Guide to
Purchasing
Green Power
Renewable Electricity, Renewable
Energy Certificates, and On-Site
Renewable Generation
U.S. DEPARTMENT OF
ENERGY
Energy Efficiency &
Renewable Energy
*EPA
GREEN
POWER
PARTNERSHIP
WORLD
RESOURCES
INSTITUTE
C* CRS
center for
resource
solutions
DOE/EE-0307
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This guide can be downloaded from:
wwwl.eere.energy.gov/femp/technologies/renewable_purchasingpower.html
www.epa.gov/greenpower/
www.wri.org/publications
www.resource-solutions.org/publications.php
Office of Air (6202J)
EPA430-K-04-015
www.epa.gov/greenpower
March 2010
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Table of Contents
Summary 1
Chapter 1: Introduction 2
Chapter 2: Green Power Defined 4
Chapter 3: The Benefits and Costs of Green Power 5
The Benefits 5
The Costs 7
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 14
Setting Goals 14
Identifying Key Decision-Makers 14
Gathering Energy Data 15
Choosing Green Power O ptions 15
Evaluating the Purchase 16
Chapter 6: Procuring Renewable Electricity and Renewable Energy Certificates 18
Developing Criteria for Screening Suppliers and Products 18
Collecting Product Information 20
Creating a Procurement Plan 20
Chapter 7: Planning an On-site Renewable Generation Project 24
Screening the Technologies 24
Obtaining Resources and Assistance 25
Creating a Project Plan 25
Anticipating Possible Barriers 27
Installing and Operating an On-site Renewable Generation System 28
Chapter 8: Capturing the Benefits of the Purchase 29
The Environmental Benefits 29
Internal Promotion 30
External Promotion 30
Chapter 9: Conclusion 32
Chapter 10: Resources for Additional Information 33
Glossary 40
Appendix: Green Power Considerations for Federal Agencies 43
Guide to Purchasing Green Power
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Summary
This 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 written
for a broad audience, including businesses, government agen-
cies, universities, and all organizations wanting to diversify
their energy supply and reduce the environmental impact of
their electricity use.
First published in 2004, the Guide to Purchasing Green Power
provides an overview of green power markets and describes
the necessary steps to buy green power. The 2010 version
represents the first major update to the guide and includes
new market information and terminology, case studies, an
updated additional resources section, and new resources for
Federal agencies to use when planning on-site renewable
projects or purchasing green power.
This section summarizes the (
information they need.
;uide to help readers find the
Chapter 1 describes the concepts of renewable energy and
green power and discusses their differences from conven-
tional energy sources. This section also summarizes recent
changes in electricity markets and the current availability
and use of green power sources.
Chapter 2 defines green power.
Chapter 3 summarizes the benefits and costs of purchasing
green power.
Chapter 4 defines three options for purchasing green power
products: renewable electricity, renewable energy certificates,
and on-site renewable generation.
Chapter 5 outlines the general steps needed to prepare to
buy green power: setting goals, identifying the key decision-
makers, gathering energy data, choosing the specific green
power options available to the purchaser's facilities, and
evaluating the purchase.
Chapter 6 discusses the steps to procure renewable electric-
ity or renewable energy certificates: developing screening
criteria, collecting product information, and drawing up a
procurement plan.
Chapter 7 describes the steps to establish an on-site green
power system: screening the technologies best suited to the
purchaser's site, obtaining technical and financial resources
and 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 cov-
ers 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 relatively 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 Green
Power Market Development Group of the World Resources
Institute (WRI), and the Green-e Energy Certification
Program administered by the Center for Resource
Solutions—worked together to write this purchasing guide.
The guide also includes a glossary of terms commonly used in
the green power field.
Finally, the appendix discusses considerations specific to
federal agencies that buy green power, particularly the pro-
curement regulations that cover the purchase of green power.
Guide to Purchasing Green Power
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Chapter 1
Introduction
Today, the energy sources used to create electricity dif-
fer in many ways, including in their environmental
impacts. In the United States, electricity is most often
generated using fossil or nuclear fuels—forms of
power generation that can have detrimental effects on human
health and the environment through air emissions and other
problems. Despite advances in pollution controls over the
last 30 years, this conventional power generation is still the
nation's single largest source of industrial air pollution and is
a major contributor to greenhouse gas emissions.
Electricity markets now offer cleaner ways of producing
power, however, and give many consumers the ability to
choose how their power is generated. One of these choices is
power from renewable sources, or "green power."
In some parts of the United States, consumers can buy green
power from the provider of their electricity. All consumers
can buy green power in the form of renewable energy cer-
tificates (RECs), which are available nationally regardless of
whether a customer's local electricity provider offers a green
power product.
While no form of electric power generation is completely
benign, electricity generated from renewable resources such
as solar, wind, geothermal, small and low-impact hydropow-
er, and biomass has proved to be environmentally preferable
to electricity generated from conventional sources such as
coal, oil, natural gas, and nuclear. This Guide to Purchasing
Green Power focuses on electricity generated from renewable
resources, both delivered through the grid and generated on-
site. Although renewable energy can also be used for heating
needs or for transportation fuels, this guide does not address
those applications.
According to the U.S. Environmental Protection Agency
(EPA), on average, replacing each kilowatt-hour (kWh) of tra-
ditional power with renewable power avoids the emission of
more than one pound of carbon dioxide. Because of the sheer
quantities of electricity involved nationwide, consumers have
enormous influence to reduce environmental impacts from
conventional power generation. If the typical commercial
building switched to 100 percent renewable electricity, the
use of green power would have the equivalent environmental
impact of avoiding the carbon dioxide emissions of nearly 28
vehicles each year.
A wide range of organizations purchase green power,
including: federal, state, and local governments; universi-
ties; businesses; nonprofit organizations; and individual
consumers. By purchasing green power, these organizations
are helping the environment and meeting their own goals,
such as financial benefits, public relations benefits, and even
national security benefits. In 2008, renewable electricity gen-
eration in the United States (excluding hydropower) equaled
nearly 124 million megawatt-hours (124 billion kilowatt-
hours)—enough to meet the annual electricity needs of
nearly 12 million average U.S. homes.
Many states already require utilities to supply some of their
electricity from renewable sources. These state mandates
(known as "compliance" markets) require a percentage of
the utility's power mix to come from renewable sources, so
that utility customers will "green" their power mix somewhat
without taking any conscious action. Voluntary purchases,
however, are still an important strategy for organizations that
want to buy most or all their power from renewable sources
or want to promote innovative development of green power.
Voluntary green power purchases have played an important
role in driving development of the market (see Figure 1) and
are expected to be an important part of the market for the
foreseeable future.
Introduction
-------
Chapter 1
Figure 1. Comparison of voluntary and compliance markets for renewable energy, 2004-2008
25,000
I Voluntary
20,000 -
15,000 -
10,000 -
5,000
Compliance (new renewables)
2004
2005
2006
2007
2008
Note: "New" renewable resources generally refer to renewable facilities that began operation in 1997 or later.
Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in the United States: A Status
Report (2008 Data). Golden, CO: National Renewable Energy Laboratory.
Leading organizations are finding that using green power
is an effective part of a strategic energy management plan.
Successful energy management plans are based on a "portfo-
lio analysis" that considers options such as energy efficiency,
load management, power purchases, on-site generation, and
non-electric (thermal) energy needs. As with any investment
portfolio, the best mix of these options depends on the orga-
nization's goals, the cost of various alternatives, and external
market conditions.
While voluntary purchases of green power are becoming
more common practice in today's electricity markets, these
markets offer a wide range of choices. This guide is intended
for organizations that have decided to buy green power but
want help in figuring out how to do it, as well as for organi-
zations that are still considering the merits of buying green
power.
The Guide to Purchasing Green Power addresses the following
commonly asked questions:
• What is 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. 19)
How should an organization choose a green power
product? (p. 15)
What are the best ways of buying green power? (p. 18)
What are the steps to installing on-site renewable gen-
eration? (p. 24)
How do I communicate my green power purchase to
stakeholders? (p. 30)
Guide to Purchasing Green Power
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Chapter 2
Green Power Defined
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 tech-
nologies, both electric and thermal. This definition
of green power includes many types of power, from solar
photovoltaic systems to wind turbines to fuel cells for auto-
mobiles.
In this guide, green power refers specifically to electricity
generated from a subset of renewable resources, including
solar, wind, geothermal, biogas, biomass, and low-impact
hydroelectric sources. These electricity sources are derived
from natural resources that replenish themselves over short
periods of time, including the sun, wind, moving water,
organic plant and waste material (biomass), and the Earth's
heat (geothermal).
Note that the terms green power, environmentally preferable,
clean power, and renewable energy may be used in slightly
different ways, which differ primarily according to the vary-
ing 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, Resources for Additional
Information.
Helping Consumers Identify
Green Power
To help consumers more easily identify green power products,
the "Green-e Energy" certification program has coordinated
the development of market-based, consensus definitions for
environmentally preferable renewable electricity and renew-
able energy certificates (RECs). The Green-e Energy program,
administered by the nonprofit Center for Resource Solutions,
certifies and verifies renewable energy products offered in
competitive electricity markets, sold in utility green pricing
programs, and sold in national markets for RECs. Further
details about Green-e Energy certification are available from
the Green-e Web site listed in Chapter 10.
Green Power Defined
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Chapter 3
The Benefits and Costs of Green Power
The Benefits
Green power can offer organizations a variety of
environmental, financial, stakeholder relations,
economic development, and national security
benefits. This Guide is designed to help buyers
navigate the costs, contracting challenges, and public rela-
tions risks.
Environmental
• Reduce environmental impacts. Conventional elec-
tricity generation is a significant source of greenhouse
gas emissions as well as the single largest industrial
source of air pollution in the U.S. The emissions from
conventional electricity generation contribute to a num-
ber of serious environmental problems, including acid
rain, fine particulate pollution, and climate change.
Green power generates less pollution than conventional
power and produces no net increase in greenhouse gas
emissions, helping protect human health and the envi-
ronment.
Financial
• Provide a hedge against risks posed by:
• Electricity price volatility. Purchasing electricity
generated by renewable energy sources may provide
the buyer protection against unstable or rising fossil
fuel prices, for example through long-term, fixed-
price supply contracts directly with developers or
generators. Organizations can also encourage stable
electricity prices by supporting new renewable
power resources on the local grid, thereby diver-
sifying the energy mix with resources that are not
subject to the rise and fall of fuel costs.
• Fuel supply disruptions. On-site renewable gen-
eration can reduce the risk of disruptions in fuel
supplies, like natural gas, resulting from transporta-
tion difficulties or international conflict.
Additional environmental regulation. To address
global climate change and regional air quality
issues, federal and state regulations could effectively
Price Stability of Green Power
Unlike power generated from fossil fuels, some green power
products are not subject to the impact of volatile fuel prices.
For this reason, companies like IBM and Advanced Micro
Devices (AMD) use green power to hedge against energy
cost variability.
In 2001, the energy managers at IBM's Austin, Texas, facility
were able to lock in power rates by signing up for Austin
Energy's GreenChoice® program. With 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,
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.
When the fuel charge increased again in 2004, IBM saved
more than $60,000.
Similarly, AMD saw significant cost savings after its first
purchase of renewable energy in 2000 from Austin Energy.
Shortly after AMD's purchase, natural gas prices soared and
became more costly than the fixed green power premium.
By 2001, AMD saved approximately $100,000 and, in
response, doubled the company's green power purchase for
the following year. In 2009, AMD purchased nearly 74 mil-
lion kilowatt-hours of green power annually, which supplies
100 percent of its Austin facility's energy needs.
increase the price of conventional electricity, making
green power financially more attractive.
Stakeholder Relations
• Meet organizational environmental objectives.
Reducing an organization's environmental impact is
one of the main motivations for buying green power
and is often important to stakeholders. For example,
buying green power can help reduce greenhouse gas
emissions from electricity consumption. If an organi-
zation is interested in creating a third-party certified
environmental management system (e.g., ISO-14001
certification for environmental performance) or is
conducting an organization-wide inventory of its green-
house gas emissions, a program for reducing emissions
will be an important part of this certification process.
Guide to Purchasing Green Power
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Chapter 3
Demonstrate civic leadership. Being among the
first in a community to purchase green power is a dem-
onstration of civic leadership. It makes a statement that
an organization is willing to act on its stated
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, Resources for Additional Information,
for details.
Generate positive publicity. Buying green power
affords an opportunity for and builds on existing public
recognition and public relations activities. Companies
that are in the public eye need to be responsive to
the concerns of environmentally conscious custom-
ers, shareholders, regulators, and other constituents.
Programs promoting green power, such as EPA's Green
Power Partnership or Green-e Marketplace, provide
assistance in reaching broad audiences to convey the
benefits of green power purchases.
Green Power's Role in Overall
Environmental Strategy
A recent survey of corporate participants in the Green-e
Marketplace program indicates that most companies view
their renewable energy purchases as part of a larger com-
mitment to environmental sustainability.
• 75 percent said support of renewable energy was part of
a multi-pronged corporate environmental strategy.
• 70 percent differentiate their company as an environmental
leader by supporting renewable energy.
• 45 percent of respondents indicated that developing an
environmentally friendly brand was very important.
A Web link to the full survey is provided in Chapter 10,
Resources for Additional Information.
Improve employee morale. Progressive action and
leadership on environmental issues like renew-
able energy 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 Collaborative, improving employee
morale was cited as the third most important motiva-
tion 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." Purchasers
of green power can also join their power supplier to
Demonstrating Community
Leadership: City of Bellingham,
Washington
By a unanimous city council vote in mid-2006, Bellingham,
Washington, took a leadership role in promoting renew-
able energy by choosing to purchase 100 percent green
power for all electricity used in city-owned facilities. From
September 2006 through Earth Day 2007, the city part-
nered with the local utility's green power program and a
local nonprofit organization to conduct the "Bellingham
Green Power Community Challenge." The goal of the chal-
lenge was to increase green power purchasing among the
city's residents and businesses to meet at least two percent
of the citywide electric load. Bellingham's results have far
exceeded original challenge goals. To date, the green power
annually purchased by more than 2,680 households, 125
businesses, and five large volume purchasers totals 82.8 mil-
lion kilowatt-hours of renewable energy certificates (RECs)
and represents approximately 12 percent of the community's
total yearly electricity use. The community's purchase resulted
in EPA recognizing Bellingham as the first EPA Green Power
Community in Washington State.
market their products together. In addition, purchas-
ers of products certified by the Center for Resource
Solutions' Green-e Marketplace program can display the
Green-e logo on their product packaging to indicate a
commitment to using 100 percent green power in the
manufacturing of the product. Many companies are also
finding that producing their products with green power
gives them an advantage in selling to their business
customers who are trying to "green" their supply chain.
Economic Development and National
Security
• Stimulate economies. Manufacturing, installing, and
operating renewable resources in the United States
requires a clean energy workforce. By purchasing green
power, an organization can help create new, domestic
jobs. These high-quality, often well-paying, jobs help
grow the local economy. Renewable power facilities can
also increase a local tax base and can provide income
for farmers and rural communities through landowner
lease payments. The renewable energy industry is an
important growth sector that can simultaneously boost
the nation's economy while meeting the nation's energy
challenges.
