with the best
potential for renewable energy projects (this study is available
from FEMP's Web site). Because these projects are usually
much larger than on-site projects, their contribution to the
federal goal can be significant. However, facilitated projects
do not require the direct federal purchase of renewables and
therefore may be subject to different treatment in the future
under the renewable purchase goals.
Key Elements of a Successful
Procurement or On-site
Installation
Based on several years of experience buying green power and
installing on-site renewable energy systems, certain lessons
for federal agencies have emerged.
Stakeholder Involvement
Green power advocates must get agreement in advance from
stakeholders such as comptrollers, energy managers, and key
decision makers. The stakeholders must participate in the
42
Green Power Considerations for Federal Agencies
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Appendix A
decision process and make reasoned, balanced decisions. It is
important to be honest and clear about the project's renew-
able sources and benefits.
Cost Control
Executive Order 13123 specifically allows the savings from
energy efficiency to be used to pay for renewable energy.
Agencies are encouraged to consider using some of the
savings from Energy Savings Performance Contracts (ESPC)
or Utility Energy Service Contracts (UESC) to buy renew-
able power. Buying RECs is generally the least expensive way
to purchase green power, but agencies should consider mak-
ing at least a small purchase through their local utility if they
have a program. Agencies should submit a budget request to
cover any remaining cost premium (per E.O. 13123, sec.
301).
Developing an Effective Solicitation
An agency's electricity consumption data should be part of
any REP and are required by the GSA, DESC, and Western
when they help with the procurement. The purchasing
agency should notify renewable power suppliers of the REP
and hold a preproposal meeting with prospective suppliers if
the procurement is not standard.
Load Aggregation
Combining several facilities into one acquisition can lead to
big purchases, but it is best to target these aggregation efforts
only to big users. Trying to aggregate many smaller users can
be difficult. It also is best to keep the procurement simple.
Supplier Relations
Utility green pricing should be seen as a partnership in which
the utility and the federal purchaser work together to con-
struct a program that meets both their needs. Investor-owned
utilities are usually not able to launch their own green power
programs without PUC approval. However, a large federal
customer could help persuade a utility to develop a new pro-
gram that would then be made available to other customers.
For all electricity suppliers, federal agencies should consider
requesting a customized product, in order to take advantage
of large purchasing volumes.
Capturing the Benefits of the
Purchase
After successfully completing a green power purchase, a fed-
eral agency usually wants to publicize its efforts. In addition
to the publicity messages available to other institutions, fed-
eral agencies can spread the word that the agency is working
to fulfill its part of the federal renewable energy goal.
Agencies with exemplary energy management programs are
eligible for FEMP awards, which enhance an agency's image
both inside and outside the government.
Federal agencies are required to report annually on their
progress toward meeting their energy management goals.
FEMP has published guidelines for counting green power pur-
chases and on-site renewable energy toward an agency's
energy management goals (www.eere.energy.gov/femp/tech-
nologies/renewable_fedrequire.cfm).
Information for Potential
Suppliers to the Federal
Government
All federal government procurements are made competitively
unless there is a compelling reason for a sole-source contract.
FEMP maintains a renewable supplier list used for renewable
electricity procurement notifications. Renewable energy sup-
pliers should contact Chandra Shah, listed in the resources
section of this appendix, to be added to this list. The GSA
(Ken Shutika) and the DESC (John Nelson) also maintain
notification lists, which are important because the GSA and
DESC make most of the electricity and renewable procure-
ments for federal sites.
Prospective suppliers are asked to provide information about
their company such as completed, in progress, and planned
renewable projects (type, location, size, third-party certifica-
tion, etc). Suppliers also should include additional
information about any projects that they believe justify a
sole-source contract.
Summary of Green Power
Opportunities for the Federal
Government
The benefits of renewable energy are enormous, and as the
nation's largest purchaser of electricity, the federal govern-
ment can have a significant impact on the way that power is
produced now and in the future. Federal agencies already
have an unprecedented and growing range of options for pur-
chasing renewable energy, and Executive Order 13123 directs
federal agencies to increase their use of renewable energy.
With more emphasis on "best value" purchasing and the
explicit consideration of environmental characteristics, con-
tracting officers now have more options than ever before to
buy renewable energy. Acting in the government's—and soci-
ety's—best interests, federal agencies can take advantage of
Guide to Purchasing Green Power
43
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Appendix A
the strategies outlined in this guidebook to help move the
United States toward a more sustainable energy future.
For federal agencies buying green power, assistance is avail-
able from the following federal agencies and national labs:
DOE Regional Office FEMP representative:
www.eere.energy.gov/femp/about/regionalfemp.cfm.
Green Power Network:
www.eere.energy.gov/greenpower.
FEMP Web sites:
Renewable energy: www.eere.energy.gov/femp/technologies/
renewable_energy.cfm.
Renewable purchasing: www.eere.energy.gov/femp/
technologies/renewable_purchasepower.cfm.
Design assistance: www.eere.energy.gov/femp/services/
projectassistance.cfm.
Training: www.eere.energy.gov/femp/technologies/
renewable_training.cfm.
Financing:
www.eere.energy.gov/femp/services/project_facilitation.cfm.
For assistance with program resources:
Department of Energy, Federal Energy Management Program
David McAndrew, Renewable Purchasing (202) 586-7722
Anne Sprunt Crawley, Technical Assistance (202) 586-1505
For assistance issuing solicitations:
General Services Administration
Ken Shutika (202) 260-9713
ken.shutika@gsa.gov
Defense Energy Support Center
John Nelson (703) 767-8669
john.nelson@dla.mil
Western Area Power Administration's Federal Renewable
Program
www.wapa.gov/powerm/pmrenpro.htm
Mike Cowan (720) 962-7245
cowan@wapa.gov
For technical assistance, including market intelligence, mar-
ket rules, and the development of requirements and
statements of work, contact
Lawrence Berkeley National Laboratory
William Golove (510) 486-5229
WHGolove@lbl.gov
National Renewable Energy Laboratory
Chandra Shah (303) 384-7557
chandra_shah@nrel.gov
For more information or assistance in developing a plan to
enhance the security of federal facilities through the use of
renewable energy, contact
John Thornton
Energy Assurance R&D Coordinator
homelandsecuritycoordinator@nrel.gov (303) 384-6469
Nancy Carlisle
NREL/FEMP
nancy_Carlisle@nrel.gov 303-384-7509
Dave Menicucci
Leader, Defense Energy Support Program
dfmenic@sandia.gov (505) 844-3077
44
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Certification Program
September 2004
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