Guide to Purchasing
Green Power
Renewable Electricity, Renewable Energy Certificates, and
On-Site Renewable Generation
U.S. DEPARTMENT OF
ENERGY
Energy Efficiency &
Renewable Energy
K
ftEPA
GREEN
POWER
PARTNERSHIP*
WORLD
RESOURCES
INSTITUTE
C CRS
center for
resource
solutions
ONREL
NATIONAL RENEWABLE ENERGY LABORATORY
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This guide can be downloaded from:
https://www.epa.qov/qreenpower/gyide-pyrchasinq-qreen-power
Office of Air (6202J) EPA430-K-04-015
www.epa.gov/greenpower March 2010
Updated: September 2018
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TABLE OF CONTENTS
Summary v
Chapter 1 Introduction 1-1
Chapter 2 Introducing Green Power 2-1
What is Green Power? ,, 2-3
Introduction to Renewable Energy Certificates 2-3
Introduction to the Voluntary Market 2-5
Certification and Verification 2-5
Tracking Systems 2-6
Chapter 3 The Benefits and Costs of Green Power 3-1
The Benefits 3-3
The Costs 3-9
Public Relations Considerations 3-12
Chapter 4 Green Power Product Options .......4-1
Purchase Options 4-4
Self-Generation Options 4-9
Green Power Supply Options Summary 4-12
Chapter 5 Using Organizational Goals to Guide Green Power Purchases 5-1
Setting Goals 5-4
Identifying Key Decision-Makers 5-5
Gathering Energy and Facility Data 5-6
Choosing Green Power Options 5-8
Chapter 6 Contracting for Green Power 6-1
Developing Criteria for Screening Green Power Suppliers and Products 6-3
Collecting Product Information 6-6
Creating a Procurement Plan 6-7
Chapter 7 Planning a Self-Generation Renewable Project 7-1
Screening the Options 7-3
Obtaining Resources and Assistance 7-4
Creating a Project Plan 7-5
Installing and Operating a Renewable Generation Project 7-8
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Chapter 8 Capturing the Benefits of the Purchase 8-1
The Environmental Benefits 8-3
Promoting the Organization's Purchase 8-5
Chapter 9 Conclusion 9-1
Conclusion 9-3
Chapter 10 Resources for Additional Information 10-1
U.S. Environmental Protection Agency 10-3
U.S. Department of Energy 10-3
World Resources Institute 10-3
Green-e Certification Programs 10-4
Glossary 11-1
Appendix A Green Power Considerations for Federal Agencies A-1
Introduction A-3
Federal Goals and Renewable Usage Information A-3
Benefits from Federal Renewable Power Purchases A-5
Renewable Procurement Authorities and Regulations A-5
Renewable Procurement Approaches ,,,,,, A-7
GSA, DLA Energy and WAPA Services A-9
Key Elements of a Successful Renewable Procurement A-11
Information for Potential Suppliers to the Federal Government A-12
Resources A-12
Appendix B Commercial Solar Financing Options B-1
introduction B-3
Third-Party Ownership Models B-5
On-Site Power Purchase Agreement (PPA): Physical PPA B-7
Off-Site Power Purchase Agreement (PPA): Financial PPA B-9
Lease B-13
Loan B-14
Cash Purchase B-16
Property-Assessed Clean Energy (PACE) B-18
Other Financing and Solar Purchasing Options B-20
Conclusion B-21
Resources B-24
Appendix C Purchasing renewable energy as a residential customer C-1
Residential consumers can drive demand for green power C-3
Purchasing Options for Residential Consumers C-3
Verification and Certification C-5
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Summary
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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Summary
Today, the diverse array of energy resources used to create electricity can produce very different environmental
impacts. In the United States, power generation is still the nation's single largest source of industrial air pollution and
is a major contributor to greenhouse gas emissions, despite advances in pollution controls over the last 30 years1.
Electricity generated from renewable resources such as solar, wind, geothermal, some forms of hydropower, and
biomass has proven to be an increasingly attractive choice for electricity consumers. This Guide to Purchasing Green
Power focuses on voluntary purchases of electricity generated from these renewable resources. It is intended for
businesses and other organizations that want to diversify their electricity supply and reduce the environmental
impact of their electricity use. Although renewable resources can also be used for heating and cooling needs or for
transportation, this guide does not address those applications.
Green power purchases are attractive to electricity consumers because they allow organizations and individuals to
use renewable electricity that is above and beyond what is required by public policy mandates such as the renewable
portfolio standards adopted by 29 states and the District of Columbia. Purchases of green power can approach or
even exceed 100 percent of an organization's electricity use. Green power purchases have and continue to play an
important role in driving the development of new renewable energy projects in the United States (see Figure S-l) and
are expected to be an important driver for the overall market for the foreseeable future.
A wide range of organizations purchase green power, including federal, state and local governments; universities;
businesses; nonprofit organizations; and individual consumers. By purchasing green power, these organizations are
helping protect the environment, meeting their own financial goals, enhancing stakeholder relations and contributing
to the development of domestic energy resources. In 2016, renewable electricity generation in the United States
(excluding hydropower) approached 342 million megawatt-hours (342 billion kilowatt-hours)—enough to meet the
annual electricity needs of over 31 million average U.S. homes.
Green power is an effective part of a strategic energy management plan. Successful energy management plans
consider options such as energy efficiency, load management, power purchases, self-generation and non-electric
(thermal) energy needs. As with any investment portfolio, the best mix of these options depends on the organiza-
tion's goals, the cost of various alternatives, and external market conditions.
Over the past 15 years, the market has developed a variety of offerings for electricity consumers, allowing them to
purchase green power from renewable sources in verified transactions. The market has gained a wealth of experience
with voluntary procurement methods, including physical power purchase agreements, green tariffs and financial
power purchase agreement contracts, and self-generation, either on-site or off-site. This latest revision to the Guide to
Purchasing Green Power provides an overview and key details on each of these procurement methods.
1 U.S. Environmental Protection Agency. (2015). Sources of greenhouse gas emissions. Retrieved from https://www.epa.aov/ahaemissions/sources-areenhouse-aas-
emissions.
vi
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Figure S-1. Demand Drivers for Renewable Energy2
Other
350
Other renewab es
Compliance
(existing renewables)
Compliance Compliance
(existing renewables) (new renewab|es)
26/0 42%
Compliance
(new renewables)
Voluntary
28%
Voluntary
Note: Compliance (new renewables) represents the amount of voluntary sales driven by state programs or policies that require regulated entities to procure RECs from
"new" projects, while compliance (existing renewables) are based on sales from existing renewables which account for 26%. Voluntary market sales represent over 27% of
all U.S. non-hydro renewable energy sales in 2016. Other renewables include utility renewable energy purchasing beyond RPS requirements and on-site generation.
While voluntary purchases of green power are becoming more common in today's electricity markets, these markets
offer many choices. This guide is intended to provide guidance to organizations that have decided to purchase or
invest in green power, as well as organizations that are still considering the merits of green power.
The Guide to Purchasing Green Power addresses the following commonly asked questions:
¦ What is renewable energy and green power? (p. 3)
What is the importance of product certification and
verification? (p. 5)
What benefits
(P. 6)
my green power purchase bring?
What is the cost of green power? (p. 12)
What are the options for purchasing green power?
(P.17)
How should an organization choose a green power
product? (p. 27)
What are the best ways to buy green power? (p.
37)
What are the steps for installing on-site renewable
generation? (p. 47)
How do I measure and account for emissions? (p.
54)
How do I communicate my green power purchase
to stakeholders? (p. 55)
2 O'Shaughnessy, E, Heeter, J, Cook, J., and Volpi, C. (2017). Status and Trends in the U.S. Voluntary Green Power Market (2016 data). National Renewable Energy
Laboratory.
h 11 ps : //www, n r e I. a o v/d o cs /f vl 8 o st i /70174. od f.
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¦JT'.-U -—If -
CHAPTER
Introduction
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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This Guide to Purchasing Green Power is intended for organizations that are considering the merits of green power
procurement options, as well as those that have decided to purchase green power and want help doing so. The guide
was written for a broad audience, including businesses, government agencies, universities and other organizations that
want to diversify their energy supply and reduce the environmental impact of their electricity use. Although it is intended
primarily for non-residential electricity consumers, residential consumers may also find many of the best practices,
processes and guidance on purchasing green power applicable to their purchasing decisions, including more specific
information in Appendix C.
First published in 2004, and previously revised in 2010, this new version of the Guide to Purchasing Green Power provides
an overview of green power markets and describes the necessary steps to procure green power. This revision represents
a major update to the guide and includes new market information and terminology, updated statistics, new case studies,
information on evolving purchasing methods, an updated additional resources section, and new resources for federal
agencies and the private sector to use when planning self-generation renewable projects or purchasing green power.
This chapter summarizes the guide to help readers find the information they need.
Chapter 2 defines green power, clarifies the role of renewable energy certificates (RECs), explains the importance of
independent certification and verification of green power, and describes the role of REC tracking systems.
Chapter 3 summarizes the benefits and costs of purchasing green power.
Chapter 4 describes options for purchasing green power products: utility and retail provider options (including green
tariffs), direct purchase options (both physical and financial power purchase agreements), community choice aggregation
and unbundled RECs; and on-site or off-site self-generation of renewable electricity.
Chapter 5 outlines the preparations necessary for buying green power: setting goals, identifying the key decision-makers,
gathering energy data, and choosing specific green power options based on availability and feasibility.
Chapter 6 discusses the process of contracting for renewable electricity: developing screening criteria, collecting product
information, drawing up a procurement plan and evaluating the purchase.
Chapter 7 describes the steps for owning and operating self-generation: 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 to maximize the benefits of buying green power, particularly through greenhouse gas account-
ing and reporting, promotion to stakeholders both inside and outside the organization, and making accurate claims about
the environmental benefits associated with a green power purchase.
Chapter 9 summarizes the key concepts and learning insights of Chapters 2 through 8.
Chapter 10 offers a list of resources for more information about all aspects of green power. Because electricity from
renewable resources may be generated in a variety of ways, many institutions are working to facilitate the development
of green power markets. Several of these organizations' programs—the U.S. Department of Energy's Federal Energy
Management Program, the U.S. Environmental Protection Agency's Green Power Partnership, the Green Power Market
Development Group of the World Resources Institute, the Center for Resource Solutions, and the National Renewable
Energy Laboratory—collaborated together to write this purchasing guide.
The guide also includes a glossary of terms commonly used in the green power field.
Finally, Appendix A, Green Power Considerations for Federal Agencies discusses considerations specific to federal
agencies that buy green power, particularly the procurement regulations that cover federal acquisition of green power.
Appendix B, Commercial Solar Financing Options provides a snapshot of the current commercial solar financing arena
and an overview of existing financing mechanisms. Appendix C, provides green power purchasing guidance for residen-
tial consumers
1-2
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CHAPTER
Introducing Green Power
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
is
¦ ¦¦¦<• Bill
2-1
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DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
£
^ *\
"\
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What is Green Power?
The term green power can be used in several different
ways. In this guide, green power refers specifically to elec-
tricity supplied from a subset of renewable resources that
provide the highest environmental benefit. Green Power
is also defined as renewable electricity that goes above
and beyond what is otherwise required by mandate or
requirement - green power is also voluntary or surplus
to regulation. Renewable energy is supplied by natural
resources that replenish themselves over short periods
of time without being depleted. Green power is a subset
of renewable energy and represents those renewable
energy resources that provide the highest environmental
benefit, such as:
¦ Solar
¦ Wind
¦ Geothermal (the earth's heat)
¦ Biogas
¦ Biomass (some forms of plant and waste material)
¦ Low-impact hydroelectric resources
Figure 2-1. Green Power as a Subset of the U.S.
Electricity Sector
U.S. Electricity Supply
Renewable Energy:
derived from natural sources that
replenish themselves over time
without depleting the earth's
resources. Abundant, available in
some capacity nearly everywhere. Not
all resources are environmentally
benign.