• Increase fuel diversity. Green power diversifies the
nation's electricity portfolio—a good way to manage
risk—and, because renewable resources are indigenous,
The Benefits and Costs of Green Power
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Chapter 3
green power reduces the country's dependence on
imported fuels.
Reduce infrastructure vulnerability. The distributed
nature of renewable resources allows for the distrib-
uted generation of renewable energy, thus, reducing the
country's reliance on a vulnerable, centralized electric-
ity infrastructure.
Economies of Scale. Most renewable energy technolo-
gies are manufactured on assembly lines, where mass
production can reduce costs. By purchasing green
power, organizations can help build demand, which in
turn could lead to lower production costs and poten-
tially lower prices.
The Costs
Green power can be priced differently than standard power
sources. It has usually been more expensive than conven-
tional electricity sources, largely due to the relative newness
of renewable technologies and their gradual diffusion into
mainstream markets, compared with conventional electricity.
Chapter 6, Procuring Renewable Electricity and Renewable
Energy Certificates, suggests ways of minimizing these costs in
conjunction with a procurement plan. Nonetheless, the cost of
green power is continuing to fall as growing demand drives the
expansion of manufacturing facilities and reduces production
costs. Figure 2 illustrates the levelized costs of renewable and
fossil fuel technologies, showing that several green power tech-
nologies are now cost-competitive with conventional sources.
Figure 2. Levelized cost of new power generation technologies in 2008
200
1
180
160
140
120
100
80
60
40
20
i
I
I
Energy Geothermal Wind Biomass Natural
Efficiency (onshore) Gas
Coal Nuclear Solar PV
a Represents estimated implied cost in 2012 for crystalline PV system
b Represents a leading thin film PV company's targeted implied cost of energy in 2012
Note: Costs have been levelized over the lifetime of the technology and include construction, fuel, and operation and maintenance
costs. The bars represent typical cost ranges at average capacity factors for each technology.
Source: Lazard. February 2009. Levelized Cost of Energy Analysis, Version 3.0.
.
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,
manufacturing capacity and world demand for the technol-
ogy, the availability of subsidies to encourage green power,
and the quantity purchased 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. Since 2000, the average price premium
has dropped at an average annual rate of eight percent (see
Figure 3).
Contracting Challenges
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 might
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,
particularly Chapter 6, Procuring Renewable Electricity
and Renewable Energy Certificates, should help reduce the
contracting challenges faced by new purchasers of green
power. In addition, sample contract templates are publicly
available to help buyers avoid difficulties in signing a green
power contract (see Chapter 10, Resources for Additional
Information).
Public Relations Risk
Some stakeholders might regard the purchase of green
power as a token effort or "greenwashing." Organizations
can improve the credibility of their green power purchase
by buying green power as part of a broader environmen-
tal management program and by working with third-party
organizations for independent auditing, certification,
endorsement, and minimum purchasing benchmarks.
Figure 3. Trends in utility green pricing premiums, 2000-2008
5 2
<_* -*-
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in the
United States: A Status Report (2008 Data). Golden, CO: National Renewable Energy Laboratory.
The Benefits and Costs of Green Power
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Chapter 4
Options for Purchasing Green Power
Green power can be procured several different
ways. The main distinction among the options is
the type of supplier and where the electricity gen-
eration equipment is located: on the electric grid
or at the facility. For electricity delivered over the power grid,
the status of utility restructuring in that state will determine
whether an organization is limited to buying green power
from its local distribution utility or whether it can choose
among competitive power suppliers. Even if the state has no
green power marketers or the utility does not offer a green
power option, an organization can buy renewable energy
certificates (RECs). For on-site green power, the resources
available at that site (e.g., solar, wind, biomass) are the main
factors determining a project's feasibility.
The range of supply options in the market provides consid-
erable flexibility to green power buyers. Organizations are
able to consider factors such as price, specific green power
generation resource (e.g., wind versus solar), ease of procure-
ment, and the location and year of the generating facility
in their purchasing decisions. By considering these issues,
buyers may be able to choose a specific type of green power
product or mix and match green power products to meet
their desired goals.
Renewable Electricity Products
Customers in many states have the ability to purchase a
green power product directly from their electricity provider.
In regulated electricity markets, customers may be able to
buy a green pricing product from their local utility. Green
pricing is an optional service offered by regulated entities to
allow customers to support a greater level of utility invest-
ment in renewable energy by paying a premium on their
electric bill. In competitive electricity markets, customers can
switch electricity service providers if their current provider
does not offer a green pricing product. In this market, the
customer can purchase a green marketing product from a pro-
vider other than their local utility. Again, a green marketing
customer pays a small premium in exchange for electricity
generated from green power resources.
Most renewable electricity products (i.e., green pricing or
green marketing products) are one of three 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
green power to supply a fixed percentage of their
monthly electricity use. In practice, this usually
results in the purchase of blended green and conven-
tional 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
products varies with use and the percentage of green
power chosen.
• Long-term fixed price contracts. Buying a portion of
the output of a renewable energy project in a long-term
contract can help a project developer secure financing,
while giving the end-user a stable electricity contract.
This model has been used with several government
and academic institutions. WRI's Green Power Market
Development Group is exploring this model for com-
mercial users.
Some renewable electricity products require a fixed monthly
fee to support a given amount of renewable generation
capacity. Others require contributing to a green power 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
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, Procuring Renewable Electricity and Renewable
Guide to Purchasing Green Power
-------
Chapter 4
Figure 4. Renewable energy certificate (REC) transaction path in a voluntary green power market
Note: Figure 4 is not intended to represent a comprehensive view of all the possible ways a REC can be traded and used.
Energy Certificates, provides more details about implement-
ing a renewable electricity purchase.
Renewable Energy Certificates
Renewable energy certificates (RECs), also known as "green
tags," "green certificates," and "renewable energy credits,"
are tradable instruments that can be used to meet volun-
tary renewable energy targets as well as to meet compliance
requirements for renewable energy policies. A REC is a cer-
tificate that represents the generation of one megawatt-hour
(MWh) of electricity from an eligible source of renewable
energy. Each REC denotes the underlying generation energy
source, location of the generation, and year of generation
(a.k.a. "vintage"), environmental emissions, and other char-
acteristics associated with the generator. RECs represent a
claim to the environmental attributes associated with renew-
able energy generation, but purchasers should nevertheless
ensure that their contracts are explicit about which envi-
ronmental attributes are conveyed to them. Figure 4 (above)
illustrates the REC transaction path.
RECs may be sold "bundled"—paired by the electric service
provider with grid electricity delivered to the buyer—or
"unbundled" from electricity as a stand-alone product and
paired by the buyer with its grid electricity purchase. RECs
combined with plain grid electricity are functionally equiva-
lent to green power purchases from a local utility, no matter
where the REC may be sourced. Purchasers of RECs may
make claims about their purchase of green power similar to
purchasers of renewable electricity products.
Because RECs are not tied to the physical delivery of elec-
trons, they allow organizations to purchase green power from
10
Options for Purchasing Green Power
-------
Chapter 4
suppliers other than their local electricity provider. RECs
help overcome a major barrier to renewable facility develop-
ment—the fact that the best renewable resources may not be
located close to population centers. The sale of RECs allows
these more remote facilities to benefit from support for green
power.
Unlike electricity, RECs do not need to be scheduled on a
transmission system, and they can be used at a different time
than the moment of generation. Certificate tracking systems
have been established in different states or regions to issue
and record the exchange of RECs, making REC markets even
more accessible.
Customers do not need to switch from their current elec-
tricity supplier to purchase RECs, and they can buy RECs
based on a fixed amount of electricity rather than on their
daily or monthly load profile. Because RECs are indepen-
dent of the customer's electricity use, load profile, and the
delivery of electricity, they provide greater flexibility than
purchasing bundled RECs and electricity from a utility.
While RECs offer increased contracting convenience, they
do not provide the same protection against price volatility
as long-term contracts.
The price for voluntary RECs can be lower than the premi-
ums for renewable electricity products for several reasons: 1)
RECs have no geographic constraints and therefore can pro-
vide access to the least expensive renewable resources;
2) the supplier does not have to deliver the power to the REC
purchaser with the associated transmission and distribution
costs; 3) the supplier is not responsible for meeting the pur-
chaser's electricity needs on a real-time basis.; and 4) REC
prices reflect greater competition because RECs are fungible
in a voluntary market. To the extent that electricity providers
are also sourcing their green power products from purchased
RECs, however, the premium that they would charge might
not differ greatly from the cost of the unbundled RECs that
organizations can buy.
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 or soon-to-be-built
renewable electricity facility. The advantage of this approach
is that it promotes new renewable facilities by providing
up-front financial assistance for their development and con-
struction. In return, the purchaser receives the RECs as they
are generated over an extended period of years. Nevertheless,
even though they are paying upfront for future RECs, buyers
cannot make environmental claims against those RECs until
they are generated. A risk of this approach is that the facility
might not be constructed or could be destroyed by a natural
disaster after construction, and buyers should investigate
what remedy the seller proposes in such an event. As with all
products, independent 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 pro-
curement of green power thus eliminating the need to buy
green power for different facilities through multiple suppliers.
Chapter 6, Procuring Renewable Electricity and Renewable
Energy Certificates, provides more details about purchasing
RECs.
Business and organization purchases of different green power
product types is shown in Figure 5, but on-site renewable
generation is not included because equivalent data are not
available.
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
Figure 5. Nonresidential green power sales by product type, 2008 (millions of kWh)
Green Pricing
2,100
Green Marketing
1,200
REC Markets
15,400
Total
1 8,700
Note: Nonresidential customers refer to business and institutional customers. Data for on-site renewable generation are not available.
Source: Bird, Lori, Claire Kreycik, and Barry Friedman. 2009. Green Power Marketing in the United States: A Status Report (2008
Data). Golden, CO: National Renewable Energy Laboratory.
Guide to Purchasing Green Power
11
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Chapter 4
price volatility, as well as a visible demonstration of envi-
ronmental commitment. It is important to note that selling
RECs from an on-site facility negates the system owner's
claim to using a corresponding amount of renewable electric-
ity generated on site because the REC buyer is buying that
claim specifically and contractually. In order to claim the
zero greenhouse gas emissions from electricity generated
on-site, the RECs would need to be retired and not sold to a
third party. In many states, excess 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 can improve the finan-
cial return for on-site renewable power systems, although net
metering is often limited to small installations. For example,
the state of California limits on-site generation systems to
1 megawatt (MW) (10 MW for up to three biogas digesters)
and the aggregated on-site systems' capacity may not produce
more than 2.5 percent of a utility's peak demand.
On-site renewable energy technologies for power generation
include photovoltaic panels, wind turbines, fuel cells, and
biomass combustion. Large facilities sited near a munici-
pal 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. Solar systems can be configured to almost any
size from a few kilowatts up to several megawatts.
On-site photovoltaic (PV) systems may be situated on
schools, homes, community facilities, and commer-
cial buildings. They can be integrated into a building,
displacing other building material costs, such as for
roofing shingles or car park shading.
Wind. Wind turbines vary in size. A typical small
unit provides 100 kilowatt (KW) or less, whereas
large turbines range from 500 kW to more than 3
MW. On-site applications 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 1 acre
of land per turbine and wind speeds that average 15
mph at a 150-foot height. In addition, placing turbines
in urban areas is inadvisable because nearby buildings
may create wind turbulence that can disrupt the tur-
bines' performance.
• Landfill and sewage methane gas. Methane gas
derived from landfills or sewage treatment plants can
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 using an internal combustion engine, gas
turbine (depending on the quality and quantity of the
On-site Generation: BMW
Manufacturing Company
Automaker BMW pipes methane gas 9.5 miles from a landfill
to serve the electric and thermal needs of its manufactur-
ing facility in Greer, South Carolina. Rather than invest in
new internal combustion engines to generate electricity, in
2003 BMW converted four turbines that previously ran on
purchased natural gas. In 2009, BMW replaced the original
four turbines with two new highly efficient turbines that will
increase the electrical output from 14 percent to almost 30
percent. By recovering the waste heat from the turbines, the
11-megawatt combined heat and power project satisfies
more than 60 percent of the facility's thermal needs, as well
as nearly 20 percent of its electricity use. To date, the project
has saved the automaker an average of more than $5 million
each year in energy costs. The new turbines installed in 2009
should return an additional average annual cost savings of
up to $2 million. With the success of its landfill gas project,
the facility is exploring on-site wind and has completed a
study of the site's wind speed and direction. For more on-
site examples, see Chapter 10, Resources for Additional
Information.
gas), direct combustion boiler and steam turbine gen-
erator set, microturbine unit, or other power conversion
technologies. 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 bio-
mass 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.
In this era of power reliability problems and national secu-
rity concerns, domestic, on-site renewable generation offers
important advantages over central-station and fossil-fueled
power plants. Moreover, on-site generation can be designed
to provide 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 indepen-
dently of the power grid is a great advantage, particularly at
remote facilities. Because renewable generation technologies
can be modular and used on a small scale, the on-site gen-
12
Options for Purchasing Green Power
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Chapter 4
eration system can be designed to enhance the redundancy
and diversity of a facility's energy supply.
On-site renewable generation typically has higher capital costs
and lower operating costs compared with installing fossil-
fueled generation. Although these costs can 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 sustain-
ing a commitment to renewable power easier. Additionally,
there are new financing models for on-site generation being
developed to lower the upfront capital investment, such as the
solar power purchase agreement (SPPA).
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
interconnection. Interconnection rules designed for large
generators often are unnecessarily burdensome for small
generators. Increasingly, however, state interconnection rules
are being standardized and simplified for smaller genera-
tors. In addition, national standards have been issued by the
Federal Energy Regulatory Commission (FERC) that may
ease interconnection in special cases. Chapter 7, Planning an
On-site Renewable Generation Project, provides more details
about procuring an on-site renewable generation system.
Customers considering on-site generation should check with
their local utility or with the state utility commission about
interconnection rules. Chapter 10, Resources for Additional
Information, provides more sources of information about
utility interconnection.
Guide to Purchasing Green Power
13
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Chapter 5
Steps to Purchasing Green Power
T
o buy green power, an organization first should deter-
mine what green power products will help fulfill its
electricity needs and decide how to procure those
products. Figure 6 illustrates the steps in this process.
Setting Goals
Figure 6. Steps to a successful green power project
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 (renewable energy cer-
tificates [RECs] and utility-supplied) and on-site renewable
generation. These steps are explained in later chapters of
this guide.
The first step in any type of green power purchase is to set
goals about what the objectives are for purchasing green
power, considering the following questions at a minimum:
• Why is the organization considering green power?
What does the organization hope to get from it?
What selection criteria are important to the
organization?
Are independent certification and verification important
to the organization?
These questions are best considered as part of the organiza-
tion's overall energy or environmental management process.
Such a process is an ongoing effort to improve the energy
and environmental performance of the organization, usually
driven by goals set by the organization's top-level leaders.