Conventional Energy:
coal, nuclear, oil, natural gas
(including conventional ways of
using energy from these sources).
Green Power:
electricity generated from a subset of
renewable resources, including solar,
wind, geothermal, biogas, biomass,
and low-impact hydroelectric
sources. Cause the least environmen-
tal damage. Green power is also
voluntary or surplus to regulation.
Green power generally does not include some resources that are often considered as renewable energy including
large hydropower and municipal solid waste.
Green Power and Related Terms
The U.S. energy supply includes a variety of energy resources. Inclusion of specific resources in certain definitions
for clean or renewable energy is often driven by other factors beyond the environmental profile of the resource.
Green power is viewed by the market as a subset of renewable energy which is shown in Figure 2-1. Green power, as
described by EPA's Green Power Partnership, is a term that includes only electricity generated from this subset of
renewable resources. Readers should keep in mind that the resources associated with renewable energy or green
power vary depending on the source or program. For more discussion on the definition of green power, please refer
to the websites of the organizations that collaborated on this guide, listed at the beginning of Chapter 10, Resources
for Additional Information.
Introduction to Renewable Energy Certificates
Due to the physical nature of electricity and the way it moves across the shared electric grid, it is difficult for
consumers (or utilities) to know precisely the source or origin of the electricity they consume, even with onsite
projects. The electricity coming through the utility grid can be generated from many different sources and is
essentially mixed together prior to consumption. Historically, these generation sources were not tracked from the
generator to consumer.
As states and organizations began developing targets for renewable electricity, a separate system of renewable
energy certificates (RECs) was therefore developed to track generation delivered to the grid to meet consumer
demand. RECs solve the problem of identification, allocation and ownership of renewable energy across a shared
2-3
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What is a REC?
A renewable energy certificate (REC) is a tradable market
instrument that represents the generation of 1 mega-
watt-hour (MWh) of electricity from a renewable energy
source.
This Chapter introduces the REC and its role as the track-
ing and accounting instrument for generation and use of
renewable energy.
Chapter 4 reviews RECs and green power product options.
The Chapter identifies that RECs are a core instrument to
all green power supply options as well as a stand alone
supply option unto itself."
electric grid. Each REC represents 1 megawatt-hour
(MWh) of electricity generated and conveys the
environmental and social attributes of the generated
electricity to consumers.
State or regional electronic tracking systems issue
RECs to generators that have registered with and
report verified generation to the tracking system.
The RECs issued are tradable legal instruments that
are used to verify ownership of the attributes of the
energy generation from the point of generation to the
point of use. The REC owner has the right to claim the
attributes of the renewable electricity.
States first created RECs to track compliance with
mandatory renewable energy targets for electricity suppliers (also known as state renewable portfolio standards),
and in some cases to verify electricity supplier statements to consumers about fuel mix and environmental impacts of
their electricity. Voluntary or non-regulatory markets and programs invariably require RECs as proof of green power
purchases, and the Federal Trade Commission has issued environmental marketing guidelines that require ownership
of RECs to substantiate commercial renewable energy claims. This substantiated claims guidance extends not only to
those who claim to be using renewable energy, but also to those who claim to be selling renewable energy, such as
renewable energy project developers.
Although there are differences in state definitions of RECs for compliance purposes, state rules and voluntary market
norms generally agree that the REC instrument provides a legal basis for making green power and other environmen-
tal claims. As such, RECs provide an essential accounting and tracking function in renewable energy and green power
claims.
In support of such claims, RECs convey information about each megawatt-hour of electricity generated and con-
sumed: not only whether it is renewable or green but also other details such as the type of fuel or resource used to
generate the electricity, air emissions created during generation, generator capacity, location and year the generator
began operation, month or quarter when the electricity on which the REC is based was generated, and other char-
acteristics associated with the generator and generation. These descriptive characteristics are usually referred to
as "attributes," and are important to documenting environmental claims and determining eligibility for programs or
financial incentives.
In addition to being essential to substantiate environmental claims, RECs help avoid double counting and claiming of
the same generation attributes by more than one party. RECs must include all relevant information on the generation
of their underlying green power including location, fuel type and month or quarter of generation. They must be tied
to 1 MWh of actual green power generation no matter how large or small the facility is or where the facility is located
relative to the consumer.
If the generator is not registered with a REC tracking system, and therefore RECs are not formally issued within a
tracking system, the generator nevertheless creates RECs or energy attributes with every megawatt-hour generated.
These RECs or energy attributes may be conveyed to another party by way of a contract. Generation must still be
measured and generator attributes verified. Without benefit of a tracking system, verification of ownership would be
proven through an independent chain-of-custody contract audit.1
This is also true in the case of self-generation where the consumer of the energy owns the generator that is not registered with a REC tracking system. The consumer-
owner of the generator may make green power usage claims based on the attributes of the generator, but the records of the generator and its output should be
documented and verifiable.
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Introduction to the Voluntary Market
Helping Consumers Identify Green
Power
Case Study: The Green-e program, administered by
the nonprofit Center for Resource Solutions, uses its
stakeholder-driven eligibility criteria to certify and verify
renewable energy products. Green-e has coordinated the
development of market-based, consensus definitions for
environmentally preferable renewable electricity and RECs.
Further details about third-party certification are available
in Chapter 10.
The voluntary market provides consumer choices,
particularly the ability to choose green power.
States can set their own renewable energy goals
and may mandate that utilities supply a specified
percentage of their electricity to customers from
renewable energy resources. Utility customers in
these markets purchase and receive renewable
energy as part of their standard electricity service
without any proactive measures on their part.
This buying and selling of renewable electricity
that simply meets a mandate and occurs because
of mandated utility purchases is known as the
"compliance market." In contrast, consumers who
choose to purchase renewable electricity above and beyond any minimum amounts that their state requires, as well
as above and beyond what is available through their standard electricity service in states that do not have renewable
energy mandates, participate in what is known as the "voluntary market."
When consumers choose to purchase green power above and beyond what is required or otherwise available, they
do so because they want to make a difference that goes beyond what would have otherwise occurred through a
mandate or as part of business as usual. These voluntary actions help increase the aggregate demand for renewable
electricity, and over time influence the way electricity is generated.
In the United States, RECs are the instrument used in compliance markets to verify that utilities are procuring and
delivering renewable energy in compliance with the state mandate and in the voluntary market to verify that volun-
tary purchasers are using green power in excess of the renewable electricity that otherwise would have been used to
meet state mandates. Voluntary and mandatory markets work alongside each other to create demand for renewable
energy. Renewable energy generation represented by RECs that is sold to a regulated entity to meet a mandate
should not also be claimed as a voluntary purchase, as this would double count the use and aggregated impact of the
renewable electricity.
Certification and Verification
The voluntary green power market is shaped by the dynamics of supply and demand with little regulatory oversight.
As a result, one major concern is ensuring that green power purchasers receive what they paid for and that RECs are
not claimed by more than one customer or buyer. It also can be difficult for consumers alone to substantiate claims
made about the quality and characteristics of green power products. To address these concerns, a best practice is for
consumers to purchase green power products that are certified and verified by an independent third party.
Third-party certification programs set minimum quality standards for green power products and can provide credi-
bility and confirmation of the product's environmental value. Certification allows customers to confidently state that
the purchased green power product has met the specific environmental and consumer protection standards adopted
by the certifying organization. A key aspect of certification is verification. Verification helps ensure that there is a
traceable pathway back to a known generator and that no other consumers can lay claim to the attributes from the
same megawatt-hour of generation. The verification process includes an audit to ensure that claims regarding envi-
ronmental and non-energy benefits associated with the purchase are accurate.
2-5
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Tracking Systems
Certificate tracking systems account for RECs and ensure that RECs are only held by one organization. These tracking
systems issue RECs based on verified generation, track ownership as RECs are sold and purchased, and track REC
retirements as the RECs are claimed or used by the organizations that own them. Tracking systems assign a unique
identification number to each REC to ensure that only one REC is issued for each megawatt-hour of generation
reported, thereby minimizing double issuance. In this way, REC tracking systems, together with certification, facilitate
and simplify the verification of green power purchases and claims for consumers.
While not all green power purchases are processed through certificate tracking systems (e.g. RECs can also- be
created and transacted in bilateral contracts without benefit of a tracking system), consumers may wish to purchase
green power substantiated with RECs that are specifically issued and tracked in such systems to gain confidence
in the standardization, enforceability and transparency of their green power purchases. The transfer of renewable
attributes through bilateral contracts can be verified and traced based on attestations that accompany the contracted
attributes. Attestations help ensure that only a single entity can legally claim the renewable attributes at a time. For
more details about third-party certification and verification, and certificate tracking systems,, see Chapters 6 and 10.
2-6
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The Benefits and Costs of Green
Power
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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DOCUMENT MAP
Summary
Chapter 1. Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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Green power can offer organizations a variety of environmental, economic and stakeholder relations benefits. Green
power purchases can also support the development of domestic renewable energy, which creates jobs, promotes
resource diversity and provides grid resilience. This chapter is intended to help buyers understand the benefits and
costs associated with purchasing green power. The focus here is on the universal benefits and costs that are synon-
ymous with all forms of green power. Chapter 4 compares the specific benefits and costs associated with different
green power supply options.
The Benefits
Green power provides benefits both directly and indirectly to the buyer. The benefits listed here are grouped into four
categories:
¦ Environmental benefits
¦ Economic benefits to the purchasing organization
¦ Stakeholder relations
¦ Development of domestic energy resources
Environmental Benefits
Reduce organizational carbon footprint. Organizations that purchase low- or zero-emissions green power may
claim to be reducing indirect (or Scope 2) emissions associated with purchased electricity—emissions that are owned
and are the direct responsibility of the utility or other owner of the generating facility, but that are the indirect respon-
sibility of the consumers of the electricity produced. Although consumers cannot directly control the generating
facility that produces their electricity, they can influence the generator indirectly through their demand side choices.
This is especially useful if the organization is accounting for its emissions through an inventory using the Greenhouse
Gas (GHG) Protocol Corporate Reporting Standard.
Reduce air pollution. Conventional electricity generation from fossil fuels is one of the single largest industrial
sources of air pollution (for sulfur dioxide, nitrogen oxides, mercury and certain types of particulate matter) in the
United States.12 The emissions from conventional electricity generation contribute to a number of serious envi-
ronmental problems. Green power generates fewer emissions than conventional power, helping to protect human
health and the environment. According to a study by the Lawrence Berkeley National Laboratory and the National
Renewable Energy Laboratory, emission reductions from each megawatt-hour of new renewable generation pro-
duced health and environmental benefits ranging from $26 to $101 per megawatt-hour (MWh).3
Reduce water environmental impacts. Most green power technologies do not consume water and have a negligible
impact on local aquatic ecosystems.4 Conventional power generation often requires water for fuel extraction, steam
production and power plant cooling. The release of spent cooling water increases the temperature of local water
resources, which can alter aquatic ecosystems. In contrast, most green power systems do not consume water or
release it into the environment. A joint study by two national laboratories found that adding new renewable electricity
1 U.S. Environmental Protection Agency, (n.d.). Air pollutants emissions trends data: Average annual emissions. Retrieved from h11ps://www.epa.qov/air-emissions-
inventories/air-pollutant-emissions-trends-data
2 U.S. Environmental Protection Agency, (n.d.). Mercury and Air Toxics Standards: Cleaner Power Plants. Retrieved from https://www.epa.qov/mats/cleaner-power-plants
3Wiser, R„ Barbose, G„ Heeter, J., Mai, T„ Bird, L, Bolinger, M„ Carpenter, A., Heath, G„ Keyser, D„ Macknick, J., Mills, A., and Millstein, D. (2016). A retrospective analysis
of the benefits and impacts of U.S. renewable portfolio standards. Lawrence Berkeley National Laboratory and National Renewable Energy Laboratory. (Publication No.
NREL/TP-6A20-65005). Retrieved from http://www.nrel.qov/docs/fv16osti/65005.pdf
4 International Energy Agency. (2012). World energy outlook 2012 (pp. 501-511). OECD/IEA. Retrieved from http://www.iea.org/publications/freepublications/publication/
WE02012 free.pdf
3-3
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to the grid resulted in water savings equivalent to 8,420 gallons of withdrawal and 270 gallons of consumption for
each megawatt-hour produced.5
Emissions and water benefits of renewable electricity generation for state renewable portfolio standard (RPS) pro-
grams through 2013 were examined in a recent Lawrence Berkeley National Laboratory study, with results shown in
Figure 3-1.
in
00
CO
I—
u
2
Figure 3-1. Environmental Benefits and Impacts of New Renewable Electricity as Evaluated
to Meet 2013 RPS Compliance8
GREENHOUSE
GAS EMISSIONS
reduced by
459 million
metric tons
equivalent to
$2.2 billion
benefit (2.2t/kWh-RE)
Estimates span $0.7 billion to
;6.3 billion (0.7 to 6.4«/kWh-RE)
SULFUR
DIOXIDE
reduced by
-177,400
metric tons
NITROGEN
OXIDES
reduced by
143,900
metric tons
equivalent to
$5.2 billion
benefit (5.3t/kWh-RE)
PARTICULATE
MATTER 2.5
reduced by
4-4,800
metric tons
o
JOBS
supported nearly
200,000
gross domestic
RE jobs
drove over
$20 billion
in GDP
Estimates spar) $2.6 billion to $9.9 billion (2.6 to lD.W/kWh-RE
reduced electricity
consumer bills by
WHOLESALE
ELECTRICITY
PRICES
$0 - $1.2
billion
(Ot- 1.2U/
kWh-RE)
WATER
USE
Consumption reduced by
4 27 billion
gallons
withdrawal reduced by
4830 billion
gallons
©
NATURAL
GAS
natural gas prices
lowered by
$0.5 - $1.14
/MMBtu
equivalent to consumer
savings ranging from
$1.3-$3.7
billion
(1.3* - 3.7
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power to become more affordable to more organizations. To illustrate the recent cost reductions, Figure 3-2 shows
that the installed cost of solar has decreased from $8- $12/watt in 2000 to $2-$4/watt in 2016. Similar dramatic cost
reductions have been seen for wind technologies. In some situations, wind and solar are now cost-competitive with
conventional energy.
Manage electricity prices. Organizations can procure green power through long-term contracts to safeguard against
expected electricity prices increases by locking in fixed costs for their electricity and the associated renewable attri-
butes for several years at a time.
Mitigate fuel supply disruptions. Disruptions in fuel supply can hinder business processes and profitability. Green
power resources can reduce the impact of fuel supply disruptions to power plants caused by transportation diffi-
culties, accidents or natural disasters by lowering demand for fuels that are delivered by rail or pipeline. In addition,
on-site self-generation or third-party owned generation, coupled with storage, can improve electricity supply reliabili-
ty and resilience in response to local power outages.
Figure 3-2. Cost of Installed Solar7
Non-Res. >500 kW,
Residential
Median Installed Price
Note Solid lines represent median prices, while shaded areas show 20th-to-80th percentile range. See Table 4-1 for annual samples sizes. Summary statistics shown only if at
least 20 observations are available for a given year and customer segment.
7Barbose, G„ Darghouth, N., Millstein, D„ LaCommare, K„ DiSanti, N„ and Widiss, R. (2017). Tracking the Sun 10: The installed price of residential and non-residential
photovoltaic systems in the United States (p. 15). Lawrence Berkeley National Laboratory and U.S. Department of Energy SunShot. Retrieved from https://emp.lbl.aov/
sites/default/files/trackina the sun 10 report.pdf.
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Case Study: Stabilizing Electricity Price with a Physical PPA
In 2014, George Washington University (GW), American University (AU) and George Washington University Hospital
(GWUH) entered into a 20-year power purchase agreement with Duke Energy Renewables for the energy from a
52-megawatt solar photovoltaic project in North Carolina. The solar energy will power more than half of GW's and AU's
electricity needs and more than a third of GWUH's need. Equally important, the agreement provides fixed pricing for the
solar energy at a lower total price than current power solutions and is expected to yield greater economic savings for the
partners as traditional power prices are anticipated to increase at a higher rate over the same period. The project will help
GW, AU and GWUH meet their climate action plan commitments without incurring additional costs.
Stakeholder Relations
Meet organizational environmental objectives. Reducing an organization's environmental impact is one of the
main motivations for buying green power. This may be driven internally by employees and shareholder initiatives,
and externally by a desire to improve brand image and perception of the organization among its stakeholders and
customers. If an organization is interested in creating a third-party certified environmental management system
(e.g., ISO-14001 certification for environmental performance) or is preparing for LEED (Leadership in Energy and
Environmental Design) certification for its building or facilities, purchasing green power could be important for attain-
ing the certification standards.
Increase brand credibility through recognized initiatives. Participating in collaborative programs improves the
environmental credibility of the organization and may help in attracting new investment. Below are a few examples:
¦ The U.S. Environmental Protection Agency's (EPA's) Green Power Partnership is a voluntary program that
encourages organizations to use green power to reduce the environmental impacts of electricity use. This
partnership tracks an organization's performance in use of green power. In return for technical assistance and
recognition, Partners commit to use green power for all, or a portion, of their annual electricity consumption.
¦ The Sustainable Purchasing Leadership Council is a nonprofit organization whose mission is to support and
recognize purchasing leadership that accelerates the transition to a prosperous and sustainable future.
¦ RE100 is a collaborative, global initiative of influential businesses committed to attaining 100 percent renewable
electricity use, with a focus on dramatically increasing corporate demand for renewable energy.
¦ CDP (formerly the Carbon Disclosure Project) works to improve corporate awareness through measurement and
disclosure as a way to effectively manage carbon and climate change risk. CDP encourages companies and cities
across the world to measure and disclose their environmental information.
¦ The Global Reporting Initiative (GRI) is an international, independent organization that helps businesses, gov-
ernments and other organizations understand and communicate the impact of business on critical sustainability
issues using the GRI Guidelines, which enable organizations to measure and understand their most critical
impacts on the environment, society and the economy.
¦ The Center for Resource Solutions' Green-e program for renewable energy certification can help organizations
purchase green power with confidence, as the program sets standards for voluntary green power and certifies
retail green power products.
Demonstrate civic leadership. Being among the first in a community to purchase green power is a demonstration
of civic leadership. It makes a statement that an organization is willing to act on its stated environmental and social
goals. Committing to green power can also demonstrate a company's willingness to innovate and reduce long-term
business risk. 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 benefit from being responsive to the concerns of
environmentally conscious customers, shareholders, regulators and other constituents. Programs promoting green
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power, such as EPA's Green Power Partnership or the Center for Resource Solutions' Green-e Program provide assis-
tance in reaching broad audiences to convey the benefits of green power purchases.
Corporate Motives to Pursue Renewables
A 2016 survey of corporate participants on motives to pursue renewables indicates that most companies view their
renewable energy purchases as part of a larger commitment to meet corporate sustainability goals. The survey results for
corporate motives are shown below:
Sustainability goals 85%
Attractive ROI 76%
Electricity price hedging 59%
Enhanced corporate reputation 54%
Reduced supply risk | 13%
Keep up with competitors | 9%
Source: O'Shaughnessy, E., Heeter, J., Liu, C., and Nobler, E. 2016. Status and trends in the U.S. voluntary green power
market (2015 data). National Renewable Energy Laboratory. Retrieved from https://www.nrel.gov/docs/fy17osti/67147.pdf,
p. 36, citing PWC study.
Improve employee recruitment and retention. Leadership on renewable energy may improve employee morale,
productivity, retention and talent acquisition. A Tandberg-lpsos MORI survey report of employees in 15 countries
showed 80 percent of survey respondents (81 percent in the United States) preferred to work for organizations with
an environmentally friendly reputation. A McKinsey survey found that company executives in the sustainability
leaders' group (companies that are more adept at capturing value through sustainability) more often report that
sustainability is important for attracting and retaining employees than respondents at other companies. A University
of California - Los Angeles study found that for companies that voluntarily adopt green practices and standards,
employees are 16 percent more productive than average.
Improve student recruitment and enrollment. In an annual survey of college applicants and their parents, the
Princeton Review found that "a majority (61 percent) of respondents said having information about colleges' commit-
ment to environmental issues would contribute 'strongly,' 'very much,' or 'somewhat' to their application/attendance
decisions." Underlining the point, the Princeton Review also ranks the Top 50 Green Colleges and reports sustainabili-
ty information for over 300 more schools in the Guide to Green Colleges.
Differentiate products or services. By purchasing green power, a company may be able to differentiate its products
or services by offering them as "made with certified renewable energy." For example, businesses and consumer
goods recognized by the Center for Resource Solutions' Green-e program can display the Green-e logo on their
company websites and product packaging to indicate use of 100 percent certified green power in the manufacturing
of the product.8 Some companies also find that producing their products with green power gives them an advantage
in marketing to customers who are trying to "green" their supply chains. For example, Steelcase, a furniture manufac-
turer, uses a scorecard to grade suppliers' performance, including a sustainability metric. One of the scorecard's listed
best practices is purchasing renewable resources. Steelcase has also helped suppliers negotiate volume pricing for
purchasing renewable energy certificates (RECs).
8 Green-e certifies both renewable energy products (sold by utilities and other energy suppliers and marketers) and companies and products (consumer goods) that use
or are made with certified renewable energy.
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Case Study: Demonstrating Community Leadership
In 2013, Maplewood, Missouri, undertook a GHG inventory of the city as a first step in developing a GHG emissions
reduction action plan. Two years later, the city's sustainability commission and city government launched the Maplewood
Green Power Community Challenge to motivate local government, businesses, and citizens to install solar or purchase
renewable energy certificates, with the goal of qualifying as an EPA Green Power Community. When the challenge began,
the goal was to match 3 percent of the city's energy use with green energy. The residents and businesses of Maplewood
showed such overwhelming support of the Green Power Challenge that they doubled the original goal and are now
matching 6 percent of the community-wide total electricity use with green power. Led by the city government and the
Maplewood-Richmond Heights School District, there are approximately 200 homes supporting green energy either by
installing solar or participating in the local utility's Pure Power program. About 20 Maplewood businesses are purchasing
RECs, installing solar, or a combination of the two. In 2016, EPA named Maplewood the Green Power Community of the
Year.
Development of Domestic Energy Resources
Stimulate domestic economy. Manufacturing, installing and operating renewable technologies in the United States
requires a trained energy workforce. By purchasing green power, organizations increase aggregate demand, leading
to creation of high-quality, high-paying jobs that can help grow the local economy (see Figure 3-3). Renewable
energy facilities can also increase the local tax base and provide income to farmers and rural communities, who
can benefit through landowner lease payments. Green power generation is an important growth sector that can
simultaneously boost the nation's economy and create jobs, while also meeting the nation's energy requirements with
renewable domestic resources.
Figure 3-3. U.S. Jobs by Electric Power Generation Technology, Q2 2015 to Q120169
400
Solar Wind Geothermal Bioenergy Low Traditional Nuclear* Fossil Advanced Other
/CHP Impact Hydro* Fuels Gas
Hydro
*Note: Hydro and Nuclear increases due to resolving suppression errors in 2015.
*Note: The methodology was revised in 2016 to capture subcontractor employment in Nuclear and Traditional Hydro, employment totals are not reflective of growth year
over year. Job figures in chart are only related to electric power generation and associated technologies.
9 U.S. Department of Energy. (2017). US. Energy and Employment Report. Retrieved from https://www.enerav.aov/downloads/2017-us-enerav-and-emplovment-report.