The goals for a specific purchase of green power then flow
from, and are greatly informed by, these overall goals.
Identifying Key Decision-
Makers
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, environ-
mental health and safety, legal, corporate relations, and/or
Re-assess Green
Power Purchase
Setting Goals (5)
Identifying Key Decision-Makers (5)
Gathering Energy Data (5)
T
Choosing Green Power Options (5)
Renewable RECs
Electricity
On-site Renewable
Generation
Developing
Screening Criteria (6)
Screening the
Technologies (7)
Collecting Product
Information (6)
Obtaining Resources
and Assistance (7)
Creating a Creating a
Procurement Plan (6) Project Plan (7)
;
:
Anticipating
Possible Barriers (7)
•
Installing and
Operating an On-site
Renewable System (7)
,
Capturing the Benefits (8)
Evaluating the Purchase (5)
(Indicates Corresponding Chapter)
marketing departments. All of their interests and concerns
must be addressed early in the planning process. Experience
has demonstrated that not doing so often leads to disagree-
ments later in the process. Because buying green power is
ultimately a financial decision, it is very important to have
14
Steps to Purchasing Green Power
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Chapter 5
the chief financial officer involved in and supportive of the
decision. In addition, other departments, such as market-
ing or environment, health, and safety, may also contribute
funds to help pay for green power.
Designating a contact person who can draw on expertise
from throughout the organization is an important step. The
departments 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 many cases, the greatest advocate of buying green
power is an executive such as a chief executive officer or
president. With this high-level support, buying and promot-
ing green power is much easier. Some organizations involve
their employees (or students, in the case of educational insti-
tutions) in selecting the green power products.
Gathering Energy Data
The organization considering green power should take an
inventory of its energy use, including electricity and ther-
mal. Its annual electricity use can be calculated from the
utility bills for each facility or business unit and for the
entire organization. These data will help: 1) compare the
organization's energy performance against peer facilities'
energy performance and understand energy use patterns and
trends; 2) determine how much green power to buy; and,
3) evaluate the environmental 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. Each organization should study
its consumption data over the past year before specifying its
requirements in order to have a complete and accurate pic-
ture of energy use. Outside consultants 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, and combined heat and power. The more
an organization's energy requirements can be reduced, the
less green power it will need to buy to achieve a given objec-
tive, which in turn makes green power more affordable.
Some organizations have saved enough money from energy
efficiency upgrades to enable them to pay for their green
power purchases.
Many resources are available to help improve the energy
efficiency 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
buildings. The ENERGY STAR Web site offers simple energy-saving tips and a directory of ener-
gy services companies to provide additional assistance, such
as a facility energy audit.
Calculating an organization's annual electricity use can deter-
mine the quantity of emissions associated with that use and
help estimate the emissions that could be prevented by buy-
ing green power. EPA offers an online tool to help estimate
emissions from an organization's current conventional elec-
tricity use at .
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 typically requires
an up-front investment (as part of either a financed project or
a capital appropriation), but the reduction in the consump-
tion of conventional energy can last for as many as 30 years.
There are new financing models being developed to help
overcome the upfront financial barriers to on-site genera-
tion. These models are discussed in more detail in Chapter 7,
Planning an On-site Renewable Generation Project.
Renewable electricity purchases and RECs usually 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 that wants to manage fuel price
risk might be more interested in buying fixed-price renew-
able electricity. An organization that finds the reliability of its
power supply to be most important might 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 electricity needs and purchase
RECs to match the remainder of its electricity use. Likewise,
organizations with facilities in multiple locations must deter-
mine whether to procure green power from one provider for
all sites, or whether to procure green power from multiple
providers based on unique options that might be available to
an individual site. Organizations with facilities in multiple
locations must also select the appropriate green power prod-
uct for each site.
The green power options available to an organization are
determined partly by the electricity market structure in the
Guide to Purchasing Green Power
15
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Chapter 5
Using Energy Efficiency Savings
to Purchase Green Power:
University of Pennsylvania
The University of Pennsylvania is funding its sizeable wind
power purchase with savings achieved through energy con-
servation. Over the past few years, the university reduced
peak electricity demand by 15 percent. This reduction enabled
the university to purchase nearly 193 million kilowatt-hours
of wind-generated renewable energy certificates (RECs), an
amount equivalent to 46 percent of its total campus electric-
ity use. Penn's long-term commitment to buying green power
helps support development of new wind generation facilities,
including a 12-turbine, 20-megawatt Pennsylvania wind farm.
state in which the facility is located. Each state has different
rules governing power marketers, and the level of competi-
tion varies among the states. Large electricity purchasers
might be able to work with their local utility or electricity
provider to tailor a product to meet their needs.
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.
Finding Green Power Suppliers
• Organizations with facilities in several states should use a
national locator such as EPA's Green Power Locator or the Green-e
Energy "Find Renewable Energy" locator . The latter is also useful for locating certified products.
• Many state governments, often the public utilities commission,
maintain a list of power marketers offering green power
products in the state, especially if state electricity markets
have been restructured.
• 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 Chapter 10 for more resources.
When considering green power options, it is useful to
consider the motivations of other green power purchas-
ers. A 2008 survey of corporations by the World Resources
Institute (WRI) and the Climate Group found that the top
criteria against which companies evaluate low-carbon tech-
nology projects include:
• Financial metrics. The return on investment (ROI) of
projects is of paramount importance.
Marketing value. The ability of projects to improve
a company's brand value or image is a key factor in
decision-making.
Carbon dioxide (CO2) benefit. The extent to which
projects can help companies reach their emission
reduction goals is also a factor they considered.
The key conclusion from the WRI-Climate Group survey
is that low-carbon technology projects must be able to
compete financially with non-renewable related projects in
order to be funded.
It is also important to anticipate barriers to making a pur-
chase, so that the process can be structured to overcome
these barriers. The same WRI-Climate Group survey found
that the most common barriers to wider investment and
greater deployment of low-carbon technologies include:
Cost of the technology.
Insufficient financial performance.
Availability of financing.
Lack of staff capacity and knowledge.
• Inadequate baseline energy data against which to dem-
onstrate improved performance.
Lack of a streamlined decision-making process.
Evaluating the Purchase
Once the green power purchase has been implemented, it is
important to collect information and evaluate how well the
purchase achieved the purchase's preliminary goals. Areas of
evaluation could include:
How well the procurement process worked.
Whether the vendors delivered what was expected.
Whether the green power purchase is providing protec-
tion against rising fossil fuel prices.
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Steps to Purchasing Green Power
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Chapter 5
How well the organization promoted its green power Additional evaluation factors apply for on-site generation
commitment. systems, such as how much energy the system is producing
(both initially and over time), how the system operation and
How well the organization educated employees about maintenance costs compare to expected, and whether output
the green power commitment. is being appropriately reported to tracking systems for the
issuance of RECs that the owner will use to substantiate its
Whether the green power purchase is helping the orga- renewable electricity use claims.
nization meet its corporate or institutional goals related
to environmental improvement and sustainability.
Guide to Purchasing Green Power 17
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Chapter 6
Procuring Renewable Electricity
and Renewable Energy Certificates
To select the green power supplier and the product, it
is helpful to develop specific criteria for judging the
alternatives. These criteria can be ranked, keeping in
mind the goals identified early in the process when
the project team was assembled.
Developing Criteria for
Screening Suppliers and
Products
The following criteria might be helpful when screening sup-
pliers and products:
• Reputation. A supplier's reputation is influenced by
factors such as how well it honors its commitments,
how easy it is to work with, its list of clients, 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
might have information about the supplier.
• Financial strength and credit. To research the finan-
cial health of a power supplier, look at its Web site and
perhaps its annual report, Securities and Exchange
Commission filings, and bond ratings.
• Location. If buying green power from a local supplier
is important, call the supplier and find out where its
renewable generation is located. Public utility com-
missions' 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 and types of resources. 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.
• Environmental performance. Assessing a sup-
plier's environmental performance can be useful.
Organizations should review the supplier's annual
financial or environmental report, examine its other
electricity products, and review its other business
activities.
For renewable electricity products, consider the following
additional criteria:
• Price. When considering price, organizations should
make sure they are comparing apples to apples. Prices
might reflect different types of products, so it is essen-
tial that organizations understand how products under
consideration might differ. For example, renewable
electricity products might quote total price per kilowatt-
hour for electricity including the green attributes, which
can be compared to the standard electricity price, but
other products, such as renewable energy certificates
(RECs) and many utility green pricing products, quote
only the incremental cost of green power, which must
be added to standard electricity rates. Furthermore,
prices might be fixed or escalate over time, or can vary
according to a price index such as the wholesale price
of electricity. Finally, the purchase of some utility green
power products might offer an exemption from variable
fuel charges or environmental taxes, which should be
factored into the ultimate price.
• 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 bundled products, an organization can still calculate
the percentage of its electricity use served by renewable
power.
• Percentage of new or incremental renewable sources.
Many experts argue that only new generation provides
incremental environmental benefits. "New" renew-
able resources generally refer to renewable facilities
that began operation in 1997 or later, which is when
the voluntary market for green power began to grow.
Besides the direct impact of purchases from new renew-
able sources, these purchases also help create the
demand necessary for constructing additional renew-
able resources.
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Procuring Renewable Electricity and Renewable Energy Certificates
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Chapter 6
In states that have adopted a renewable portfolio stan-
dard (RPS), electricity providers are required to include
a minimum percentage of renewable electricity in
their standard product offering. Renewable electric-
ity products create additional environmental benefits
only if the power purchased is not already part of the
provider's minimal RPS requirement. In other words,
an organization should purchase a renewable electricity
product that is not already being used to satisfy a RPS
mandate or goal imposed on a utility nor is the renew-
able electricity product included in the utility's standard
electricity service.
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. Wind, solar, and geothermal power
usually are the most environmentally preferable energy
sources. Each is renewable and nonpolluting, with
limited impact on the land or local habitats. Certain
environmental groups regard some types of hydropow-
er, biomass, and municipal solid waste as less desirable.
Hydropower dams may drastically alter river habitats
and fish populations; biomass facilities may emit sig-
nificant quantities of smog-forming pollutants; and
burning municipal solid waste may release heavy met-
als and other toxins into the environment. Municipal
solid waste may also include nonrenewable materials
derived from fossil fuels, such as tires and plastics,
which when burned release carbon dioxide into the air.
It also is important to check the environmental char-
acteristics of any nonrenewable generation resources,
as they will contribute to the overall environmental
impact of the power purchased.
Renewable energy resources also have different asso-
ciated costs. For instance, a green power product
generated from a resource that is scarce in one part of
the country will be more expensive than purchasing the
same resource-derived product from another part of the
country.
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 might also offer greater price stability as
well as provide better support to new renewable energy
projects. When determining the value of price stability,
be aware of "typical" market fluctuations in power pric-
es and how the price of renewable electricity can vary.
Finally, a contract may include options for renewal,
which can offer flexibility in the future. Before entering
The Role of Product Certification
One of the major concerns with buying green power is
ensuring that purchasers get what they pay for. It can be
difficult to substantiate claims made about the quantity and
characteristics of the product purchased. Also, it is important
to ensure that two organizations are not claiming to have
purchased 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 indepen-
dent 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 sell-
ers have generated or purchased enough renewable energy
to match their sales commitments. Visit
for additional information about third-party certification and
verification.
into a long-term contract, however, buyers should take
into consideration potential policy changes (most nota-
bly, a carbon cap-and-trade program) that impact future
environmental claims for purchasing green power.
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 envi-
ronmental value. By purchasing a product that has
met specific environmental and consumer protection
guidelines adopted by the certifying organization, a
purchaser will be better positioned to address stake-
holder questions about purchase quality and credibility.
Visit for more information about
certification and verification.
Location of generation. In order to support the local
economy and to contribute local environmental ben-
efits, some organizations may prefer local or in-state
renewable generation. Some renewable electricity
products, however, use resources located out-of-state,
and renewable energy certificates may be based on gen-
eration located outside of the purchaser's region. For
example, purchasing RECs from a state in which fossil
fuel comprises more of the electric generation mix may
provide greater environmental benefit than purchas-
ing RECs from a state in which renewable electricity
Guide to Purchasing Green Power
19
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Chapter 6
generation is plentiful; RECs, therefore, do not neces-
sarily represent a uniform set of environmental impacts
or attributes. As a reporting convention, EPA allows
Climate Leader Partners to claim emission reductions
based on the regional average emissions rate for where
the REC was generated. Regional average emissions
rates can be found by visiting EPAs Emissions and
Generation Resource Integrated Database (eGRID) at
. Further guidance can be found
in Chapter 10, Resources for Additional Information.
Specific generation facility. Some green power pro-
viders generate their power at a specific site, such as
a nearby wind farm, rather than offering green power
from a mix of different resources. These products, such
as the annual output of one particular wind turbine,
are sometimes preferred by customers because such
products offer a closer sense of connection between
a purchase and a specific environmentally beneficial
facility.
Collecting Product Information
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
suppliers 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 ingredi-
ents—that provides information in a standard format and
makes product comparisons easier. This information is gen-
erally available from the state's public utility commission.
Another source of public information is third-party certifiers,
such as Green-e Energy, which can provide information
about the products they have certified to meet minimum
environmental standards.
The next step is estimating the cost of green power for the
organization and calculating the cost/benefit ratio. For help
finding cost data, contact one of the organizations that spon-
sored this guidebook (listed in Chapter 10, Resources for
Additional Information).
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 orga-
nization 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 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
overcome resistance to green power within the organization.
Some organizations have outdated perceptions of the reli-
ability of renewable energy technologies, misunderstandings
about using a variable 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 a
fixed quantity, a fixed amount of money, 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
The procurement plan should discuss cost. Cost has tradi-
tionally been the primary concern with green power, but
there are an increasing number of financing models for pur-
chasing green power that result in a cost benefit over the
long-run. Negotiating the right contract can have a big effect
on the financial costs and benefits of buying green power.
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Chapter 6
Price Hedging With Renewables
Southern New Hampshire University (SNHU) has found
an innovative financial arrangement to stabilize its energy
budget while also reducing its carbon emissions. The uni-
versity has entered into a 15-year renewable energy hedge
agreement with wind farm owner, Iberdrola Renewables.
The hedge is structured as a contract-for-differences financial
swap under which the parties agreed to a strike price and
duration for the agreement. SNHU continues to buy power
from its current supplier, and Iberdrola Renewables continues
to sell into the local electricity spot market. The energy sales
are then analyzed. If the sales income received by Iberdrola
Renewables is greater than the strike price, Iberdrola
Renewables pays SNHU the difference between the income
and strike price. If the income is less that the strike price, then
SNHU pays Iberdrola Renewables the difference. The hedge
has stabilized the cost of the 15-million kWh of electricity
used by the university annually. If energy costs increase even
modestly over the 15 years, SNHU could save an average
of $1.2 million per year for both electricity and natural gas.
Several strategies are available to help minimize and manage
the extra cost of green power:
• 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.
• Buy green power for only part of the organization's
electricity use. Green power does not have to be
used for all electricity consumption. For example, the
organization might buy green power for just 5 or 10
percent of its electricity use. Buying 10 percent green
power may add less than 1 percent to the organization's
electricity bill. Alternatively, some renewable electricity
products cost less because they contain less than 100
percent green power or offer lower-percentage options.