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The Costs
There are several factors that can affect green power costs; most of them depend on the choices an organization
makes. These factors include the following:
¦ Green power product option (discussed more in Chapter 4)
¦ Green power supplier (e.g., competitive bid or not)
¦ Renewable resource and technology type (e.g., wind, solar, hydro, biomass)
¦ Quantity of green power purchased
¦ Duration and terms of contract
¦ Available incentives for green power
¦ Location of the generator or consumer
Figure 3-4 illustrates the levelized costs of renewable and fossil fuel technologies and shows that several clean energy
technologies are now cost-competitive with conventional energy sources.10 Despite this progress, the product type an
organization chooses can make a big difference in cost and in how that cost is incurred. For example, even if the extra
cost is low, purchasing unbundled RECs still comes at a cost premium on top of the standard electricity cost to the
consumer. The same is usually true for purchases of green power from a utility.
In contrast, the competitive costs for some renewable energy technologies shown in Figure 3-4 have made self-gen-
eration and long-term contracts or direct purchasing from generators more accessible to an increasing number of
organizations.
For example, while self-generation can require a major capital outlay that varies significantly depending on the size
of the installation, that cost can be recovered over time through stable and, in some cases, lower ongoing operating
costs.
Long-term contracting for electricity supply avoids the upfront capital cost and may also provide competitive and
predictable electricity costs depending on the contract terms. In some states, solar companies will capitalize, own and
install a solar project at an organization's site with a commitment from the host organization to purchase the output
over a period of years. Alternatively, creditworthy large energy consumers may be good candidates for long-term
contracts for off-site green power supply from the utility grid. The risk with long-term contracts is that future electric-
ity prices may turn out to be lower than expected, and the organization is locked in to the higher price specified in the
contract. Some contracts can specify which party accepts the market risk for higher electricity prices.
These procurement or product options may allow for cost savings over the life of the project or contract. Chapter 6,
Contracting for Green Power, suggests methods for minimizing green power purchase costs as part of a procurement
plan.
10 Levelized cost of electricity (LCOE) is used to compare the relative cost of energy produced by different energy-generating sources, regardless of the project's scale or
operating time frame. LCOE is a calculation accounting for all of a system's expected lifetime costs (including construction, financing, fuel, maintenance, taxes, insurance
and incentives), which are then divided by the system's lifetime expected power output (in kilowatt-hours). All cost and benefit estimates are adjusted for inflation and
discounted to account for the time-value of money.
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Figure 3-4. Levelized Cost of New Power Generation Technologies in 201611
">>
O)
Solar PV—Rooftop Residential
Solar PV—Rooftop C&l+
Solar PV—Community
Solar PV—Utility Scale Crystalline'21
Solar PV—Utility Scale Thin Film'21
Solar Thermal Tower with Storage'31
Fuel Cell+
Microturbine+
Geothermal
Biomass Direct
Wind
$85
$76 ^^^^^^^^¦$150
$461 $53 #$82(4)
o
c
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Csl
00
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•
00
.1
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4-1
<
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$55 ^^^^^^H$114
$30^^® $60 #$113(6)
re
c
Diesel Reciprocating Engine'7)+
Natural Gas Reciprocating Engine'S)+
Gas Peaking
IGCC'9'
Nuclear"01
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Gas Combined Cycle
$197 $281
$68 $106
$156 ^^^^^H$210
o
C
%
c
o
$112 $183
u
$60 $143
$42 $78
$0 $50 $100 $150 $200 $250 $300 $350
Levelized Cost ($/MWh)
Note: Here and throughout this presentation, unless otherwise indicated, analysis assumes 60% debt at 8% interest rate and 40% equity at 12% cost for conventional and Alternative Energy generation technologies. Reflects global, illustrative
costs of capital, which may be significantly higher than OECD country costs of capital. See "Unsubsidized Levelized Cost of Energy—Cost of Capital Comparison" page for additional details on cost of capital. Analysis does not reflect potential
impact of recent draft rule to regulate carbon emissions under Section 111(d). See Appendix for fuel costs for each technology.+ Denotes distributed generation technology. REC Prices
11 Lazard. (2017). Lazard's Levelized Cost of Energy Analysis—Version 10.0. Retrieved from https://www.lazard.com/media/450337/lazard-levelized-cost-of-enerqy-version-110.pdf.
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REC Prices
The premiums associated with green power were originally conceptualized as representing the incremental cost of
the renewable resource above the utility's "avoided cost," meaning the cost of building the next power plant the utility
will need, discounted to today's present value. This avoided cost can be quite low, hence, many green power products
available from utilities today are offered at a price premium over the retail electricity price.
However, trading of RECs separate from electricity has led to pricing that is based more simply on the supply of and
demand for RECs. In a competitive voluntary national market, RECs have become commodities, and REC supply
currently exceeds demand nationally. This has driven wholesale REC prices down in recent years'. Figure 3-5 below
tracks the wholesale prices of wind RECs traded in voluntary markets from 2009 to 2015, as reported by REC brokers.
These wholesale prices typically reflect large quantity transactions of national wind RECs. The REC price in a retail
transaction may be 5-10 times higher, depending on the volume purchased, the resource type and the location of the
generator.
Regional prices may also vary, especially where there is competing demand for RECs to satisfy utility mandates to
acquire and supply minimum percentages of renewable energy or where specific renewable resources may not exist
(i.e., low-impact hydropower).
If an organization owns the green power generating facility and keeps the RECs, there is no additional cost for RECs.12
In certain direct or retail purchase options, the acquisition of RECs may be built into the cost of long-term contracts.
Ownership of RECs in this case is the result of contract negotiation. Because the price is not reported and may not
even be separately specified, there is no visibility into REC prices for such transactions.
Figure 3-5. Trends In Voluntary National Wholesale Wind REC Prices13
1.5
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-C
s
^ 1.0
v-/
O
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k.
Q_
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LU
0.0
2010 2012 2014 2016
12 In many cases, on-site generation is owned by a third-party, who (as project owner) may choose to sell the RECs to someone else. Organizations hosting on-site projects
but contracting for the power should make sure the contract is explicit about which party owns the RECs if the hosting organization wishes to claim it is using green
power
130'Shaughnessy, E, Heeter, J., Cook, J„ and Volpi, C. (2017) Status and Trends in the U.S. Voluntary Green Power Market (2016 data) (p 21) National Renewable Energy
Laboratory https://www,nrel,gov/docs/fv18osti/70174.pdf.
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Contracting Challenges
Purchasing green power can be challenging, depending on the supply options available and the local regulatory
environment. If an organization chooses to pursue long-term contracting, for example, it will incur transaction costs
stemming from soliciting and vetting bidders, negotiating contracts and obtaining legal advisory services. These
types of procurements are customized agreements.
If an organization chooses to pursue generation that it owns and operates, it will need to ensure site control (if off-
site), undertake engineering feasibility studies, determine equipment size and type, obtain permits, design and specify
the installation, secure a vendor, and contract for installation as well as operations and maintenance. If the project
is on-site, but owned by someone else, the organization hosting the project may face many of the same challenges
pertaining to long-term contracts and will need to address concerns about how the installation will affect the building
or the facility's operations.
Although organizations purchasing green power for the first time may need to invest extra effort to learn about
the market and available options, these costs often decrease significantly over time as the buyer gains experience
with the process. Following the information and strategies provided in this guide, particularly Chapter 6, 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 Considerations
Organizations can ensure the credibility of their green power purchase by buying green power as part of a broader
environmental management strategy or program, as well as by working with third-party organizations for indepen-
dent auditing, certification, endorsement and minimum purchasing benchmarks.
Organizations purchasing green power can experience public relations and internal challenges, which can fall into the
following categories:
Conceptual. Some people may struggle to understand that the REC market instrument represents the
intangible environmental attributes of generation. RECs are an inherently separate commodity and also trade
separately from physical electricity. Nevertheless, RECs are the legal accounting instrument in the U.S. market
for voluntary green power use and purchasing, and they are supported in GHG accounting guidance and state
RPS policies. Their validity to representing the conveyance of environmental attributes of green power is also
founded in case law. Educating stakeholders about how purchases of specified electricity work in electricity
markets can help, and sourcing green power from projects within the organization's local electricity grid may
help minimize confusion.
Purchase credibility. Questions about whether an organization really receives what it claims it bought can be
easily addressed through greater transparency. Example efforts to improve credibility and transparency include
purchasing renewable energy that is certified and verified by third-party certification programs and use of
facilities whose RECs are tracked in independent electronic tracking systems.
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Market impact. Some stakeholders may struggle to understand or accept the benefits of a national renewable
energy market in which new development and generation of renewable energy will depend on sufficient
demand. They may be concerned that purchasing green power from existing renewable facilities does not have
a big enough impact on the overall supply of renewable energy due to current national levels of supply and
demand of RECs. Iff these concerns are important to an organization, it may want to emphasize purchases from
new facilities or leverage its resources to help a new renewable facility get built. This may offer added repu-
tational benefits beyond the core renewable energy usage and emissions rate offered by all REC-based green
power supply options.Bi
14 Center for Resource Solutions. (2016). How renewable energy certificates make a difference: The impacts and benefits of buying renewable energy. Retrieved from
https://resource-solutions.orq/wp-content/uploads/2016/03/How-RECs-Make-a-Difference.Ddf
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CHAPTER
Green Power Product Options
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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Green power can be procured in several different ways, however, all forms of green power supply and consumption
include renewable energy certificates (RECs). If an organization chooses to purchase green power they may procure
it from a local distribution utility, from competitive power suppliers, or directly from a renewable energy generator,
depending on regulatory conditions in the state. Even in states where there are no green power retail suppliers and
the utilities do not offer a green power option, any organization in the United States can buy RECs as a stand-alone
product, "unbundled" from the organization's electricity purchases. For organizations considering owning or leasing
green power generation facilities, the energy resources (e.g., solar, wind, biomass) available at the proposed gener-
ation site are an important initial consideration in determining a project's feasibility. Self-generation is not limited to
on-site opportunities such as rooftop solar photovoltaic. Large organizations in particular might consider owning off-
site generation where project siting may be more cost-effective and resource options more abundant.
The range of supply options in the market provides considerable flexibility. Organizations can consider factors such as
price, long-term cost savings, generation resource type (e.g., wind versus solar), ease of procurement, the direct and
indirect effect of their demand-side choices, and the location of the generating facility in their purchasing decisions.
With these choices, organizations can usually find a green power product that will meet their desired goals.
Chapter 2 introduced the REC and emphasized its role as the tracking and accounting instrument for generation and
use of renewable energy. As the basis for claiming and allocating the usage of renewable energy and its environmen-
tal attributes, ownership and retirement of RECs are essential with each green power option discussed in this chapter
and all green power purchasing options in the United States. As discussed in more detail below, RECs are also offered
as a stand-alone purchase option or product. When discussing these options and RECs in particular, it is important to
clarify when one is referring to RECs as a tracking instrument essential to all green power product options, or to RECs
as a stand-alone or unbundled product offering. It is also important to note that all supply options include RECs which
convey ownership of the attributes and the right to claim renewable energy usage on a shared grid.
This document identifies six general green power supply options, including four types of green power purchase
options and two types of self-generation options, as shown in Figure 4-1. Several of these options are described in
more depth in Appendix B, Commercial Solar Financing Options.
Figure 4-1. Voluntary Green Power Supply Options
Blocks
Percent of Use
Self-Generation
Purchase Options
Green Tariff
(Sleeve)
Off-Site
Unbundled
REC
Product
Utility & Retail
Provider
Options
Financial
Contracts
On-Site
(Behind-
the-Meter)
Power
Purchase
Agreement
Community
Choice
Aggregation
Direct
Purchase
Options
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Purchase Options
Unbundled REC Products
Customers can buy green power in any quantity of megawatt-hours by purchasing RECs separately from electricity
- an unbundled product option. Purchasing a standalone REC product allows organizations to effectively self-bundle
the renewable energy attributes associated with the RECs with the organization's consumed physical electricity.
This is in contrast to a supplier that sells a green power product that includes both the electricity and RECs bundled
together, as in the case of either a retail green power product from your electricity supplier (i.e., utility) or alternatively
through the direct purchase from a specified generator.
In purchasing unbundled RECs, organizations can claim receipt of the environmental attributes of the REC-generating
facility (or facilities) without affecting their physical electricity purchase and delivery options. Unbundled REC pur-
chases can be scoped to meet an organization's electricity usage over any period of time, but monthly and annual
contracts have historically been the most common transaction periods. Unbundled purchases may also be arranged
as a percentage of monthly or annual electricity consumption or as a long-term fixed price contract.
Unbundled products provide versatility, making renewable electricity available to all grid consumers regardless of the
location of the generator or consumer on the grid. Unbundled RECs also offer purchasers the flexibility to purchase
renewable energy from any provider rather than being limited to a local electricity supplier. This expanded availability
and ease of participation creates a larger market that supports market efficiencies, scalability and lower transaction
costs, because a single REC purchase can cover a wide operational footprint through a single transaction. Due to their
ease of acquisition, unbundled REC procurements often serve as an entry point for organizations entering the green
power market. As they gain experience, organizations may become more interested in other supply options, such
as self-generation or direct purchase from a green power project, in order to achieve cost savings or to have a more
direct impact on increasingly incremental supply. Organizations may also pursue a combination of supply options that
includes unbundled RECs to cover certain parts of their operations.
Purchasing unbundled REC products provides significant flexibility but also entails net premium expenditures in addi-
tion to electricity costs incurred by the organization, so this option does not yield cost savings. Because unbundled
RECs are separate from electricity purchases, they cannot help purchasers hedge against increases in future electrici-
ty costs.
Dual Purposes of Renewable Energy Certificates
A REC is a tradable certificate that represents the generation of 1 megawatt-hour (MWh) of electricity from a renewable
energy source. RECs serve two distinct purposes. One is as a tracking instrument essential to all renewable energy and
environmental claims. The other is as a product option that may be purchased separate from electricity.
RECs as Accounting Instruments: All green power purchases are based on the ownership of RECs, which represent the
environmental attributes associated with green power. Hence, an organization's claim that it uses green power can be
substantiated only through the ownership and retirement of RECs. If an organization uses electricity from a renewable
resource without also owning and retiring the REC, it is not considered to be using renewable electricity. Some renewable
energy projects are not formally issued RECs by a tracking system and in these cases the project still produces environ-
mental attributes in megawatt-hour increments that must be owned in order to substantiate green power use.
RECs as a Product Option: RECs may be purchased separate from electricity ('unbundled") as a way to buy green power.
Organizations that buy unbundled RECs match them to all or a portion of their electricity used and may claim to be using
green power with the attributes of the RECs.
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Utility Retail Options
Customers may be able to buy green power from their local electricity supplier. Green power is an optional service
offered by many utilities and competitive suppliers to allow customers to support a greater level of investment in
renewable energy, often by paying a premium on their electric bills. In some states where retail electric choice is
permitted, customers can switch electricity service providers if their current provider does not offer a green power
product.
Utility supply options involve the sale of both the RECs and electricity as a single commodity product within the same
utility bill. Some utilities may buy unbundled RECs and bundle them with their electricity service as green power. In
some cases, the renewable electricity generator could be owned either by the utility itself or by a third party, but the
customer purchases the REC-substantiated electricity from the utility. With the first two utility product options below,
the transaction process is easy, but the product is usually sold at higher cost than conventional electricity supply. The
third option below demands more involvement and transactional effort, but may afford other benefits. Utility product
options typically include the following:
¦ A block option is a fixed energy quantity, often 100 kilowatt-hours, of 100 percent renewable electricity, offered
for a fixed monthly price. The price is usually expressed as a price premium above the price of conventional
power. Customers usually can sign up for as many blocks as they desire.
¦ Percentage of monthly use is an approach whereby customers may choose green power in an amount based
on a fixed percentage of their monthly electricity use. In practice, this usually results in the purchase of blended
green and conventional power, unless the customer chooses 100 percent green power. This is typically priced
as a premium on a "cents per kilowatt-hour" basis over the standard rate. The monthly cost for these products
varies with use and the percentage of green power chosen.
¦ A green tariff describes an arrangement by which regulators authorize a utility to negotiate a long-term contract
for green power with an individual large customer. The traditional green tariff form is sometimes called a
"sleeve" because it is a contract within a contract: the utility enters into a long-term contract with a third-party
green power generator, and in turn contracts with the customer to purchase the RECs and electricity. Green
tariffs can take several forms under a green tariff arrangement with the utility, renewable generator and green
tariff customer taking different roles relative to each other in the transaction.
In "sleeve" contracts, the utility provides the balancing power, distribution infrastructure and transactional ser-
vices to the customer served by the green tariff. In this way, the utility meets its customer demands and retains
revenue, while the customer can access green power without regulatory and transactional constraints.
Some utilities have begun using a new form of green tariff, where the utility procures the long-term contract
with the third party green power generator and allows multiple large customers to sign up for just a slice of the
larger project. With these products, customers all have the same commercial terms and do not negotiate as
many complexities.
In states where retail access to generators is not authorized, green tariffs are an effective way for utilities to
facilitate renewable electricity purchases for their customers. Usually, the utility is required to recover all costs of
the long-term contract with the third party green power generator from the purchasing customer, to ensure that
other utility customers do not bear any of the costs (or share the benefits) of the long-term contract.
Community Choice Aggregation (CCA)
A CCA is formed in accordance with a state policy that enables local governments to aggregate electricity demand
within their jurisdictions and contract for electricity supply (often renewable energy) to serve that demand.
Meanwhile, the existing electric utility maintains transmission and distribution services. CCAs are not authorized in all
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Case Study: Engaging a Utility
One-on-One to Achieve an
Organization's Specification
Google has worked with its local utilities to
negotiate customized one-on-one renewable
off-takes, resulting in the purchase of 48 MW of
wind energy from the Grand River Dam Authority
(GRDA) for Google's Oklahoma data center, and
up to 407 MW of wind from MidAmerican Energy
for its Iowa data center facilities. Instead of
Google buying energy directly (via a power pur-
chase agreement (PPA)) from the developer who
built the wind farm, the utilities enter into PPAs
with local wind farms, and Google has agreed to
a long-term purchase agreement with the utili-
ties—essentially, a PPA within a PPA, or a sleeve
contract. This approach places responsibility for
integrating the output from the wind farms on
the utility. The agreement calls for Google to pay
GRDA a premium for the renewable energy.
states. As of this writing, they are authorized in California, Illinois,
Massachusetts, New Jersey, New York, Ohio and Rhode Island.
The CCA often sources local renewable energy generation,
contributing to the support of local employment and economic
development. Depending on the renewable sources, aggregated
demand and state incentives, the electricity rates of the CCA
may add or remove net expenditures to an organization's elec-
tricity bill. In most cases, all customers in the CCA community
participate by default, unless they choose to "opt out" of the
program. Local governments periodically reassess CCA costs
and benefits and can either modify or stop offering CCA con-
tracts altogether. Hence, it is important to note that the
availability of CCAs in the long-term is unknown and decisions
regarding the green power itself are out of the control of the
electricity consumer. Some CCAs have also been known to buy
renewable power that traditionally has not been desired by the
voluntary green power market.
Direct Purchase Options
In some states, organizations can contract directly with a specific third-party owned generator to obtain green power.
Direct purchase options include both physical power purchase agreements (PPAs) and financial PPAs. Both types of
arrangements offer an organization a tangible and clear association with a specific renewable energy facility.
Physical PPA. PPAs are long-term contracts (often 10 to 20 years, but sometimes longer or shorter) between the
organization purchasing renewable electricity and a party that generates that electricity. The renewable energy
generator can be on-site or off-site, but the buyer must be located in the same power market to allow for physical
delivery of electricity. The contract specifies the electricity price (generally a long-term rate with a price escalation
clause), the schedule for the delivery of electricity, and the transfer of RECs from the generator (seller) to the purchas-
er. The purchaser must ensure the RECs are included in the PPA for the electricity to be considered renewable and to
substantiate green power use and environmental claims.
Physical PPAs are not available in all markets due to state regulations. In states without retail access, end-use con-
sumers are not allowed to purchase directly from green power generators. Also, solar installers may be reluctant to
offer third-party ownership and solar PPAs in states that do not shield them from regulation as a utility. Purchasing
organizations will need to determine from state utility regulators whether PPAs with non-utility owners are an option.
The benefit of PPAs are that they require little capital investment on the part of the purchasing organization, offer
certainty of electricity cost and allow for the accrual of savings often within the first year.
It should be acknowledged that physical PPAs also present risks to the purchaser because they are a bet that future
electricity prices will be higher than the PPA negotiated price. If electricity prices go lower than expected, the
purchaser will forgo savings. Organizations could find that they are stuck with a PPA price that exceeds what others
are paying. The underlying assumptions that go into determining the PPA price are often key to whether it will offer
savings to the purchaser organization.
Financial PPA. A financial PPA, also known as a virtual PPA (VPPA) because the energy is not delivered to the buyer,
is a long-term contract in which a generator and purchaser agree on a reference electricity settlement price (the
"strike price," which may include an escalator rate). The electricity generated by the project is sold into a wholesale
regional power market where the generator is located rather than delivered to the buyer, and therefore the buyer's
consumption of electricity can occur in a different power market than where the renewable energy generator is
located, including in a traditionally regulated retail electricity market.
-------
In a financial PPA, any difference between the settlement price and the wholesale market price is balanced by both
transacting parties over the life of the contract. On a monthly basis, if the generator earns more from the wholesale
market than the strike price, it pays the extra revenue to the purchaser; if the generator earns less than the strike
price, the purchaser makes up the difference to the generator. Hence, this option is also referred to as a contract for
differences.
The financial PPA is a hedge for both parties, ensuring fixed revenue to the seller and fixed costs to the buyer. As a
green power purchase option, a financial PPA of necessity must convey RECs to the buyer. In essence, a financial PPA
is a hedge against rising electricity prices combined with an unbundled REC contract, where the cost of RECs varies
depending on the difference between the wholesale market price and the agreed upon settlement price. In order for
the contract to have a hedge value, there must be correlation between the wholesale market where the renewable
energy project sells its electricity and the retail market where the buyer consumes their electricity.
As with a physical PPA, a financial PPA does not protect the buyer against the risk of lower retail electricity prices.
(Similarly, the seller is protected against lower wholesale market prices, but would miss out on extra revenue from
higher retail electricity prices.)
Some of the advantages of financial PPAs are as follows:
¦ Organizations may be able to obtain long-term cost stability even when they are located in states that do not
allow retail choice and they lack authorization to transact physical PPAs in the market where they operate.
¦ The organization entering a financial PPA can continue to purchase electricity at retail from its usual supplier.
¦ If the financial PPA is undertaken with a project under development, it may support a strong claim of directly
adding new green power capacity and can be used by the developer to help secure project financing.
Financial PPAs also have some risks:
¦ If the strike price is consistently above the wholesale market price, the purchasing organization will be constantly
making up for the generator's generation revenue losses.
¦ If the parties are located in different regions, it is important that the retail price the buyer pays for electricity
is influenced in the same direction as the movement in wholesale market prices that the seller receives. Stated
another way, the price of electricity in the wholesale market where the renewable generator is located and the
retail electricity price of the organization's operational use of electricity must have a high degree of price correla-
tion for the purchasing organization to realize an economic hedge.
¦ Even if the parties are located within the same region, if the region uses locational marginal pricing to value
energy depending on supply and congestion, the parties may face different prices depending on each parties'
sub regional locational marginal pricing. Again, it is easier to agree on a strike price when the prices that both
parties face move in parallel.