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) might offer greater flexibility in the
future but also might cost more. But a longer contract
(e.g., 10+ years) 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 par-
ticular situation and products available.
Use a contract for difference. A contract for difference
(CFD) is a financial agreement that allows renewable
power suppliers and purchasers to lock in stable power
prices and revenues by agreeing to pay the difference
between the actual power price and an agreed-upon
benchmark or "strike" price. CFDs have tended to
be used most often for government and college and
university customers. Consult with your auditor to
understand any associated accounting issues. To learn
more about the CFD model, visit .
• Offset the cost with savings from energy efficiency.
Reducing the total amount of electricity purchased
helps make green power more affordable. When review-
ing 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.
• Use savings from competitive choices. Competitive
choices of either green power or commodity electric-
ity can 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 emis-
sions 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.
Procurement Methods
Organizations can purchase green power in several different
ways, depending on the options available as well as the orga-
nization's procurement 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 the Appendix.
Guide to Purchasing Green Power
21
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Chapter 6
Call several sellers. An organization can keep the
procurement process relatively simple by calling a few
green power providers—either REC marketers, utilities,
or other electricity providers that may be available to
them. An off-the-shelf product may meet its needs. If
the organization wants something different, it can ask
for an informal proposal. After a discussion, the orga-
nization may be ready to negotiate directly with one
of the suppliers about product definition, certification,
price, and terms. Or if the organization is planning a
large purchase, the suppliers might be willing to tailor
something to its needs.
Negotiate with the utility. Buying power is simple,
though the choices are fewer, if the organization is
served by a single utility in a regulated market. 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 encourage 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 cur-
rently certified.
Request proposals. Large companies and public insti-
tutions, 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 might 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. RFPs can also be more formal, casting a wider
net through a broadly advertised solicitation. The latter
requires more effort to prepare and evaluate responses.
Government agencies must follow the procurement
rules governing their agency.
A two-step process is possible as well, in which the
organization first issues a request for information (RFI)
and, based on the responses, sends a more detailed RFP
to those suppliers that meet its general qualifications.
The RFI would be broadcast to a larger audience, not
only to find out who meets the organization's qualifica-
tions, but also to gauge the amount of interest.
For large purchases, RFPs may be addressed to renew-
able power generators (wholesale) as well as retail
suppliers. Buying directly from generators might lower
the cost but probably will require longer-term purchase
commitment. Buyers will still need to work with a
retail supplier to integrate the wholesale contracts, so
active engagement with your preferred retail supplier
will be important. In addition, for RECs there have
been instances where market-setting purchasers using
the RFP process have yielded higher prices in the short
term due to the large purchase size. In this case, buy-
ers planning to make a large purchase may elect not to
issue a public RFP but rather contact specific suppliers
individually in the market.
EPA's Green Power Partnership offers assistance to
partners putting together a green power purchase RFP,
and the Department of Energy's (DOE's) Federal Energy
Management Program (FEMP) provides the same ser-
vice for federal agencies. For RECs, the DOE Green
Power Network maintains an online listing of green
power RFPs that can be used as models at .
Use an electronic auction. Electronic auction plat-
forms (also known as electronic procurement or
"e-procurement") allow for real-time transparent bid-
ding and "reverse auctions" to drive bid prices lower
than might be achieved otherwise. Initially used in the
1990s by pools of buyers in retail markets that allowed
for direct access competition, these electronic auction
mechanisms are being tried with varying degrees of
success by utilities and large customers and can offer a
new forum for renewable energy transactions.
Online auctions can provide significant price transpar-
ency and control that the paper-based RFP process does
not always provide. With the reverse auction approach,
price quotes are delivered in real-time via a Web-based
Using an RFP versus an RFI
An RFI may be a productive way to engage suppliers about
innovative, new purchasing strategies. Suppliers might not
want to respond to an RFP if the request is not "cookie cutter,"
as they know there would have to be significant negotiations
once the winner is selected that could require changes to
their costs while being locked into a pricing commitment.
To ensure broad participation and validate interest from
the market about new purchasing ideas, an RFI can provide
important information to purchasers. Based on the results of
the RFI, you can either proceed directly to negotiating with a
particular vendor or refine your procurement goals in order
to issue a detailed RFP that will have a better chance of mul-
tiple qualified bidders.
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Procuring Renewable Electricity and Renewable Energy Certificates
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Chapter 6
platform, which results in dynamic bidding and helps
achieve rapid downward price pressure that is not nor-
mally achieved using conventional paper-based bidding
and procurement. Buyers (currently, utilities) can either
award contracts to the suppliers who bid the absolute
lowest price, or those that best meet the buyer's spe-
cific, pre-established terms for quality, capacity, or other
value-adding capabilities.
Special Considerations for RECs
RECs can be bought from marketers or sometimes directly
from renewable energy generators. Several environmental
brokers are active in REC markets, offering another approach
to procurement that is increasingly being used by large pur-
chasers. Brokers do not own the certificates but rely on their
knowledge of the market to connect buyers and sellers for a
fee. They can help negotiate deals that take into account an
organization's unique interests.
REC Tracking Systems
A tracking system is an electronic database that is used to
track the ownership of RECs or MWh of electricity, much like
an online bank account. A tracking system issues a uniquely
numbered certificate for each MWh of electricity generated
by a generation facility registered in the system, tracks the
ownership of certificates as they are traded, and retires the
certificates once they are used or claims are made based on
their attributes or characteristics. Because each MWh has a
unique identification number and can only be in one owner's
account at any time, this reduces ownership disputes and the
potential for double counting.
A tracking system can be used to verify compliance with a
RPS, to help create environmental disclosure labels, and to
substantiate voluntary green power or environmental claims.
Tracking systems are not substitutes for product certification
and verification, as tracking systems only monitor wholesale
transactions; individual retail green power customers do
not generally hold accounts in tracking systems unless they
make very large purchases. See Chapter 10, Resources for
Additional Information, for details.
Reducing the Cost of Green
Power: State of Connecticut
In late 2007, the state of Connecticut successfully used Web-
based reverse auctions to secure electric supply contracts
totaling 909 million kilowatt-hours between November
2007 and June 2009. The supply contracts include more
than 22 percent electricity from green power sources, which
was a prerequisite of the state. The online auction allowed
Connecticut and the energy suppliers to participate in real-
time with full price visibility, which heightened competition
among suppliers and allowed the state to lock in the lowest
price. Under these contracts for electric supply reported sav-
ings through December 2008 are $19.5 million, as compared
to the price that would have been paid for standard service.
When buying RECs, organizations should make sure that
the RECs they buy have not been double-sold and claimed
by another party. For example, voluntary purchases of RECs
should not also be counted by utilities for compliance with
regulatory requirements such as renewable portfolio standards
(RPSs), and RECs used to comply with such requirements
should not be sold into voluntary markets. If they are dou-
ble-counted, the voluntary purchaser would not create any
benefits over and above what is already required by public
policy. Utilizing tracking systems and third-party certifiers
can help ensure that RECs are not claimed by more than one
party. To avoid potential double claims on environmental
benefits, contracts for RECs should be explicit about what
environmental characteristics are included with the sale.
Sometimes RECs are incorrectly referred to as carbon offsets,
but RECs and offsets are not the same. RECs are tradable
instruments, expressed in terms of a unit of electric genera-
tion (1 megawatt-hour [MWh]), that represents the source's
resource type, facility location, direct emissions, and genera-
tion date, among other characteristics. Offsets are expressed
in tons of emission reduction and may come from a variety
of project types not related to power generation. In volun-
tary markets to date, some renewable energy projects have
qualified as sources for offsets; however, the associated
environmental attributes from a green power project that are
used to generate a REC cannot also be claimed for offset pur-
poses. See Chapter 10, Resources for Additional Information,
for details.
Guide to Purchasing Green Power
23
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Chapter 7
Planning an On-site Renewable Generation
Project
Depending on the size of the system, on-site genera-
tion projects tend to take more steps than do other
green power purchases because they can 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 to get an on-site
project up and running. Due to the complexity of building
on-site renewable energy projects, organizations are increas-
ingly turning to power purchase agreements (PPAs). With
PPAs, a third-party project developer coordinates the build-
ing and maintenance of an organization's on-site system. The
organization needs to purchase only the power output. The
following steps, along with the information listed in Chapter
10, Resources for Additional Information, can help. In the
end, the on-site renewable system—whether self-financed or
third-party financed—will generate power and other benefits
for many years to come.
Screening the Technologies
Based on work done in the first steps of the process of pur-
chasing green power (Chapter 5, Steps to Purchasing Green
Power), the organization 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-effective-
ness of the organization'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 net present value.
The analysis should account for state and federal financial
incentives, interconnection rules (e.g., insurance require-
ments or standby charges), and net metering laws that might
apply to the on-site generation facility. Each renewable tech-
nology has unique characteristics that make it more or less
appropriate for a given situation. The evaluation criteria need
to be defined in a way that objectively compare the various
technologies. The result of this screening will be a specific
technology that best 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 determined by the load to be served
by the system, the organization's capital budget, or physical
constraints at the site (such as rooftop area for photovoltaic
[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 capac-
ity over time. The modular nature of PV technology makes
it especially suited to this approach, although wind can
also be installed in larger modules. A contractor or utility
representative can help choose the right size system, or the
organization can also use one of the software tools listed in
Chapter 10, Resources for Additional Information.
Most on-site systems will be grid-connected, so that when
the on-site renewable generation is less than the organiza-
tion's electricity demand, remaining power needs can be met
by the utility grid. The economic analysis will be affected if
the organization wants to include energy storage (e.g., bat-
teries, capacitors, flywheels) or backup generation to provide
power when the utility grid is down. This is a separate deci-
sion, however, from the decision to install on-site generation.
If backup power is included, the additional cost of the back-
up system and electrical equipment for switching from utility
to backup power must be considered. The economic analysis
will also be affected 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).
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Planning an On-site Renewable Generation Project
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Chapter 7
Obtaining Resources and
Assistance
If the organization chooses to own and operate an on-site
power system, it has much to learn, but excellent informa-
tion resources are available. Before making a purchase, the
organization's project team should study the technology
and understand its objectives and what questions to ask,
in order to be able to write a procurement specification. At
this point, the organization should seriously consider seek-
ing 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, the Department of Energy's Federal
Energy Management Program (FEMP) offers technical assis-
tance to federal agencies.
The financial details are usually what make or break an on-
site project, so the project team should collect information
about incentives and financing options (including PPAs) that
could make the project more cost-effective. Some state pro-
grams might also require that only certified installers install
systems. Many states offer financial incentives specifically
for customers that install qualified renewable generation sys-
tems. These incentives may take the form of direct payments
(rebates), competitive solicitations, consumer financing, or
lower taxes (either sales or property tax exemptions). In addi-
tion, the federal government offers an investment tax credit
for solar and geothermal energy systems, among other incen-
tives for renewable energy. (For more information, visit the
Database of State Incentives for Renewable Energy at .) The state energy office, local utility, or renew-
Using Incentives to Finance an
On-Site Generation System:
Sierra Nevada Brewing Company
The Sierra Nevada Brewing Company installed a 1.2-MW
DC fuel cell system at its brewery in Chico, California. The
fuel cell is powered by natural gas and supplemented by
digester gas from the treatment of brewing wastewater; its
waste heat is harvested in the form of steam and used for the
brewing process as well as other heating needs. The 1.2 MW
of electricity, combined with 1.9 MW solar panels, supplies
about 90 percent of the brewery's overall power require-
ments. The capital cost of the fuel cell system was funded
by a $2.4-million incentive from the local utility (Pacific Gas
and Electric Company), $1 million in financial support from
the U.S. Department of Defense Climate Change Fuel Cell
Program, and a 30 percent federal investment tax credit.
These incentives covered about two-thirds of the upfront
capital cost for the system.
able 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.
Creating a Project Plan
Once the organization has decided on a specific generation
technology, it is time to conduct a detailed feasibility study.
This study will quantify all the costs and benefits of the
project to evaluate its cost-effectiveness. The study should be
based on inputs that are as specific as possible to the organi-
zation'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 require-
ments of the applicable incentive programs.
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 oper-
ate its own generation equipment. In some circumstances,
though, it can enter into a PPA to buy the electricity gener-
ated 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 pur-
chased only from a qualified utility. Moreover, it is important
to consider how the choice of who owns the system will
affect the availability of tax credits and incentives (for
instance, non-taxable entities are not eligible for tax credits).
An organization can handle the procurement options for on-
site generation in the following ways:
• 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
Guide to Purchasing Green Power
25
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Chapter 7
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 experi-
ence with renewable energy systems, it runs the risk of
ending up with a poorly performing system.
Hire a qualified contractor for a turnkey system. An
organization probably will use a request for proposal
(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 instal-
lation, and to commission the system. There are some
companies (particularly in the PV industry) that are
vertically integrated, from manufacturing to design and
installation to operations and maintenance. Before hir-
ing a contractor, an organization should check with the
state government to see if contractors must be licensed
to install an on-site system.
Hire an energy services company (ESCO). The ESCO
will be responsible for design, installation, mainte-
nance, and financing. This arrangement differs from
a turnkey project in that ESCOs typically work under
performance contracts, 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 electricity 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.
Host an independently owned system via a PPA.
When considering on-site green power, some compa-
nies decide not to install solar PV systems because of
the high capital investment, maintenance costs, and
financial 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, with no up-
front cost. This approach is known as a power purchase
agreement (PPA), and it can greatly simplify the process
of installing on-site renewable power. Under a PPA, a
third party owns the renewable energy system and sells
the power to the site host under a long-term contract
(usually 10 to 20 years). The power payments from
the site host pays for the capital cost of the system.
A third-party project developer typically handles all
aspects of the project development including site assess-
ment, system configuration, procurement, installation,
and financing. The project developer is also typically
responsible for system operations and maintenance.
A PPA project usually involves two contracts: 1) a site
license or lease, and 2) a power purchase agreement.
The contractual arrangements are shown in Figure 7.
As with other types of green power purchases, organiza-
tions should make sure that the contract also defines the
ownership of the renewable energy certificates (RECs)
and therefore the rights to claim the use of renewable
Figure 7. Power purchase agreement (PPA) contractual relationships
On-site solar
PV system
10-20 year PPA
Receives solar power
from on-site system
under long-term PPA
Provides space and access
for solar PV array but does
not own system
No capital required
Equipment, installation,
warranties
Project
Developer
Sales and
O&M revenue
Financing
Receives income
from sale
of electricity
Arranges financing
and system design
and construction
ROI
Manufacturer-Installer
Receives revenue from sale of
panels, inverters, O&M, etc.
Provides warranties for
equipment and performance
Receives ROI from electricity
sales, state and federal incentives
Provides capital and owns system
for at least 5 years
Note: Nonresidential customers refer to business and institutional customers. Data for on-site renewable generation is not available.