¦ There is a difference in value to the grid between energy delivered by the generator to its nearest node and
energy that is delivered to a transactional market hub. It is often desirable that the purchasing organization
negotiate the strike price at the hub to remove the cost and risks associated with power delivery.
From the purchasing organization's perspective, the keys to a satisfactory financial PPA are to:
¦ Make sure both parties to the financial PPA face the same wholesale electricity markets so that the retail price
paid by the buyer is correlated with the movement of wholesale market prices where the generator is located.
¦ Understand that a low strike price benefits the purchaser because any revenue from energy sales earned by the
generator must be paid to the purchasing organization.
¦ Evaluate carefully all assumptions in determining future prices. This requires an understanding of how the whole-
sale electricity market operates, as well as the expertise to develop realistic expectations about future wholesale
prices.
-------
Diligently negotiate the price and allocation of the risks associated with power delivery because the organization
is not receiving the power directly.
Be aware that if the wholesale price falls, that benefit will not be available to the purchasing organization
because it will have to pay the difference between the low market price and the agreed upon strike price, while
competitors In that market may be getting lower electricity prices. It is a choice between paying the same as
everyone else (regardless of price volatility) and hedging against rising electricity prices.
Table 4-1 breaks down the sales of green power by the four major green power purchasing types in 2016. These sales
do not include self-generation options, which are discussed in the following section. Of the several different green
power purchasing options, unbundled REC products are the most popular voluntary market sales option. Figure 4-2
shows the use of these options over the past several years in terms of total sales volume. It is important again to
reinforce that all these supply options involve a REC to substantiate the options as green power.
Table 4-1. Voluntary Green Power Sales in 2016 (MWh)'
Options for Purchasing Green Power
Unbundled REC Products
51800,000
Utility Retail Options
26,989.000
Community Choice Aggregation
8,378,000
Direct Purchase Options
8,149,000
Total
95,450,000
10'Shaughnessy, E, Heeter, J., Cook, J., and Vol pi, G. (2017). Status and trends in the U.S. voluntary green power market (2016 data). National Renewable Energy
Laboratory. Retrieved from https://www.nrel.aov/docs/fv18osti/70174.pdf
4-8
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60
Figure 4-2. Green Power Sales from 2010 to 20162
50
40
Unbundled RECs
Voluntary PPAs
¦1
Competitive Suppliers
Utility Green Tarrifs
¦i
Utility Green Pricing
Community Solar
¦
CCAs
30
20
10
2010
2011
2012
2013
2014
2015
2016
Self-Generation Options
In addition to purchasing green power, organizations can own or lease and generate green power either on-site at
their own facilities, (behind the meter) or at an off-site location.
Green power technologies for self-generation include solar photovoltaics, wind power, fuel cells and electricity
storage that use renewable fuels. Large facilities sited near a municipal landfill or sewage treatment plant may be able
to use recovered methane gas for on-site electricity and/or heat production. The following describes each of these
and additional options in more detail:
Solar. Solar photovoltaic (PV) systems can be scaled to almost any size from a few kilowatts up to many mega-
watts. PV systems may either be ground-mounted or rooftop-installed on schools, homes, community facilities
and commercial buildings-. They can be integrated into a building, displacing other building material costs, such
as those for roofing shingles or car park shading.
Wind. Wind turbines vary in height and blade sweep, with individual turbines having the ability to generate
from hundreds of kilowatts up to several megawatts in capacity. Wind turbines may be best-suited for off-site
applications. On-site installations are usually only possible in nonurban areas and often require zoning permits to
exceed 35-foot height restrictions (a tower for a 250-kilowatt 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 minimally
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 turbines' performance.
2 O'Shaughnessy, E, Heeter, J, Cook, J, and Volpi, C. (2017). Status and Trends in the U.S. Voluntary Green Power Market (2016 data). National Renewable Energy
Laboratory.
htt ps : //www, nrel.a ov/docs /fv18ost i /70174. pd f.
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Case Study: Reducing the Cost of
Green Power through Virtual Net
Metering
It pays to know and take advantage of state
financial and regulatory incentives. Some states
allow virtual (or remote) net metering, where
the renewable generator is off-site but the out-
put can nevertheless be credited against the
customer's electricity bill through an account-
ing reconciliation. Some states offer group net
metering, where multiple owners can share in
the billing credits from a single off-site project.
In Massachusetts, municipalities and other gov-
ernmental entities can receive billing credits for
an off-site installation they don't own if they are
the "host customer," meaning they are assigned
100 percent of the output. UMass-Boston is
using this virtual net-metering rule to purchase
the output from a 3.9-MW solar installation at
Boston Business Park, home to several ware-
housing and distribution companies. The PV
array is owned by Altus Power America, which
sells the energy produced to UMass-Boston
through a net-metering credit purchase agree-
ment. UMass-Boston will avoid up to $5 million
in energy costs over the next 20 years. The elec-
tricity is not considered self-generated because
the university does not own the solar project.
Fuel cells and electricity storage technologies. Fuel cells
are another way of producing power. Some fuel cell technol-
ogies emit essentially no air pollution through the conversion
of the fuel into electricity, but the electricity they produce
cannot be considered green power unless they operate on a
renewable energy-produced fuel source, such as landfill gas
or hydrogen derived from PV or wind power. Fuel cells are
similar to other electricity storage technologies in this
respect.
Landfill and wastewater methane gas. Methane gas derived
from landfills or anerobic digesters at wastewater treatment
plants, livestock or agricultural operations, or organics (e.g.,
food waste) management facilities can be used to generate
electricity. The methane gas is converted to electricity using
an internal combustion engine, gas turbine, direct combus-
tion boiler and steam turbine generator set, microturbine,
or other power conversion technologies. Most methane gas
projects produce from 0.1 to 4 megawatts (MW) of electrical
output with many landfill methane projects generating in the
5-20 MW range and some as large as 50 MW.
¦ Biomass. Biomass is plant material burned in a boiler to drive
a steam turbine to produce electricity. Biomass systems can
also be good for producing combined heat and power at
facilities with large thermal loads. Biomass projects are best
suited to locations with abundant biomass resources (often
using waste products from the forest industry or agriculture).
Although biomass is considered a renewable resource, it may have air emissions impacts. Furthermore, not all
biomass is eligible under voluntary market certification standards. Buyers of biomass-based green power should
consult with program administrators and third-party certification programs to determine criteria for eligible
biomass resources.
Self-generation of green power can occur on-site (within the organization's facilities at the point of consumption) or
off-site. Under both scenarios, the organization must retain ownership of the RECs in order to claim the use of renew-
able electricity.
On-site Generation
On-site renewable generation is a visible demonstration of the organization's environmental commitment. Generating
power on-site also offers control over electricity expenditures. Flowever, even though the project is on-site and
providing electricity to the owner, the organization must either retain and retire the RECs to claim that it is using
renewable electricity from the on-site project or replace any self-generated RECs that are sold, in order to claim that
it is simply using renewable electricity based on the replacement REC attributes. (See REC Arbitrage on pp. 4-11)
In many states, excess electricity generated from on-site renewable generators may be sold back to the grid at the
same price at which power is bought (or at the price of wholesale power), through a policy option called net metering.
Net metering is a cost recovery policy that helps improve the financial return for qualifying on-site renewable power
systems, although net metering is often limited to smaller behind-the-meter installations. For example, the state of
California limits on-site generation systems to 1 MW (or up to 10 MW for up to three biogas digesters) and the total
aggregate generation of all net-metered systems' capacity may not produce more than 5 percent of a utility's peak
demand.
4-10
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If energy storage is incorporated into on-site system design (and energy storage technology costs are declining),
on-site renewable generation can serve critical loads when power from the grid is interrupted, as well as when the
renewable resource is not available. This ability to operate independently of the power grid can be a great advantage
and contribute to project economics where grid stand-by or demand charges may be high.
REC Arbitrage
The price of RECs may vary depending on market dynamics, such as supply and demand, and market policies, such as
renewable energy mandates with which utilities must comply. If there is a significant discrepancy between REC prices in
the voluntary and compliance markets, an organization may be able to leverage these differences to its financial advan-
tage by selling its eligible renewable energy project's RECs for a higher price in a compliance market and purchasing
replacement RECs from another renewable project at a lower price. This is commonly referred to as REC arbitrage (also a
REC swap).
This opportunity could arise in the case of self-generation, as well as where an organization purchases power directly from
a generator, as in a PPA. In either case, the REC owner has the choice to keep the RECs or sell them into a compliance
market where the REC value is greater. However, if the organization sells the RECs and buys replacement RECs, it would
have to claim the attributes of the replacement RECs rather than the attributes of the generator that supplied the energy.
For more information on REC arbitrage please see the U.S. EPA's guidance document titled "Renewable Energy Certificate
(REC) Arbitrage."
Off-site Generation
Under certain circumstances, organizations may prefer to own renewable electricity technologies off-site, away from
their own facilities. If the off-site generation is owned by the consuming organization, the RECs produced can be
retired by the organization and used to substantiate green power use claims. Similar to owned on-site generation, the
organization can sell those RECs for additional revenue; however, doing so would negate the organization's ability to
claim it is using green power, unless replacement RECs are purchased.
An organization may find advantages in owning off-site generation rather than on-site generation:
Resource availability. Off-site generation projects might perform more favorably and produce more electricity
due to the site's renewable resource characteristics. The organization could own a renewable generator in an
area with better access to renewable resources, thereby maximizing the return on investment.
Better match to green power needs. Land may be more available and cheaper off-site, allowing a larger gener-
ating project that more closely matches the organization's need for green power.
Easier permitting and regulation. Regulations and permitting laws could be more flexible in some cases for an
off-site electricity generation site. Zoning and safety laws with respect to proximity to other buildings and devel-
opment are some of the key factors that could restrict on-site power generation at an organization's facility.
Utility benefits. Locating a generation facility elsewhere on the grid may provide benefits to utility operations.
In some cases, the utility may provide incentives to locate generation in specific areas to help solve reliability or
congestion issues.
Economic benefits. Organizations may choose off-site generation options in areas where they can sell the
power at higher prices, where renewable incentives are stronger, or where there is greater opportunity for REC
arbitrage.
Shared Renewables
Shared renewables projects, such as community solar, are an emerging off-site generation option that may allow an
organization to purchase a share of a renewable energy system within its utility service area. For organizations that
have rooftops unsuitable for self-generation and have cash flow or institutional constraints that prohibit ownership
4-11
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of renewable power equipment, shared renewables (particularly solar and wind) give access to the benefits of
owning renewable power at a more affordable upfront cost. The organization will typically receive utility bill credits
and possibly the associated RECs produced from its share of the shared project output. Shared renewables may be
implemented in a variety of ways, however, including arrangements where the consumer purchases, rather than owns,
a share of the output. Also, some utilities offer green power retail options under the "community" or "shared" renew-
ables nomenclature. Not all shared renewables options necessarily provide RECs to their participants. Therefore, an
organization should carefully review the contractual terms, and perhaps the policy landscape, before investing in the
project. If an organization does not receive the RECs associated with the shared renewables project, then it cannot
claim to be receiving or using green power. Similarly, it is deceptive for shared renewable energy providers to sell
generation or generating credits from their project as "green power" or "renewable energy" if the project owner does
not convey the associated RECs to the project shareholders.
Green Power Supply Options Summary
Table 4-2 summarizes the seven main options for procuring green power, including both renewable purchasing
options and self-generation options. The table compares each option based on the parameters of capital investment
cost, terms of commitment and transaction complexity.