Source: Hassett, Timothy C, and Karin L Borgerson. 2009, Harnessing Nature's Power. Deploying and Financing On-Site Renewable Energy. Washington, DC:
World Resources Institute.
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Chapter 7
Procuring On-Site Generation
Through a Solar Power Purchase
Agreement: Staples & Kohl's
To avoid the large upfront capital outlays required of an
on-site power generation system, many organizations have
entered into solar power purchase agreements. Under these
agreements, an organization hosts a PV system and agrees
to purchase its output for a given period of time, while a
third-party developer owns, operates, and maintains the
system. Two companies that have been leaders in advanc-
ing the solar services model are Staples and Kohl's. As of
June 2009, Staples is hosting 24 active rooftop solar systems
on its stores, distribution centers, and offices throughout the
country and has more than 100 more systems under devel-
opment. The company's fleet of hosted solar systems totals
almost 4,000 kW and produces about 4 million kWh per
year. Staples has used solar power through a solar power
purchase agreement since 2005. The fixed price for power
in the agreements is competitive with local commercial rates
and acts to hedge against price volatility in retail electricity.
Similar to Staples, Kohl's entered into a solar power purchase
agreement for a 20-year term in 2007 The company's near-
term goal is to have 100 activated solar locations on its
store rooftops. As of June 2009, Kohl's has 67 solar power
systems activated in California, New Jersey, Wisconsin, and
Connecticut, with another 10 in various stages of construc-
tion. The company estimates that, on average, a hosted solar
system provides roughly 40 percent of a store's annual elec-
tricity needs. Kohl's is currently the largest retail host of solar
electricity production in the world.
electricity. A host of an on-site system under a PPA wish-
ing to claim environmental benefits such as a reduction
of carbon emissions from the on-site system will need to
retire the RECs generated from the on-site system.
Choosing a Vendor
When choosing a vendor, obtaining more than one bid is
recommended, 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 infor-
mation about their members' expertise and interests, and
Chapter 10, Resources for Additional Information, lists more
sources.
When choosing a vendor, the organization should obtain
comparative information from the companies it is consider-
ing, usually through either an REP or an RFI as described in
Chapter 6, Procuring Renewable Electricity and Renewable
Energy Certificates. An REP is appropriate if the organization
already has a detailed system design and simply wants a ven-
dor to implement that design. An RFI is better for comparing
vendors' qualifications and experience and should be used to
Guide to Purchasing Green Power
select a vendor to 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 RFI approach often leads to the sys-
tem best tailored to the organization's needs.
Some factors to consider when choosing a provider of on-site
generation include 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 sys-
tems similar to the one the organization is considering.
Another important factor is whether there are any judg-
ments 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 train-
ing. As with any other capital project, licenses and
certifications are an indicator of a contractor's qualifi-
cations.
Liability and professional insurance. If any problems
arise with the system during installation or opera-
tion, 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
permits, 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 three categories: 1) techni-
cal, 2) financial, and 3) regulatory. Most technical barriers
pertain to the local utility's electrical interconnection require-
ments. Other technical barriers are fuel availability and
storage; space limitations; power-quality impacts; fire, safety,
27
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Chapter 7
and zoning requirements; and operations and maintenance
issues. Financial barriers come as a result of changing eco-
nomic conditions, such as the availability of tax credits,
direct subsidies, or the climate for loans and project finance
opportunities. Regulatory barriers pertain mainly to the
required permits and approvals, such as air emissions per-
mits, utility standby charges, exit fees, and land-use permits.
Often the contractor for the project can be made respon-
sible 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.
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 prob-
lems 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 commis-
sioning), 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 ver-
ifying 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 main-
tenance 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.
28
Planning an On-site Renewable Generation Project
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Chapter 8
Capturing the Benefits of the Purchase
An organization should provide and seek recogni-
tion for its green power commitments in order to
sustain momentum and support for the renew-
able energy program. An organization should
consider various internal and external promotional and
marketing strategies to generate measurable, positive public-
ity and public relations benefits. To maximize the positive
publicity, the use of green power should be made part of the
organization's comprehensive environmental management
efforts. Purchasers of renewable energy may make claims
about use of renewable energy by combining their renewable
energy certificates (RECs) with their own electricity usage or
through a utility green power purchase.
The Environmental Benefits
When an organization highlights its green power purchase,
it is important that it know the quantity of any emissions
avoided. These emissions can be greenhouse gases (GHGs)—
primarily carbon dioxide, as well as other pollutants that
affect the environment and human health, such as particulate
matter. A buyer of green power can calculate its reduction
of emissions using a tool provided by EPAs Green Power
Partnership at .
Despite the estimates provided by these calculation tools,
organizations should be careful about claiming avoided emis-
sions because the ability to make emission reduction claims
vary according to the regulatory policies affecting the emis-
sions in question. Under voluntary programs, such as EPAs
Climate Leaders program, it has become common practice to
use the zero emissions attributes of green power purchases to
reduce indirect or "Scope 2" emissions (from purchased elec-
tricity) as permitted by the program's reporting guidelines.
Under a mandatory cap and trade program, these accounting
practices may change, so buyers of green power should check
with EPA or other authorities about any updated greenhouse
gas accounting rules prior to making new environmental
claims.
The concern about climate change has prompted many
organizations to complete a GHG emissions inventory. An
inventory is a detailed list of emissions by source and type of
greenhouse gas, usually expressed in metric tons of carbon
dioxide equivalent (MTCCUe).
An inventory serves many purposes, including:
• Identifying opportunities for reduction and managing
GHGs.
• Participating in public reporting and voluntary reduc-
tion initiatives.
• Participating in mandatory government-reporting pro-
grams.
• Trading in GHG emissions markets.
An inventory also allows organizations to record their emis-
sion information in an official registry with a government
agency. Several GHG registry programs have been established
to record GHG inventories, including The Climate Registry,
Wisconsin's Voluntary Emissions Reduction Registry, the
U.S. Department of Energy's I605b Voluntary Greenhouse
Gas Reporting program, the American Carbon Registry, and
the Regional Greenhouse Gas Registry. For more informa-
tion, see the GHG accounting standards developed by the
World Resources Institute (WRI)/World Business Council for
Sustainable Development (WBCSD) GHG Protocol Initiative
at .
Renewable energy purchases and on-site generation may
earn building owners credit toward a variety of green build-
ing standards. For example, the U.S. Green Building Council
(USGBC) runs the Leadership in Energy and Environmental
Design (LEED) certification program, which recognizes
buildings that generate or purchase renewable energy for a
certain amount of their electricity use, awarding credit pro-
portional to generation and purchase amount. For purchased
renewable energy, LEED requires that renewables meet the
criteria of Green-e Energy.
Guide to Purchasing Green Power
29
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Chapter 8
Internal Promotion
One of the benefits of buying green power is improving
employee morale. It is also important to maintain internal
support for purchasing green power. To achieve these goals,
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 organiza-
tion'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 for their home electricity use through an organi-
zation-wide program. A staff adoption program should
create incentives, provide information, set milestones
for staff purchases over time, and recognize individual
achievements.
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 pur-
chase can motivate additional purchases by the general
public, the organization's customers, and its affiliates, thereby
extending the impact of the initial purchase. To be effective,
organizations must be sure to substantiate any claims made,
per Federal Trade Commission and National Association of
Attorneys General marketing guidelines (see Chapter 10,
Resources for Additional Information).
• Construct a public relations plan. Construct a plan
to publicize to target audiences the organization's pur-
chase 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 orga-
nization can create special print materials and press
releases for distribution, and conduct e-mail campaigns
that distinguish it as an innovative leader. Retail com-
panies 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.
Using Green Power for
Promotion and Branding
Lundberg Family Farms supports the use and implementation
of renewable energy through both on-site solar generation
and the purchase of wind-based RECs. In 2008, the family-
owned enterprise purchased 4.8 million kilowatt-hours (kWh)
of renewable electricity, which accounts for 100 percent
of its annual electricity use. In addition to this purchase,
Lundberg installed two solar photovoltaic arrays on company
warehouses, which produce nearly 688,000 kWh annually.
To promote its commitment to renewable energy, Lundberg
Family Farms is a member of both EPA's Green Power
Partnership and Green-e Marketplace. Lundberg features
its purchase on product packaging and spreads the word
about green power through its public Web page, speaking
events, newsletters, and at industry trade shows. Multiple
local broadcast stations have also featured stories about the
company's green power activities.
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. An
organization can also research and contact local envi-
ronmental writers and publications to encourage feature
stories about the organization and its commitment 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
highlight it to customers in daily sales interactions.
Organizations might also teach staff 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 organi-
zation's environmental commitment and promote its
purchase of green power. These opportunities might
include marketing the organization's purchase on its
products and encouraging its suppliers and affiliates to
follow its lead and buy green power.
Work with third-party organizations. Third-party
organizations can help provide credibility to green
power purchases that meet minimum purchasing
benchmarks. These organizations also offer publicity
channels that promote renewable energy and highlight
environmental commitment. All the organizations
sponsoring this guidebook help their partners and com-
panies publicize their achievements in buying green
power. Members of EPA's Green Power Partnership and
30
Capturing the Benefits of the Purchase
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Chapter 8
those who participate in Green-e Marketplace can also
use these programs' respective logos in their promo-
tional activities.
Create marketing partnerships with green power
suppliers. Offer retail customers the opportunity to
sign up for green power, and reward them with benefits
such as gift or discount cards, merchandise, or collater-
al products (e.g., T-shirts, hats) that tout the company's
image as an environmental leader.
Awards competitions. A number of entities recognize
leadership in the purchase of renewable energy, includ-
ing EPA's Green Power Partnership and the Center for
Resource Solutions' Green-e Energy program as part of
the annual Renewable Energy Markets conference. See
Chapter 10, Resources for Additional Information, for
more details about these awards.
Guide to Purchasing Green Power
31
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Chapter 9
Conclusion
Purchasers of electricity can have a significant impact
on the way that power is produced, now and in
the future. Businesses, governments, and nonprofit
organizations have an unprecedented and increas-
ing 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 support 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.
32
Conclusion
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Chapter 10
Resources for Additional Information
U.S. Department of Energy
The Department of Energy's Office of Energy Efficiency and
Renewable Energy (EERE) works to strengthen the United
States' energy security, environmental quality, and economic
vitality through public-private partnerships. It supports this
goal by enhancing energy efficiency and productivity and by
bringing clean, reliable, and affordable energy technologies to
the marketplace.
As a part of EERE, the Department of Energy's Federal
Energy Management Program (FEMP) facilitates the fed-
eral government's implementation of sound, cost-effective
energy management and investment practices to enhance
the nation's energy security and environmental stewardship.
FEMP provides project transaction services, applied tech-
nology services, and decision support services. All of these
services are available to assist federal agencies with deploying
renewable technologies.
Federal Energy Management Program:
Green Power Network:
FEMP Renewable Power Purchasing:
U.S. Environmental Protection
Agency
The U.S. Environmental Protection Agency's (EPA's) Green
Power Partnership is a voluntary program that encourages
organizations to buy green power as a way to reduce the
environmental impacts associated with purchased electricity
use. The partnership has more than 1,200 partner organiza-
tions voluntarily purchasing billions of kilowatt-hours of
green power annually. Partners include a wide variety of
leading organizations such as Fortune 500 companies; small
and medium sized businesses; local, state, and federal gov-
ernments; and colleges and universities.
Green Power Partnership:
< www. ep a .gov/greenp ower>
Green Power Equivalency Calculator:
< www. ep a .gov/greenp ower/pubs/calcul ator. htm >
Clean Energy:
Climate Leaders:
Landfill Methane Outreach Program:
eGRID Database:
Power Profiler:
Green Power Leadership Awards:
ENERGY STAR:
World Resources Institute
World Resources Institute (WRI) is an environmental think
tank that goes beyond research to find practical ways to
protect the Earth and improve people's lives. WRI's mission
is to move human society to live in ways that protect the
Earth's environment and its capacity to provide for the needs
and aspirations of current and future generations. Its work
is organized around four key programmatic goals: People &
Ecosystems, Governance, Climate Protection, and Markets
and Enterprise.
WRI has been engaging the private sector on climate policy
and low-carbon technology deployment for a decade. These
projects are designed to achieve two primary goals: 1) accel-
erate corporate deployment of renewable energy, and 2) build
a business constituency that is more informed on climate
Guide to Purchasing Green Power
33
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Chapter 10
and energy policy. WRI's business network is composed of
more than 70 large corporations that are engaged through
the Green Power Market Development Group (GPMDG),
along with its California and European affiliates, and the
U.S. Climate Business Group, with regional workgroups in
the Northeast, Midwest, and Southeast. This activity has
achieved several important milestones. For instance, GPMDG
partners have procured more than 1,000 MW of new,
cost-competitive renewable energy, while several GPMDG
members have made the list of top corporate users of solar
photovoltaics.
• World Resources Institute:
Green-e Programs
The Green-e® certification programs are among the nation's
leading voluntary certification and verification programs,
designed to help businesses and households compare and
select clean renewable energy and carbon offset options.
Renewable energy products that meet the Green-e Energy
standards and carbon offsets that meet Green-e Climate stan-
dards are identified by the Green-e logo. Renewable energy
products that meet the Green-e Energy standards and carbon
offsets that meet Green-e Climate standards are identified by
the Green-e logo, as shown below.
The Green-e Web site, , 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
34
Resources for Additional Information
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Chapter 10
Additional Resources
The Additional Resources section is not intended to be an exhaus-
tive list of all resources on a certain subject, but rather an
introduction for learning more on a topic ofinterest.
Developing a strategic energy management plan:
ENERGY STAR's Guidelines for Energy Management:
Electricity restructuring:
2002. May. A Primer on Electric Utilities, Deregulation, and
Restructuring of U.S. Electricity Markets. U.S. Department of
Energy.
Status of Electricity Restructuring by State Web Site. Energy
Information Administration,
Current state of green power markets:
Bird, Lori, Claire Kreycik, and Barry Friedman. 2009,
September. Green Power Marketing in the United States: A Status
Report (2008 Data). Golden, CO: National Renewable Energy
Laboratory. NREL/TP-6A2-46581.
(Updates will be posted on the Green Power Network's Web
site at ).
Bird, Lori, David Hurlbut, Pearl Donohoo, Karlynn Cory, and
Claire Kreycik. 2009, March. An Examination of the Regional
Supply and Demand Balance for Renewable Electricity in the
United States through 2015. Golden, CO: National Renewable
Energy Laboratory. NREL/TP-6A2-45041.
Lazard. 2009, February. Levelized Cost of Energy Analysis,
Version 3.0.
Motivations for purchasing green power:
Holt, E., R. Wiser, M. Fowlie, R. Mayer, and S. Innes. 2001,
January. Public Goods and Private Interests: Understanding
Non-Residential Demand for Green Power. Prepared for the
American Wind Energy Association and the National Wind
Coordinating Committee,
The Green-e Marketplace survey of green power purchasing
motivations is available atxwww.resource-solutions.org/
publications>
Center for Resource Solutions/Natural Marketing Institute.
2008. Unlocking the Power of Renewable Energy Certification to
Build Credibility with Consumers.