Table 4-2. Summary of Supply Options3
Supply
Option
Unbundled
REC
Products
Utility
Supply
Options
Community
Choice
Aggregation
Physical
Power
Purchase
Agreements
Financial
PPAs /
Contract for
Differences
On-site Self
Generation
Off-site Self
Generation
Upfront
Capital
Investment
None
None
None
None
None
4>-4>4)4)
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CHAPTER
5
Using Organizational Goals to
Guide Green Power Purchases
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
-------
DOCUMENT MAP
Summary
Chapter 1. Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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Determining an organization's renewable energy goals is the first step to selecting the appropriate green power
supply opt ion (s), Using key decision-makers' goals to guide the process will help an organization successfully select a
green power purchase. Gathering energy use data for each facility will help the organization understand the amount
of renewable energy that must be purchased to meet its goals. Knowing each facility's total energy use will also
provide the basis to evaluate whether self-generation is a viable option. Once these steps are completed, an organi-
zation can develop a green power procurement strategy that aligns the available supply options with its goals. This
process is illustrated in Figure 5-1 and further explained below.
Figure 5-1. Steps for Selecting Green Power Supply Options Based on Organization Goals
Q.
Q.
a.
DC
Set goals (5)
Identify key decision-makers (5)
Gather energy and facility data (5)
Select best-fit green power supply options (5)
Capture the benefits (8)
Evaluate the green power procured, whether via purchase (6) or self-generation (7)
Procure green power, per the supply option(s) selected, whether purchase (6) or self-generation (7)
Environmenta!
Off-site Generation, On-site Generation
Self-Generation
Economic
Identify options that best fit
desired goals (5)
GOALS/BENEFITS
SUPPLY OPTIONS
Stakeholder
Relations
Unbundled RECs, Utility & Retail,
CCA, PPA, CfD
Economic Development/
National Security
Purchase
Note: Numbers in the figure refer to chapter numbers where more information can be found.
5-3
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Setting Goals
Questions to consider
Clear goals are critical to purchasing the best-fit green power option, identifying metrics that will help evaluate prog-
ress and communicating a plan for green power within and outside an organization. At a minimum, the organization
should consider the following questions when setting goals:
¦ Why is the organization considering purchasing green power? What does the organization hope to get from it?
¦ What selection criteria are important to the organization?
¦ Does the organization have significant experience and expertise with energy procurement and management, or
is it a passive electricity consumer looking to choose a unique energy product and provider for the first time?
¦ What selection criteria are most important (e.g. visibility, resource type, independent certification and verifica-
tion, low cost and low involvement)?
Motivation of organization and types of goals
An organization's goals will be driven by its motivations for purchasing green power. The questions above will serve to
bring management objectives and stakeholder inputs into the process of establishing an organization's overall energy
and environmental goals. Some examples of goals are shown below:
¦ Achieve 100 percent green power use by 2030. Reduce emission footprint by 50 percent by 2020.
¦ Supply 50 percent of electricity use from on-site generation and the remainder from green power purchases.
¦ Add 10 megawatts of new green power capacity to serve electricity needs.
¦ Lower electricity costs by 10 percent compared to 2017 baseline, by 2025.
¦ Mitigate purchased electricity price increases.
¦ Hedge against electricity price volatility (if exposed to the wholesale market).
¦ Establish predictable electricity cost budgets through 2030.
¦ Increase reliability and security of supply for specific facilities or processes.
¦ Build brand recognition for specific products that can be marketed as "Made with Renewable Energy."
¦ Increase shareholder satisfaction by reducing emission risk or liability.
¦ Take visible actions in the community to demonstrate civic leadership and environmental commitment.
¦ Qualify as part of a green supply chain serving a larger business.
These sample energy and environmental goals fit into the four broad categories of green power benefits highlighted
earlier in Chapter 3: environmental, economic, stakeholder relations and development of domestic energy resources.
Once the organization's goals are established, it is important that the organization document and communicate them
to the public. These actions will help the organization ensure that there is internal agreement and awareness of the
main motivations for purchasing green power, inform stakeholders (customers, business associates and the local
community) of the organization's objectives, provide justification the organization can use to support its pursuit of
green power as time passes, evaluate progress toward achieving green power goals, and adapt those goals over time.
Organizations that clearly document and communicate these goals inspire and sustain the structural change that is
needed to achieve those goals. Those goals and motivations will ultimately inform which green power supply option
(see Chapter 4) is best.
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Identifying Key Decision-Makers
The organization must identify key decision-makers who can approve the purchase of green power on a sustained
basis over time, as well as the implementers who will assess the gathered energy, facility and energy market data to
identify feasible options and obtain support from the organization and its stakeholders for green power purchases.
Importance of having a champion
The people in an organization who are interested in green power may be high-level decision-makers (such as senior
C-level executives) as well as staff from departments such as the following:
¦ Purchasing
¦ Facilities/energy management
¦ Environmental health and safety
¦ Legal
¦ Corporate relations
¦ Marketing
A high-level green power champion is often critical to achieving green power goals, particularly because these deci-
sions stretch across departments. This champion can help align the interests of the other key decision-makers and
garner support from other important stakeholders.
Knowing key decision-makers
All of the interests and concerns of key decision-makers must be addressed early in the planning process. Not doing
so may lead to disagreements later in the process. The list below identifies potentially influential C-level executives
who may need to be involved in the decision to purchase green power.
¦ Chief Executive Officer (CEO) - The CEO is the integrator of the organization's growth, management and envi-
ronmental objectives, and a key decision maker in approving green power purchasing options.
¦ Chief Financial Officer (CFO) - Because buying green power is ultimately a financial decision, it is important to
have the CFO involved in and supportive of the decision.
¦ Chief Operating Officer (COO) - The COO may have overall responsibility for assessing the organization's
emissions footprint and for determining the feasibility of different green power options, including whether to
purchase or self-generate.
¦ Chief Marketing Officer (CMO) - The CMO leverages the green power activities of the organization to build the
brand or the relationship with key target stakeholders.
¦ Chief Commercial Officer (CCO) - The CCO aligns green power procurement with the organization's commercial
strategy and development.
¦ Chief Sustainability Officer (CSO) - The CSO is often charged with driving the environmental business actions of
the organization and often possesses the decision-making power to move green power decisions forward
In addition, other departments may also be involved with the purchase of green power if such a decision aligns with
their responsibilities. Facilities/energy management staff might be interested in how procuring green power could
improve the efficient operation of facilities. Fluman resources might be interested in corporate sustainability efforts
that may boost employee morale or attract better talent. Sustainability officers naturally have an interest in environ-
5-5
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mental beneficial purchases. In some cases, all else being equal, decision makers will support green power if they can
be convinced that it will not have a detrimental impact on their responsibilities.
Strategies for coordination with key decision-makers
Designating a contact person who can draw on experts from throughout the organization is an important step.
Additionally, this primary contact can form and lead a cross-functional team to develop and implement a green
power plan. The departments that are ultimately chosen to participate will depend on the type of green power supply
options being considered. However, all departments that are relevant to the green power purchase decision should be
identified and consulted early in the process. It also is important to involve senior management in planning and deci-
sion-making. Some organizations further involve their employees (or students, in the case of educational institutions)
in selecting green power products.
A simple matrix like the one shown in Table 5-1 below is a useful tool for identifying high-level staff who have the most
influence on an organization's decision to purchase green power. As Table 5-1 shows, gauging each stakeholder's level
of interest and relative influence within the organization helps determine who must be on board with the decision.
A stakeholder's influence within the organization can come in many forms: ability to influence or make a purchasing
decision, to implement the purchase after it is made, to unlock financial and staff resources, and to evaluate legal and
financial risks. Those that have high interest and high influence will need more frequent updates and consultations on
progress towards the goal.
Table 5-1. Matrix for internal Stakeholder Analysis
Level of Interest: Low
Level of Interest: High
Level of Influence:
Low
Monitor
(Minimal Effort)
e.g., Human Resources, CCO
Keep Informed
(Supporters)
e.g., COO, Facilities Mgt.,
Environmental Compliance
Level of Influence:
High
Keep Satisfied
(High Effort)
e.g., CFO, CMO, Legal, Board
Members
Key Players
(Champions)
e.g., CEOs Sustainbility Officers
Note: Assignment of individual decision-makers to different quadrants in Table 5-1 may vary depending on organization and leadership structure.
Gathering Energy and Facility Data
Obtaining reliable energy use data is important for developing goal metrics since total energy use is the denominator
of any "percent green power" goal. Gathering energy use data is also a good way to focus attention on energy man-
agement and opportunities for efficiency. Gathering energy and facility data is important whether the organization is
interested in purchasing green power or pursuing on-site or off-site self-generation.
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Evaluating facility opportunities
Organizations may wish to organize data on renewable energy possibilities by building. As a preliminary step, orga-
nizations considering on-site generation can conduct a renewable energy survey of their properties to consider the
following:
¦ Do the buildings have flat roofs or south-facing roofs with good solar access?
¦ Is the site windy enough to consider on-site wind, and is there enough acreage to install it?
¦ Are there other unique renewable energy opportunities either on or adjacent to the site (e.g., a sustainable
source of methane gas that could be converted to energy, or feedstock for biogas digester)?
Later, these opportunities can be evaluated more rigorously if self-generation is consistent with the organization's
goals.
Electricity use data collection
The organization should measure its facilities' energy use, including electricity and thermal, over at least the last two
years to make an informed decision about its supply options. 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. Evaluate the organization's energy performance and compare to local, state and national level energy use
patterns and trends.
2. Determine the amount of green power that must be purchased or self-generated to match the organization's
goals.
3. Evaluate the environmental impacts (e.g., GHG emissions) of the organization's current electricity use.1
The ENERGY STAR Portfolio Manager® tool can aid in comparing the organization's building energy usage with that
of similar buildings nationwide while normalizing for other variables that influence energy use patterns.2 Portfolio
Manager also allows users to track electric demand, which is an important financial consideration and one that may
guide the choice of a green power product. Portfolio Manager also facilitates the tracking of green power use allocat-
ed across a building portfolio.
Each organization should study its energy consumption data from the past few years, to evaluate variation and
patterns in energy consumption on a seasonal, monthly and daily basis. Adjustments should be made for known
acquisition or divestiture of assets. Monthly electricity consumption data are the most important, while peak demand
and interval-meter data, if available, are useful in interpreting demand charges and tracking variation in energy usage
with time. These detailed data can also help with selecting green power options that have the desired impact on the
organization's energy use patterns.
Building ownership status
An organization's ownership of its building or facilities may also have implications for electricity use data collection.
An organization that does not own or operate its building may pay for its electricity as part of an aggregate leasing
cost and may not receive a separate bill. In such cases, the organization would need to estimate its electricity use by
1 For guidance on how to conduct a GHG emissions inventory, see: Greenhouse Gas Protocol, A Corporate Accounting and Reporting Standard. World Resources Institute
and World Business Council for Sustainable Development, March 2004. Available at http://www.ghqprotocol.org/standards/corporate-standard. Also Greenhouse Gas
Protocol, Scope 2 Guidance. World Resources Institute, 2015. Available at http://www.ghgprotocol.org/scope 2 guidance.
2 ENERGY STAR. (n.d.). Use Portfolio Manager. Retrieved from https://www.energvstar.gov/buildings/facilitv-owners-and-managers/existing-buildings/use-portfolio-
manager
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calculating the floor area of the facility in question and applying a national average electricity intensity use factor on
a kilowatt-hour per square foot basis for that particular building type. A best practice is to be transparent about how
the organization calculates electricity use when actual consumption figures are unavailable.
Case Study: Riding in the Slipstream of a Bigger Deal
Large corporations are leading the charge in direct renewable electricity purchasing, but medium-sized firms can benefit
from power purchase agreements (PPAs) as well. Tech giant Amazon.com contracted to purchase about 90 percent of a
new 253-MW wind farm in Texas. This was followed by Boston data storage firm Iron Mountain Inc., which contracted with
the wind farm for the remaining 10 percent of output, sufficient to power all of its Texas operations—more than 75 facilities
in total—as well as operations across additional states, providing long-term rate stability and allowing Iron Mountain to
save $1.5 million annually. The purchase will cover about 30 percent of Iron Mountain's North American electricity footprint.