Economic development and job creation:
Environmental and Energy Study Institute (EESI). 2008,
October. Jobs from Renewable Energy and Energy Efficiency.
Washington, DC.
Kammen, Daniel M., Kamal Kapadia, and Matthias Fripp.
2006, January. Putting Renewables to Work: How Many Jobs
Can the Clean Energy Industry Generate? Berkeley, CA: UC
Berkeley,
Environmental Law and Policy Center. 2003. Job Jolt: The
Economic Impacts of Repowering the Midwest: The Clean Energy
Development Plan for the Heartland.
Environmental benefits:
Serchuck, Adam. 2000, April. The Environmental Imperative for
Renewable Energy: An Update. College Park, MD: Renewable
Energy Policy Project (REPP), University of Maryland.
Environmental claims guidance:
Federal Trade Commission. 1998. Guides for the Use of
Environmental Marketing Claims,
National Association of Attorneys General. 1999.
Environmental Marketing Guidelines for Electricity.
Renewable energy certificates (RECs):
EPA's Green Power Partnership. 2008. Renewable Energy
Certificates.
Aga, Jaineel and Chris Lau. 2008. Bottom Line on Renewable
Energy Certificates. Washington, DC: World Resources
Institute,
Hamrin, Jan, and Meredith Wingate. 2003, May. Regulator's
Handbook on Tradable Renewable Certificates. San Francisco:
Center for Resource Solutions,
American Bar Association, American Council on Renewable
Energy, and Environmental Markets Association. Master
Renewable Energy Certificate Purchase and Sale Agreement.
Guide to Purchasing Green Power
35
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Chapter 10
Lieberman, Dan. 2004. Tractable Renewable Certificates and
Emissions Values: The CRS Perspective on Best Practices in
Marketing. San Francisco: Center for Resource Solutions.
EPA's Green Power Locator provides links to retail and
wholesale marketers of renewable energy certificates:
The Green Power Network lists brokers, wholesale marketers,
and retail products:
Green-e lists certificate marketers and brokers that offer cer-
tified products:
The World Resources Institute Green Power Market
Development Group, Guidelines for Writing a REC Request for
Proposal and Sample Contract for Renewable Energy Certificates.
Renewable energy tracking systems:
EPA's Green Power Partnership page on REC tracking sys-
tems:
Environmental Tracking Network of North America
(ETNNA):
Electric Reliability Council of Texas (ERGOT):
New England Power Pool/Generation Information System
(NEPOOL/GIS):
PJM Generation Attribute Tracking System (GATS):
Western Renewable Energy Generation Information System
(WREGIS):
Midwest Renewable Energy Tracking System (M-RETS):
APX's North American Renewables Registry:
Utility green-pricing programs:
The Green Power Network updates lists of top utility pro-
grams:
Bird, Lori, and Kaiser, M. 2006. Trends in Utility Green Pricing
Programs. National Renewable Energy Laboratory.
Bird, Lori, Claire Kreycik, and Barry Friedman. 2008,
October. Green Power Marketing in the United States: A Status
Report (llth Edition). Golden, CO: National Renewable Energy
Laboratory. NREL/TP-6A2-44094.
U.S. Department of Energy, Energy Information
Administration. 2009, April. Green Pricing and Net Metering
Programs,
Holt, Edward, and Meredith Holt. 2004. Green Pricing
Resource Guide. 2nd ed. Washington, DC: American Wind
Energy Association.
Jenkins, J. 2006, September. Powerful Choices VI: A Survey
of Retail Green Power Programs in the Pacific Northwest.
Renewable Northwest Project, Portland, OR.
Lieberman, Dan. 2002, October. Green Pricing at Public
Utilities: A How-to Guide Based on Lessons Learned to Date.
Center for Resource Solutions and Public Renewables
Partnership.
Green power product lists:
The Green Power Network maintains lists of products offered
in each state:
The EPA Green Power Partnership supports a Green Power
Locator:
Green-e maintains a list of certified products offered in each
state:
On-site renewable energy generation:
FEMP. 2002, May. 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.
U.S. Department of Energy. 2007. Small Wind Electric Systems:
A U.S. Consumer's Guide,
Wind Powering America, (See "Quick Links to States" for state-specific
information).
Massachusetts Renewable Energy Trust. 2009. The
Commercial Buyer's Guide to Solar Electricity in Massachusetts.
Midwest Region Consumer's Guide to Buying a Solar Electric
System.
36
Resources for Additional Information
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Chapter 10
Hassett, Timothy C., and Karin L. Borgerson. 2009, March.
Harnessing Nature's Power: Deploying and Financing On-Site
Renewable Energy. Washington, DC: World Resources
Institute,
Government incentives for renewable energy:
The Database of State Incentives for Renewable Energy
includes information about capital cost incentives and net-
metering laws at the state level, as well as information about
federal and utility incentives:
The Clean Energy States Alliance is composed of "Clean
Energy Funds" or "State Funds," a growing number of public
funds in the United States whose objective is building mar-
kets for renewable energy and clean energy resources. The
alliance collects and disseminates information and analysis,
conducts original research, and helps to coordinate activities
of the state funds:
The American Wind Energy Association lists state incentives
for small wind installations:
Bolinger, Mark, Ryan Wiser, Karlynn Cory, and Ted James.
2009, March. PTC, ITC, or Cash Grant? An Analysis of the
Choice Facing Renewable Power Projects in the United States.
Berkeley, CA: Lawrence Berkeley National Laboratory. LBNL-
1642E.
Interconnection with the utility grid:
Standards Board of the Institute for Electrical and Electronics
Engineers, Inc. (IEEE). Standard 1547: "Standard for
Interconnecting Distributed Resources with Electric Power
Systems":
This standard has several components:
• IEEE 1547.1 2005 Standard for Conformance Tests
Procedures for Equipment Interconnecting Distributed
Resources with Electric Power Systems
• IEEE 1547.2 Application Guide for IEEE 1547 Standard
for Interconnecting Distributed Resources with Electric
Power Systems
• IEEE 1547.3 2007 Guide For Monitoring, Information
Exchange, and Control of Distributed Resources
Interconnected with Electric Power Systems
• IEEE P1547.4 Draft Guide for Design, Operation, and
Integration of Distributed Resource Island Systems with
Electric Power Systems
The Federal Energy Regulatory Commission (FERC) has
issued standard procedures and a standard interconnection
agreement for the interconnection of generators to the power
grid. The rules differ depending on whether the generator is
larger or smaller than 20 megawatts:
The DSIRE database lists state interconnection rules:
(click on "Summary Tables" then
"Rules, Regulations, & Policies for Renewable Energy").
California Rule 21: standards for interconnection of dis-
tributed energy resources:
Department of Energy (DOE) Office of Electricity Delivery
and Energy Reliability:
DOE Federal Energy Management Program (FEMP),
Interconnection and Permitting Guide.
Haynes, Rusty, and Chuck Whitaker. 2007. Connecting to the
Grid: A Guide to Distributed Generation Interconnection Issues.
Fifth Edition. Interstate Renewable Energy Council (IREC).
Measurement and verification of renewable system
performance:
Webster, Lia, and James Bradford. 2008, April.
Guidelines: Measurement and Verification for Federal Energy
Projects, Version 3.0. Washington, DC: Federal Energy
Management Program,
PVWATTS is a calculator to estimate the output from pho-
tovoltaic solar installations. The model calculates monthly
and annual energy production in kilowatt-hours and monthly
savings in dollars,
PV systems:
American Solar Energy Society:
Solar Electric Power Association:
Solar Energy Industries Association:
North Carolina Solar Center:
California Energy Commission. 2000, April. Buying a
Photovoltaic Solar Electric System: A Consumer Guide.
California Energy Commission. 2001, June. A Guide to
Photovoltaic (PV) System Design and Installation.
Bolinger, Mark. 2009, January. Financing Non-Residential
Photovoltaic Projects: Options and Implications. Berkeley, CA:
Lawrence Berkeley National Laboratory.
Guide to Purchasing Green Power
37
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Chapter 10
Merry, Liz, and Elisa Wood. 2008, October. The Customer's
Guide to Solar Power Purchase Agreements. The Rahus Institute.
jggeshall.
Cory, Karlynn, Jason Coughlin, and Charles Cog
2008, May. Solar Photovoltaic Financing: Deployment on
Public Property by State and Local Governments. Golden,
CO: National Renewable Energy Laboratory. NREL/
TP-670-43115.
Renewable energy trade associations:
American Council on Renewable Energy:
American Solar Energy Society:
American Wind Energy Association:
< ww w. awea. org>
Biomass Coordinating Council:
Geothermal Energy Association:
Geothermal Resources Council:
Interstate Renewable Energy Council:
Low Impact Hydropower Institute:
Midwest Renewable Energy Association:
National Hydropower Association:
National Wind Coordinating Collaborative:
Northeast Sustainable Energy Association:
Renewable Energy Markets Association:
Solar Electric Power Association:
Solar Energy Industries Association:
Utility Wind Integration Group:
Windustry:
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.
RETscreen International
Developer: Natural Resources Canadas CANMET Energy
Diversification Research Laboratory (CEDRL).
Assesses the economics of various renewable energy installa-
tions:
RETFinance
Developer: Energy Analysis Team at NREL
Simulates a 30-year nominal dollar cash flow for renew-
able 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):
Carbon Value Analysis Tool
Developer: World Resources Institute
A screening tool to help companies integrate the value of
carbon dioxide emissions reductions into energy-related
investment decisions:
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:
A version for California facilities is offered by the CEC:
ProForm
Developer: Lawrence Berkeley National Laboratory
Allows an integrated environmental and financial prefeasibil-
ity analysis of on-site renewable energy and energy efficiency
projects:
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:
Hybrid Optimization Model for Electric Renewables
(HOMER)
Developer: NREL
Compares the cost-effectiveness of off-grid renewables with
grid extensions or stand-alone generators:
38
Resources for Additional Information
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Chapter 10
Real Options Analysis Center
Developer: NREL
Provides online models for the valuation of renewable energy
research and development and the valuation of distributed
generation assets:
PV Watts
Developer: NREL
Provides estimated system output and savings calculations
based customizable system specifications and in the field sys-
tem performance data. User inputs their system information
and selects a system in the general area of the user's own site
to provide calculations,
Greenhouse gas resources:
World Resources Institute/World Business Council for
Sustainable Development Greenhouse Gas Protocol:
U.S. Environmental Protection Agency's Climate Leaders, a
voluntary government-industry partnership:
Guidance from Climate Leaders about treatment of RECs and
other green power purchases in greenhouse gas inventories:
The Climate Registry:
Carbon Disclosure Project:
U.S. Department of Energy's voluntary GHG registry:
World Wildlife Fund's (WWF) Climate Savers:
World Resources Institute Carbon Value Analysis Tool:
The California Energy Commission has summarized state
activities related to greenhouse gas inventories at
The Regional Greenhouse Gas Initiative:
EPA rulemaking
In response to the FY2008 Consolidated Appropriations
Act (H.R. 2764; Public Law 110161), EPA published
the Mandatory Reporting of Greenhouse Gases Rule in
September 2009. This rule requires reporting of greenhouse
gas (GHG) emissions from large sources and suppliers in the
United States, and is intended to collect accurate and timely
emissions data to inform future policy decisions.
Metzger, Eliot. 2008. Bottom Line on Climate Policy
Terminology. Washington, DC: World Resources Institute.
Heilmayr, Robert. 2008. Bottom Line on GHG Emissions
Registries. Washington, DC: World Resources Institute.
Carbon Offsets:
Climate Action Reserve
Green-e Climate Standard:
Green-e Climate Protocol for Renewable Energy:
World Resources Institute Bottom Line on Climate Policy
Terminology:
Voluntary Carbon Standard Registry:
Guide to Purchasing Green Power
39
-------
Glossary
T
his glossary defines some of the important terms used
in this guide. More definitions can be found at .
Annual consumption. The amount of electricity used by a
consumer in one year, typically measured in kilowatt-
hours (kWh). This information can be acquired from an
electricity bill or by contacting the energy provider.
Cap and trade. A policy for limiting the amount of pollu-
tion emitted. The cap is a limit on the total amount of
pollution that can be emitted (released) from all regu-
lated sources (e.g., power plants); the cap is set lower
than historical emissions in order to reduce emissions.
Trading is a system in which emission sources can buy
or sell allowances on the open market. Because the total
number of allowances is limited by the cap, emission
reductions are assured. For more information about cap
and trade programs, see the EPAs cap and trade Web
page at .
Capped and uncapped markets. Power markets in the
United States that are either subject to carbon dioxide
emission caps (most notably the northeastern states) or
not, as of mid-2009. The treatment of avoided carbon
dioxide emissions due to renewable power purchases
differs depending on the type of carbon market in which
the purchaser is located.
Carbon dioxide. A gas created in the atmosphere from
burning fossil fuels. Burning fossil fuels releases car-
bon that has been stored underground for millions of
years that transforms during the combustion process
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 burning fossil fuels.
Combined heat and power (CHP). An electricity generation
technology, also known as coeeneration, that recovers
waste heat from the electric generation process to pro-
duce 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. Generic electricity not associated
with a particular power generation source.
Competitive markets. Allowing consumers to choose from
among several electricity suppliers. Until recently, most
consumers received generation, transmission, and dis-
tribution services from one local utility company. As a
regulated monopoly, the utility was given an exclusive
franchise to provide electricity to consumers in a par-
ticular community. Rates were set, and consumers had
little choice but to pay the rate for their area. In the late
1990s and early 2000s, however, several states restruc-
tured their electricity industry and now give consumers
a choice of competing suppliers.
Conventional power. Power produced from nonrenewable
fuels such as coal, oil, natural gas, and nuclear fuels.
These fuels are a finite resource that cannot be replen-
ished once they have been extracted and used.
Distributed generation. 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 electric-
ity markets, more and more customers will be able to
choose from a range of energy suppliers that market dif-
ferent types of power products, including green power
from renewable energy. Restructured local utilities offer
electricity products generated exclusively from renew-
able 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 cus-
tomers may elect to have their utility generate a portion
of their power from renewable sources.
Energy efficiency. When products or systems use less energy
to do the same or a better job than conventional prod-
ucts or systems can. Energy efficiency saves energy, saves
40
Glossary
-------
Glossary
money on utility bills, and helps protect the environment
by reducing the amount of electricity (and associated
environmental impacts) that needs to be generated.
Fossil fuels. Coal, oil, and natural gas, the United States'
principal source of electricity, due largely to their low
cost. All three were formed many hundreds of millions
of years ago; hence the name, fossil fuels. Because fos-
sil fuels are a finite resource and cannot be replenished
once they have been extracted and burned, they are not
considered renewable.
Global climate change. Long-term alteration in the Earth's
climate, compared to what would be expected naturally,
due to human activities. 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 the cli-
mate 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, intensifying a natural phenomenon called the
greenhouse effect. Over the next century, scientists proj-
ect that global temperatures will increase 2 to 6 degrees
Fahrenheit as a result of rising concentrations of green-
house 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 EPA's Climate Change Web site at
.
Green power. Electricity that is generated from renewable
energy sources. Green power is a term that implies a
lesser environmental impact than from conventional
electricity generation. The resources that qualify as green
power vary depending on the state or organization.
For more details, see Chapter 2, Green Power Defined.
Green power marketers. Energy suppliers operating in
states that permit retail competition in the electricity
markets. This term can also include utilities that offer
green power options under what are typically referred to
as green marketing products.
Green power products. Electricity generated exclusively
from renewable resources or from a combination of fossil
and renewable resources if they are differentiated from
the standard mix of generation resources.
Green pricing. 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.
Greenhouse effect. A natural process whereby greenhouse
gases allow incoming solar radiation to pass through the
Earth's atmosphere, while preventing part of the outgo-
ing infrared radiation from the Earth's surface and lower
atmosphere from escaping into outer space. This pro-
cess 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 (GHGs). Gases in the Earth's atmosphere
that produce the greenhouse effect. Changes in the con-
centration 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.
Interval meter. An electricity meter that measures a facility's
energy usage in short increments (typically 15 min-
utes). These meters are useful for determining electricity
demand patterns and participating in real-time pricing
programs.
Kilowatt-hour (kWh). 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. Hydroelectric power generated
with fewer environmental impacts than large-scale
hydropower, 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. A method of crediting customers for electric-
ity 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.
New renewable generation facilities. Facilities built in the
recent past or will be built to meet the growing market
demand for green power. Currently, new generation
must be from renewable energy generating facilities that
Guide to Purchasing Green Power
41
-------
Glossary
began operation on or after January 1, 1997, according to
the Green-e Energy certification standard and EPA Green
Power Partnership requirements.
Offsets. Expressed in tons of emissions reduction and may
come from a variety of project types not related to power
generation. In voluntary markets to date, renewable
energy projects have qualified as sources for offsets, rely-
ing on a rigorous review and criteria that assess whether
the emissions reductions are real, additional, measur-
able, permanent and verified. However, output from a
project that is used as a REC for energy purposes cannot
also be claimed for offset purposes, too.
On-site renewable generation. Electricity generated by
renewable resources using a system or device located at
the site where the power is used.
Peak demand. The maximum power consumption for a
facility, measured over a short time period such as 15
minutes or an hour.
Power marketer. An entity that buys and sells power gener-
ated by others. A green power marketer is an electricity
supplier that offers a green power product.
Power purchase agreement (PPA). A contract to purchase
power from a third-party project developer for a speci-
fied period and price. This type of contract can be used
to purchase power from on-site renewable generation
systems, avoiding large capital investments for the end-
user.
Registry. Usually refers to "climate registries," which are
systems that set consistent and transparent standards
to calculate, verify, and publicly report greenhouse gas
emissions.
Renewable electricity. Power generated from renewable
resources and delivered through the power grid to end
users.
Renewable energy certificates (RECs). Tradable instru-
ments that can be used to meet voluntary renewable
energy targets as well as to meet compliance require-
ments for renewable energy policies. A REC is a
certificate that represents the generation of 1 megawatt-
hour (MWh) of electricity from an eligible source of
renewable energy. Each REC denotes the underlying
generation energy source, location of the generation,
and year of generation (a.k.a. "vintage"), environmental
emissions, and other characteristics associated with the
generator. RECs represent a claim to the environmental
attributes associated with renewable energy generation,
but purchasers should nevertheless ensure that their
contracts are explicit about which environmental attri-
butes are conveyed to them. RECs are also known as
"green tags," "green certificates," and "renewable energy
credits."
Renewable energy resources. Resources that are continu-
ously replenished on the Earth, such as such as wind,
solar, geothermal, hydropower, and various forms of
biomass. Some definitions also include municipal solid
waste as a renewable resource.
Renewable portfolio standard (RPS). More recently called
a renewable electricity standard. A regulatory mandate or
target stating that a minimum percentage or amount of
each electricity supplier's resource portfolio must come
from renewable energy.
Tracking system. An electronic database that is used to
track the ownership of RECs, much like an online bank
account. A tracking system issues a uniquely numbered
certificate for each MWh of electricity generated by a
generation facility registered in the system, tracks the
ownership of certificates as they are traded, and retires
the certificates once they are used or claims are made
based on their attributes or characteristics. Because each
MWh has a unique identification number and can only
be in one owner's account at any time, a tracking system
reduces ownership disputes and the potential for double
counting.
42
Glossary
-------
Appendix
Green Power Considerations
for Federal Agencies
Purchasing green, or renewable1, power means making
a difference by changing the way we purchase basic
commodities. For the federal government—the largest
consumer of electricity in the United States with an
annual electricity bill of more than $4 billion—the ability to
make a difference is enormous. This appendix provides an
overview of considerations specific to federal agencies that
buy renewable power.
Section 203 of the Energy Policy Act of 2005 (EPAct 2005)
directs that federal agencies meet renewable energy con-
sumption goals, eventually reaching 7.5 percent of the
electric energy they consume. Executive Order 13423 further
directs agencies that at least half of their renewable energy
consumption must come from "new" renewable sources
(projects built after January 1, 1999) and, to the maximum
extent possible, renewable energy generation projects should
be implemented on agency property for agency use.2 The goal
of these requirements is to make the federal government a
leader in developing the market for renewable power.
As a result of these policies (and previous executive orders),
the federal government's purchases of renewable power have
increased dramatically over the last decade (Figure A-l). In
fiscal year 2006, the latest year for which detailed data are
available, purchases of renewable energy, including renew-
Figure A-l. Renewable Power Purchases by Federal Agencies
E013123
EPAct 2005
EO 13423
On-Site Generation
2003 2004 2005 2006 2007 2008
Non-Electric RE Bonus, Federal or Indian Land
Eligible Old Renewable Electricity *** New Renewable Electricity
Source: DOE/FEMP; Note: direct purchases during 2000-2006 include RECs; categories changed in FY07 due to a change in the
renewable reporting requirements.
1 The federal government uses the term "renewable" instead of "green" power because it more clearly defines the product being purchased. The term
"renewable" will be used in this appendix.
2 The Energy Independence and Security Act (EISA) of 2007 also directs that 30 percent of the hot water demand in new federal buildings (and major
renovations) be met with solar hot water equipment.
Guide to Purchasing Green Power
43
-------
Appendix
able power, renewable electricity credits (RECs), and landfill
gas, comprised more than 80 percent of federal government
renewable energy use (with the remainder coming from on-
site generation, as identified in Table A-l).
Although the federal government is meeting its current goals,
many challenges remain in making sure that the govern-
ment's power purchases are promoting the development of
new, high-quality renewable resources in the most cost-effec-
tive way. 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 managers are taking an important step in
helping the federal government achieve these goals. Federal
agencies that are interested in participating in procure-
ments run by the General Services Administration (GSA),
the Defense Energy Support Center (DESC), or the Western
Area Power Administration (Western) should read the sec-
tion "Procurement Approaches to Renewable Electricity and
RECs" in this appendix.
Table A-l. Federal Renewable Technologies and
Purchases, 2006
Source
Biomass thermal
Green power purchases
Ground-source heat pump
Photovoltaics
Solar thermal
Wind
Total
Annual Energy
Contribution (GWh)
109
2245
182
34
11
19
2600
Source: DOE/FEMP. Data FY2006. Purchases include RECs and renewable power
purchases.
Federal Definitions of
Renewable Energy
EPAct 2005 (sec. 203) defines "renewable energy" as electric
energy generated from solar, wind, biomass, landfill gas,
ocean (including tidal, wave, current, and thermal), geother-
mal, municipal solid waste, or new hydroelectric generation
capacity achieved from increased efficiency or additions of
new capacity at an existing hydroelectric project. Biomass
resources can only meet the renewable consumption goals if
they meet carefully defined criteria, which federal agencies
should ensure they are familiar with before proceeding with
a biomass-fueled renewable energy project. Federal agencies
can use the renewable resources listed above as defined in
EPAct 2005 to meet renewable power use goals.
FEMP provides guidance on renewable resource definitions
and other issues relating to Executive Order 13423 and
EPAct 2005's renewable use goals on its Web site at .
Note that FEMP guidance is subject to change.
Benefits from Federal
Renewable Power Purchases
Owing to the large volume of electricity consumed by the
federal government, agencies purchasing even a slightly
greater percentage of renewable power can have a large ben-
efit for the environment and the overall renewable power
market. In addition to the benefits discussed earlier in this
guidebook, renewable power purchases by federal agencies
provide benefits specific to federal customers.
Federal agencies accrue many direct benefits from purchas-
ing renewable energy, including:
Compliance with federal goals. EPAct 2005, Executive
Order 13423, the Energy Independence and Security
Act of 2007 (EISA 2007), and Executive Order 13514
contain several energy management goals for federal
facilities, including: energy intensity reduction, green-
house gas reduction, green buildings, and the use of
renewable energy. Using renewable energy or installing
on-site generation systems might help an agency meet
all four of these goals (although the ability to count
renewable energy and RECs toward energy intensity
reduction is being gradually phased out between 2007
and 2012).
• Accomplishment of an agency's organizational mis-
sion. Many in the federal government understand that
the government's overall mission also includes a com-
mitment to environmental protection. Beyond that
general obligation, individual agencies, such as the EPA,
have the specific mission of protecting the environ-
ment. Purchasing renewable energy is one way to help
fulfill both goals.
• Demonstration of responsiveness and leadership.
The purchase of renewable energy represents a clear
demonstration of the agency's responsiveness to its
citizens, the majority of whom, according to several
surveys, favor renewable energy. The federal govern-
ment has shown that it can be a leader in the area of
renewable energy.
44
Green Power Considerations for Federal Agencies
-------
Appendix
Increased visibility. Presidential awards are given to
federal agency energy management teams that strive to
comply with federal requirements. Energy scorecards
for each federal agency are tallied to gauge the degree
of compliance. Federal agencies that become EPA Green
Power Partners are also eligible for awards through the
partnership program.
Federal renewable energy purchases also include societal
benefits, such as:
• 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 facil-
ities 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 fed-
eral government's energy consumption, purchases of
renewable power by federal agencies help stimulate
the overall renewable power market. Further, a strong
federal demand for renewable energy demonstrates that
switching to renewable energy is a national priority;
exemplifies renewable power's societal and customer
benefits; facilitates the availability of renewable power
products, which can help lower their cost.
Regulations Governing
Renewable Power
Procurement
Best Value
The Federal Acquisition Regulation (FAR) has traditionally
focused on minimizing the government's costs by strongly
favoring the procurement of the least expensive goods and
services, often leaving contracting officers little room to con-
sider 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 busi-
ness 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 8.405[c] [3]). As formally defined in the
FAR (Part 2.101), best value means "the expected outcome of
Sources of Federal Authority to
Purchase Renewable Power
Energy Policy Act of 2005
The Energy Policy Act of 2005 (EPAct 2005) provides the
fundamental authority for federal agencies to buy renew-
able power.
Energy Independence and Security Act of 2007
The Energy Independence and Security Act of 2007 (EISA
2007) directs federal agencies to purchase solar thermal hot
water systems and makes it easier for agencies to finance
renewable energy projects through energy savings perfor-
mance contracts.
Executive Order 13423
To comply with E.O. 13423, federal agencies must ensure that
at least half of all renewable energy required under EPAct
2005 comes from new renewable sources (developed after
January 1, 1999). To the maximum extent possible, renewable
energy generation projects should be implemented on agency
property for agency use. Agencies can also purchase renew-
able energy to help meet E.O. 13423 requirements.
Executive Order 13514
Federal agencies are required to inventory and manage
greenhouse gas (GHG) emissions to meet federal goals and
mitigate climate change. Renewable power is an important
component of GHG management.
an acquisition that, in the Government's estimation, provides
the greatest overall benefit in response to the requirement."
Commercial Items
In restructured or competitive 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 ser-
vices 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 language 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
commercial item. But as a specific type of electricity, renew-
able energy's status as a commercial item is slightly less
certain. Support for such a designation is aided by the ongo-
ing development of active renewable energy exchanges in
which commercial entities buy and sell renewable energy in
large quantities.
Guide to Purchasing Green Power
45
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Appendix
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 cur-
rently commercially available.
In addition, certification efforts by state and nongovern-
mental organizations help to establish renewable energy as a
commercial item by establishing a brand name. Third-party
certification provides additional value to the federal govern-
ment through verification and annual audits to eliminate
double counting of renewable products. When buying renew-
able power and RECs for federal agencies, the GSA and DESC
routinely use the commercial item designation and require
third-party verification.
Utility Services
As a large purchaser of electricity, the federal government
has well developed methods for purchasing power, known
as utility services. FAR Part 41 governs these procurements,
typically from regulated utilities, which have been used by
agencies to purchase renewable power, RECs, and on-site
generation systems through a power purchase agreement
(PPA).
FAR and the Environment
FAR Part 23 seeks to minimize the environmental impacts of
federal purchases. Subpart 23.2 addresses energy and water
efficiency, as well as renewable energy. 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 as "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."
Part 11 of the FAR, "Describing Agency Needs," states that
environmental objectives, including the purchase of prod-
ucts 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 jeopar-
dize 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).
Innovative Purchase Opportunities
Even though the procurement of renewable power has
become common enough that it is generally not "innovative,"
in some situations the methods outlined above do not apply,
and 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
(FARl.l02[d]).
Procurement Approaches
to Renewable Electricity
and RECs
Restructured/Competitive Markets
In a restructured or competitive market, agencies must use
competitive acquisition procedures to "shop" for renewable
energy from a variety of providers. Since an agency will be
evaluating competing offers, normal solicitation procedures
must be followed. Federal agencies should follow one of two
solicitation approaches: 1) using designated contracting agen-
cies, such as the GSA, the DESC, or, in some cases, Western;
or 2) 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 procurement, including renewables.
Fully Regulated Markets
Where retail competition is not available, federal agencies
may be able to buy renewable power through a green pric-
ing program offered by their local utility. If such a program
exists, agencies should find out the specific participation
procedures. If a GSA areawide contract (AWC) is already in
place with this utility, the agency should complete the util-
ity's green-pricing contract, as well as the AWC Exhibit A
contract. A competitive solicitation is not required since it is
a utility service.
Green Power Considerations for Federal Agencies
-------
RECs
Federal agencies can buy RECs throughout the country.
Since a variety of suppliers offer RECs, normal solicitation
procedures must be followed. GSA, DESC, and Western have
experience with REC procurement.
On-site Systems
Federal agencies are encouraged to procure renewable power
in the form of on-site renewable energy systems. EPAct
2005 provides a bonus to agencies toward federal renewable
energy goals by allowing agencies to double count renewable
energy if it is produced on-site and used at a federal facil-
ity, produced on federal lands and used at a federal facility,
or produced on Native American land and used at a federal
facility.
On-site systems can be procured through a variety of financ-
ing mechanisms, including energy savings performance
contracts (ESPCs), utility energy services contracts (UESCs),
and power purchase agreements (PPAs). ESPCs and UESCs
allow a third party to provide the capital financing for the
renewable system to be repaid over the life of the system (for
more information about ESPCs and UESCs, see the FEMP
financing page listed at the end of this appendix). Agencies
can also purchase on-site systems using appropriated funds
and standard contracting for commercial items.3 Before start-
ing a renewable power project, it is important to contact the
local utility regarding interconnection procedures, net meter-
ing, incentives, power purchase agreement (PPA) rules, tariff
provisions, and standby charges.
Federal agencies can also purchase renewable power pro-
duced by on-site renewable energy systems through PPAs,
as described in Chapter 7 of this guide. While these types
of power purchase contracts have become common outside
the federal government, the federal government has limited
experience with these procurement methods. PPA purchase
terms usually extend over 10 to 20 years, as shorter contract
terms make it harder for project developers to obtain financ-
ing. GSA and other agencies have executed power purchase
agreements with terms of 10 years or less, although this
shorter term makes the project riskier for the developer and
thus more expensive for the federal agency. Usually, federal
agencies purchase electricity as a utility service under FAR
Part 41, which limits contracts to 10 years. A contract term
longer than 10 years may be possible if Western acts as the
procurement agent for facilities in the Western service ter-
ritory, or if the procurement is done under DoD's 2922A
30-year authority. The DESC renewables team has experience
with entering into PPAs for on-site renewable systems and
is a good resource for federal agencies looking to make this
type of purchase.
Appendix
Some of the factors that need to be considered in a
PPA include the type of land use agreement, National
Environmental Policy Act (NEPA) review, default and
recourse for the agency, and utility incentive payments. As
with other on-site systems, it is important to coordinate with
the local utility on issues such as interconnection require-
ments, net metering rules, and potential standby/tariff
changes. In addition, it is important that the PPA contract
ensures that the ownership of RECs produced by the system
is clearly articulated. In most of the federal PPA projects
completed to date, the project developer has sold the RECs
to the local utility to help the utility meet its solar require-
ment. Selling valuable RECs allows the project developer to
reduce the PPA price. If the agency does not retain the RECs,
it needs to purchase "replacement" RECs in order for the on-
site system to count toward renewable consumption goals
(this is known as a "REC swap"). In addition, if the agency
does not retain the RECs, it will not be able to claim the
carbon reductions in its comprehensive greenhouse gas emis-
sions inventory. On-site systems whose RECs are swapped
are still eligible for the double bonus toward federal renew-
able purchasing goals, as long as the swap is done according
to FEMP's guidance on this subject.
Using GSA, DESC, or Western
GSA Power Procurement Services
GSA has assisted many federal agencies in the procurement
of renewable power, and its ability to aggregate renewable
requirements for many agencies might result in lower prices.
GSAs support to its federal customers for energy-related prod-
ucts is provided by the GSA Energy Division at . Through this division, GSA provides areawide
contracts (AWC) for the procurement of utilities and aggregate
purchasing of natural gas and electricity. GSA customizes its
aggregate electric and natural gas procurements to meet the
financial and physical supply requirements of its federal and
non-federal agency clients. In addition, GSA has federal sup-
ply schedules for energy services, which federal agencies can
use to help assess and manage their procurement of renew-
able power and renewable energy generation systems. Visit
for more information.
DESC Power Procurement Services
Under the DESC Electricity and Renewables Program, com-
petitive solicitations are issued for electricity, RECs, and
on-site renewable power projects. DESC is involved in retail
electricity purchases in states that have approved and imple-
mented deregulation/restructuring. RECs can be purchased
3 The GSA supply schedule includes some renewable energy systems.
Guide to Purchasing Green Power
47
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Appendix
nationwide. DESC recently expanded its offerings to include
competitive purchases for on-site renewable generation that
are financed, owned, operated, and maintained by a third
party.
Under its Electricity and Renewables Program, DESC:
Procures electricity for Department of Defense and fed-
eral civilian activities.
Uses aggregation to attract market interest without cus-
tomer cross-subsidization.
Acts as procurement agent for on-site PPA projects.
• Works with customers to develop requirements, iden-
tify risk preferences, and develop risk-mitigation plans.
• Tailors each solicitation to market conditions and cus-
tomer requirements.
• Conducts "best value" and "low-price technically
acceptable" acquisitions, depending on requirements
and customer preference.
Contracts for Economic Load Response Services.
Uses various pricing methods: fixed price, block and
index, and Locational Marginal Pricing.
• Has extensive experience procuring power for the fed-
eral government.
• Performs all contract administration functions.
DESC's program uses commercial practices for its solicita-
tions and procurement strategy, which has been central to
successfully engaging the market. In addition, DESC's pro-
gram is flexible enough to support unusual and/or "out of the
box" customer requests and requirements while complying
fully with applicable procurement regulations. DESC is also
involved in ESPC and UESC procurements on behalf of DoD
and federal civilian agencies.
Go to to view ongoing DESC solicita-
tions or to find contact information for DESC's electricity and
renewables acquisition team.
Western Renewable Power Products
Regardless of location, federal agencies can purchase RECs
from Western. An agency pays for the renewable energy/
benefit at cost, plus a fee to cover the administrative cost of
acquiring the renewable resources from a supplier. For more
information about these programs, visit Western's Web site at
.
For a federal agency that is a Western customer within the
Western territory, Western may be able to buy and deliver
renewable energy to the federal site. Agency costs include
renewable power generation, transmission (if needed), related
ancillary services, distribution (if needed), and program
administration. If the agency receives power from another
utility, the agency will need to obtain the cooperation of that
utility before arrangements can be made to deliver renewable
energy from Western.
If the federal agency has a physical site for a renewable ener-
gy project within the Western territory and would be willing
to host a third-party owned system, Western can purchase
the energy from that project on behalf of the agency under a
long-term contract.
Agency Procurement
If an agency does not deem it advantageous to request
assistance from GSA, DESC, or Western, it may contract
separately for renewable energy. In this case, the purchase
should meet the requirements of the FAR section the agency
has decided to use, such as FAR Part 12 or Part 41.
FEMP Assistance for On-site
Renewable Generation
Projects
On-site renewable generation projects face different issues
than do power purchases. To help federal agencies tap the
renewable resources that are available at their facilities,
FEMP offers several programs to assist with on-site genera-
tion projects.
Agency-Level Planning
FEMP offers technical assistance to help federal agencies
identify and prioritize energy projects across the entire agency
portfolio. This can be useful when the agency elects to devel-
op a long-term strategic vision that can be used to prioritize
energy management activities over a multi-year period.
Renewable Resource Screenings and
Assessments
To help agencies and facility managers assess their opportu-
nities for on-site renewable energy generation, FEMP offers
assistance with renewable resource screenings and assess-
ments. Screenings can be done on a large group of sites to
identify which of those sites have potential for cost-effective
renewable projects, or can be done to screen out sites with
little potential. Screenings can also be conducted on a single
48
Green Power Considerations for Federal Agencies
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Appendix
site or as part of an ESPC or UESC project. While screen-
ings are done at a broader level, assessments dig deeper to
analyze, which specific renewable technologies would be best
for satisfying the energy needs at particular sites. Screenings
and assessments take into account such factors as the qual-
ity of renewable resources available, applicable incentives or
rebates, and other site-specific factors. To begin the screening
or assessment process, information about each site is needed
including site name, address, longitude and latitude, square
footage of individual buildings, and utility use and cost data
for each fuel.
Agencies can generally assess the quality of renewable
resources at their sites by using renewable resource maps.
Maps are available at for a
wide variety of renewable resources including solar, wind,
biomass, and geothermal. These maps indicate the degree
of availability of each resource at locations across the entire
United States. Some maps show where each renewable tech-
nology would be cost-effective for federal facilities under
varying assumptions including electricity and renewable sys-
tem prices.
Agencies can also find screening tools on the FEMP Web site.
By entering basic site information into these software tools,
agencies can obtain a general indication of which sites have
potential for cost-effective projects using a particular renew-
able technology.
Before initiating a project, renewable resources at a site must
be confirmed, especially for renewable resources that are
very site-specific, such as wind. Resource maps and screen-
ing tools are a good start, but it is important to consult an
expert for a professional evaluation before implementing
renewable energy projects.
Technical Assistance
FEMP can also help agencies implement renewable energy
projects. This technical assistance can include engaging
stakeholders, developing product specifications, sizing sys-
tems, reviewing plans and specifications, designing requests
for proposals, reviewing and evaluating proposals, choos-
ing the best financing and contract vehicles, and in some
cases evaluating the performance of installed systems. FEMP
allocates funding according to a "Call-for-Projects" process,
in which federal agencies apply through a merit-based selec-
tion process for FEMP-funded technical assistance on their
renewable energy projects, but agencies may also fund assis-
tance through interagency agreements.
Technical assistance funding is not for system purchases, but
FEMP does help some project teams acquire additional proj-
ect financing if needed. Agencies may participate in FEMP's
alternative financing 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. FEMP
has helped agencies obtain financing for biomass fuels, geo-
thermal heat pumps, parabolic-trough solar collectors, and
photovoltaic systems through these financing programs.
Training
FEMP offers various training courses to help federal energy
managers become more proficient in energy management and
learn about alternative forms of financing for energy-saving
projects. For more information, visit FEMP's training Web
site listed at the end of this appendix.
Utility-Scale Projects
FEMP encourages agencies to facilitate large renewable ener-
gy projects on federal lands. These utility-scale projects are
typically owned by third parties and can be developed under
Enhanced-Use Lease (EUL) arrangements, for agencies with
such authority. The projects offer the opportunity for large-
scale application of renewable energy technologies, but it is
very important to coordinate with the local utility regard-
ing interconnection, net metering, tariff changes, etc. before
moving forward with a utility-scale project.
Power generated from a utility-scale project can be used to
meet the load of the host federal site, or be sold by the local
utility to its non-federal customers.
Federal sites in western states should contact the Bureau of
Land Management (BLM) about opportunities to collaborate
on utility-scale renewable energy projects on federal lands.
FEMP and BLM have identified those federal lands with the
best potential for large renewable energy projects. The joint
study is available on FEMP's Web site.
Key Elements of a Successful
Procurement or On-site
Installation
Based on several years of experience buying renewable power
and installing on-site renewable energy systems, certain les-
sons for federal agencies have emerged.
Stakeholder Involvement
Renewable power advocates must get agreement in advance
from internal stakeholders such as comptrollers, energy
managers, and key decision-makers. The stakeholders must
participate in the process and make reasoned, balanced
Guide to Purchasing Green Power
49
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Appendix
decisions. It is important to be honest and clear about the
project's renewable sources and benefits. A cross-functional
team with representatives from across the organization will
result in the best project.
Cost Control
Federal energy management directives specifically allow the
savings from energy efficiency to be used to pay for renew-
able energy. Projects that bundle renewable power purchases
with energy efficiency projects (possibly through an ESPC or
UESC) can result in a shorter payback period for the com-
bined project. Buying RECs is generally the least expensive
way to meet renewable energy requirements, but agencies
should consider making at least a small purchase of renew-
able power through their local utility, if they have a program.
Developing an Effective Solicitation
An agency's electricity consumption data should be part of
any renewable power REP and are required by GSA, DESC,
and Western for the procurement of on-site systems. The
purchasing agency should notify renewable power suppliers
of the REP and conduct a pre-proposal meeting with pro-
spective 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 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
construct a program that meets both their needs. Investor-
owned utilities are usually not able to launch their own
renewable power programs without public utility commission
approval. However, a large federal customer could help per-
suade a utility to develop a new program that would then be
made available to other customers. For all electricity suppli-
ers, federal agencies should consider requesting a customized
product, in order to take advantage of discounted pricing
that may be available for large volume purchases.
Capturing the Benefits of the
Purchase
After successfully completing a renewable power purchase, a
federal agency usually wants to publicize its efforts. In addi-
tion to the publicity messages available to other institutions,
federal agencies can spread the word that the agency is work-
ing 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. Especially with on-
site generation, however, it is important to be careful about
making claims when RFC-swapping or selling is involved.
An agency cannot claim to be using power generated by on-
site solar, for example, if the RECs are sold or swapped for
some other type of RECs.
Federal agencies are required to report annually on their
progress toward meeting their energy management goals.
FEMP has published guidelines for counting renewable
power purchases and on-site renewable energy toward an
agency's energy management goals at .
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.
Renewable energy suppliers should contact the GSA (Ken
Shutika), DESC (John Nelson), or Western (Randy Manion)
to be placed on renewable procurement notification lists.
Contact information is listed at the end of this appendix.
Summary of Renewable
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
purchasing renewable energy, and EPAct 2005 directs fed-
eral agencies to increase their use of renewable energy. With
more emphasis on "best value" purchasing and the explicit
consideration of environmental characteristics, contracting
officers now have more options than ever for buying renew-
able energy. Using the strategies outlined in this guidebook,
federal agencies can meet their renewable energy goals and
help move the United States toward a more sustainable ener-
gy future.
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Green Power Considerations for Federal Agencies
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Appendix
Federal Resources for
Renewable Power
Information
For federal agencies buying renewable power, assistance
is available from the following federal agencies and national
laboratories:
Green Power Network:
FEMP Web sites:
Renewable energy:
Renewable purchasing:
Renewable power purchase agreements:
Financing:
Training:
Federal Renewable Energy Working
Group:
Federal Acquisition Regulation (FAR):
For assistance with program resources:
Department of Energy, Federal Energy Management Program
Mark Reichhardt, Renewable Purchasing (202) 586-4788
mark.reichhardt@ee.doe.gov
Anne Sprunt Crawley, Technical Assistance (202) 586-1505
anne.crawley@ee.doe.gov
Defense Energy Support Center
John Nelson (703) 767-8523
john.nelson@dla.mil
Andrea Kmcaid (703) 767-8669
andrea.kincaid@dla.mil
Western Area Power Administration
Renewable Resources for Federal Agencies Program
Randy Mamon (720) 962-7423
manion@wapa.gov
For technical assistance, including market intelligence,
market rules, and the development of requirements and
statements of work, contact:
Lawrence Berkeley National Laboratory
Gerald Robinson (510) 486-5769
GTRobinson@lbl.gov
Rich Brown (510) 486-5896
REBrown@lbl.gov
National Renewable Energy Laboratory
Chandra Shah (303) 384-7557
chandra.shah@nrel.gov
Pacific Northwest National Laboratory
Mike Warwick (503) 417-7555
mike.warwick@pnl.gov
For more information or assistance in developing a plan
to enhance the security of federal facilities through the
use of renewable energy, contact:
National Renewable Energy Laboratory
Bob Westby (303) 384-7534
Robert.Westby@nrel.gov
For assistance issuing solicitations:
General Services Administration
Ken Shutika (202) 260-9713
ken.shutika@gsa.gov
Sandia National Laboratory, Defense Energy Support
Program
Dave Memcucci (505) 844-3077
dfmenic@sandia.gov
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Guide to Purchasing Green Power
Renewable Electricity, Renewable Energy
Certificates, and On-Site Renewable Generation
a collaboration of
U.S. DEPARTMENT OF
ENERGY
Energy Efficiency &
Renewable Energy
SEPA
GREEN
POWER
PARTNERSHIP
WORLD
RESOURCES
INSTITUTE
O CRS
center for
resource
solutions
March 2010
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