Other data collection considerations
Other relevant information to collect may include a general assessment of the energy market in which the organi-
zation operates, the organization's existing energy efficiency and sustainability efforts, and available resources. For
example:
¦ Existing energy consumption and cost reduction objectives, and their effects on the procurement strategy for
green power.
¦ Resources (time, staff, financial) that can be set aside for procuring green power, both in the short and long
term.
¦ Electricity cost and rate information where the organization's facilities are located.
¦ Whether the organization operates facilities in a regulated or restructured energy market.
¦ Available incentives for self-generation, such as state or utility financial incentives. To identify available incen-
tives, consult the Database of State Incentives for Renewables and Efficiency at http://www.dsireusa.ora.
Choosing Green Power Options
Using goals to guide supply option choices
The next step is to determine the green power solutions that meet the organization's goals, factoring in the pref-
erences of key decision-makers along with the energy use and other gathered data. For example, an organization
that wants to manage fuel price risk might be more interested in entering into a physical or financial power purchase
agreement (PPA). An organization that finds the reliability of its power supply to be most important might be more
interested in on-site renewable generation coupled with storage. Likewise, organizations with facilities in multiple
locations must determine whether to procure green power from one supplier for all of their operations, or whether to
procure green power from different suppliers for each site based on a unique green power supply option that might
be available to only specific sites. Selecting just one supplier tends to minimize transaction costs and the complexity
associated with multiple contracts, while selecting a unique supplier for each site might maximize utility bill savings if
some sites have access to less expensive green power products than others.
All green power product options are covered in more detail in Chapter 4. The section below identifies how well each
green power supply option generally aligns with common organizational goals. It is important to note that ownership
of renewable energy certificates (RECs) is required to substantiate an organization's environmental claims regardless
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of the green power product option selected. Also, each option may be structured or designed differently to provide
different benefits and have different impacts. Shared renewables may be offered in several different purchase
options.
Self-generation options. The initial high capital expenditure for self-generation is often recovered over the
green power project's lifetime by avoided utility electricity costs, avoided purchases of RECs and financial incen-
tives offered by utilities and government agencies. Self-generation can also serve as a financial hedge against
rising electricity prices and volatile REC prices as self-generation locks the generator into a known electricity and
REC cost over the life of the project.
On-site generation. Due to siting constraints, most on-site self-generation options are limited to solar
photovoltaics and, in a few cases, biomass or wind. On-site green power generation can provide a visual
demonstration of an organization's commitment to achieving environmental goals.
Off-site generation. Off-site options can potentially meet the organization's goals more effectively as they
may be able to scale and generate more power while encountering fewer constraints than on-site generation.
Off-site options may also qualify for various state or federal financial incentives.
Purchase options. If self-generation is not a viable option due to limitations such as resource siting, capital
financing, human resources and technical expertise, organizations can meet their environmental goals by
purchasing green power. The type of energy market (regulated or restructured) can also determine the green
power product options available.
Unbundled RECs. Unbundled RECs are the most prevalent and flexible product option used in the market.
They are accessible to all organizations, as they avoid the challenges of siting, capital financing, complex
transactions and technical expertise, but they add cost on top of electricity expenses since the organization
is buying RECs in addition to paying for its conventional electricity use. Unbundled RECs can be sourced
locally or nationwide, from a variety of different project types and sizes, from both new and older projects,
and through long-term and short-term agreements. Purchasing an unbundled REC product that sources from
a small group of local, new projects with a long-term purchase agreement may have similar environmental
benefits to on-site self-generation or local PPA options.
Utility retail products. Off-the-shelf products, such as fixed blocks of green power or percent-of-use choic-
es, allow organizations to buy small to large quantities of green power at very low transactional costs, but as
with unbundled RECs, usually add incremental cost on top of electricity expenses. Different utility products
will be structured differently in terms of where projects are located, the size and types of projects used, the
age of projects used, and the length of the purchase terms. Some utilities combine unbundled RECs with
their own electricity service, essentially offering a credible green power option through a single billing.
Utility green tariffs. Organizations can sometimes procure electricity and RECs through green tariffs, often
referred to as a "sleeve" contract, through their utilities. Green tariffs in most cases offer a fixed price for
green power, which provides predictability for budgeting, and may provide cost savings depending on the
tariff negotiated. Green tariffs are available in a limited number of states at this time, but are the focus of
continued interest by larger electricity consumers.
Community choice aggregation (CCA). CCAs allow certain jurisdictions (such as a municipality or county
jurisdictions) to aggregate electricity consumers and procure electricity on their behalf from suppliers other
than the local utility. The purpose may be to offer electricity at a price lower than the local utility, or to offer a
product with more green power than is available from the utility. CCAs can therefore provide economic ben-
efits and environmental benefits at a very low transaction cost to organizations within the CCA jurisdiction.
Although participation is easy, electricity consumers have little to no control over the type of supply secured
by the CCA on their behalf (the same is true for utility retail product suppliers). The type of green power
purchased by some CCAs can change frequently and may not meet national voluntary consumer quality
standards. CCAs are currently authorized in only a few states.
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Physical PPAs. Physical PPAs for green power convey RECs and deliver power to the purchaser, usually via
the shared grid. PPAs are long-term contracts that provide price stability and, potentially, financial savings
in some regions where conventional electricity prices are high. Substantial purchases may provide branding
and marketing opportunities even though the renewable project is owned by someone else. Depending on
the market where the facility receiving the green power is located, PPAs may be signed for both on-site and
off-site generation options.
Financial PPAs. Financial PPAs enable organizations to enter into an agreement with a third party that
combines a downside electricity price hedge with an unbundled REC contract. Financial PPAs (also known as
virtual PPAs or contracts for differences) do not include the delivery of physical power to the electricity con-
sumer. Similar to physical PPAs, financial PPAs provide potential dollar savings and branding opportunities for
the purchasing organization.
Organizations may have multiple goals related to green power procurement, and there are usually multiple options
available to satisfy these goals. Table 5-2 illustrates how the various options are likely to satisfy some typical organiza-
tional goals.
Table 5-2. Alignment of Options and Goals
Goals/
Options
Environmental:
Make green
power claims;
reduce
emission foot-
print
Economic:
Mitigate electricity
price rises; ensure
predictable budget
Stakeholder
relations:
Respond to
environmental con-
cerns and interests
Direct or indirect
impact on new
supply
Considerations
On-site
Yes; generates
green power; must
keep RECs
Yes; depends on
the levelized cost
of electricity over
project life, project
size relative to load
Yes; direct project
involvement shows
commitment; size
matters for emissions
footprint mitigation
Direct impact on
new supply
Mostly solar; policy
risk falls on owner;
often net-metering
dependent; size
might not provide
enough green
power
Off-site
Yes; generates
green power; must
keep RECs
Yes; ownership
provides power sales
revenue at market
clearing price
Yes; branded
renewable energy
generators yield
public awareness;
larger projects offer
greater benefits
Direct impact on
new supply
Off-site may mean
larger projects,
which require
Orgs, with access
to capital and
expertise; may
require managing
and integrating
generation
Shared
Renewabies
Yes, if RECs
convey to partic-
ipant
Yes; share of
ownership provides
power at known cost
through bill credit
Maybe; RECs must be
retired; often RECs
do not convey to
participants
May result in direct
or indirect impact
on new supply
Mostly solar;
driven by state
policy; may involve
penalties for
participant exit
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Goals/
Options
Environmental:
Make green
power claims;
reduce
emission foot-
print
Economic:
Mitigate electricity
price rises; ensure
predictable budget
Stakeholder
relations:
Respond to
environmental con-
cerns and interests
Direct or indirect
impact on new
supply
Considerations
Unbundled
RECs
Yes
No; REC purchases
are in addition to
electricity costs and
require two separate
billings
Yes, but may vary
depending on stake-
holder interests
Most often an
indirect impact
on new supply;
depends on con-
tract design
Easy to purchase
larger amounts
too; cost is often
additional to
electricity cost; can
limit transaction
costs and barriers
to engagement
Utility
Supply
Yes; utility must
retire RECs on
consumers' behalf
No, for off-the-shelf
products that charge
green premium;
involves a single
billing.
Yes; may vary
depending on
stakeholder interests;
RECs must be retired
Most often an
indirect impact
on new supply:
depends on utility
program design
Easy purchase;
cost is additional to
electricity cost.
Utility
Green Tariff
Yes, tariff must
transfer to or
retire RECs on
customer's behalf
Yes, for green
tariff, depends on
negotiation
Yes; RECs must be
retired on customer's
behalf
May directly
impact new supply
Green tariff is
similar to PPA, but
with utility rather
than generator
CCA
Yes; CCA must
retire RECs on
consumers' behalf
Varies depending
on wholesale supply
costs (market condi-
tions)
Yes; RECs must be
retired on customer's
behalf
Generally, an
indirect impact
on new supply;
depends on CCA
design
Must take what
CCA offers: limited
flexibility
Physical
PPA
Yes; RECs must
convey to con-
sumer
Yes; depends on
negotiated price
Yes; RECs must be
included
Power purchase
and REC contract
offers a direct
impact on new
supply
Requires good
credit rating, large
load requirement,
ability to agree to
long-term contract
Financial
PPA
Yes; RECs must
convey to con-
sumer
Yes: depends on
negotiated set-
tlement price and
wholesale-to-retail
market correlation
Yes; RECs must be
included
Financial PPA
coupled with
unbundled REC
contract offers a
direct impact on
new supply
Requires deep
understanding of
wholesale markets
and future price
movements
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CHAPTER
Contracting for Green Power
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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To select a green power supplier and product, purchasers should start by developing specific criteria for assessing
their options. These criteria can be ranked based on the goals identified early in the process (see Chapter 5).
Developing Criteria for Screening Green Power Suppliers and
Products
Criteria for Screening Suppliers
¦ Reputation. A supplier's reputation is built on how well it honors its commitments, how easy it is to work with,
who its customers are and how well it is viewed by the industry. Assessing a supplier's reputation should entail
obtaining references and conducting a review of energy industry literature. It may be also helpful to connect
with environmental groups who might have information about the supplier.
Certification. Certification provides important assurances related to the credibility of the seller and the sale of
green power products. Retail green power suppliers, renewable energy certificate marketers, and projects selling
directly to consumers may sell certified green power products.
Financial strength and credit. To research the financial health of a power supplier, purchasers should look at its
annual reports, Securities and Exchange Commission filings and bond ratings.1
¦ Location. If buying green power from a local supplier, purchasers should ask where the supplier sources its
renewable generation. Public utility commissions' websites often have contact information for registered retail
suppliers.
¦ Product choice. Some suppliers offer several green power products that vary in the percentage of renewable
power and mix of resources. In such cases, buyers may be able to change their product options in the future
without having to search for a new supplier and negotiate a new contract.
Environmental performance. Assessing a supplier's environmental performance can be useful. Review the
supplier's annual financial, environmental, or corporate social responsibility reports; its other electricity product
offerings; and other business activities.
These criteria may apply to all types of purchase options, including direct purchase options from generators. In direct
purchase cases, organizations may want to consider the generating company's experience in building new projects of
similar size and financial arrangement and its history of operation and maintenance. The next chapter discusses other
criteria that may apply to self-generation projects.
Criteria for Renewable Electricity Products
¦ Price. When considering price, organizations should make sure they are comparing apples to apples. Differing
prices might reflect different types of products. For example, renewable electricity products might quote total
price per kilowatt-hour for electricity that includes the green attributes (e.g., RECs), which can be compared
to the standard electricity price, but other product options, such as unbundled 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 for long-term contracts might be fixed or escalate over time, or they can be tied to a
variable price index such as the wholesale price of electricity. Finally, the purchase of some utility green power
1 SEC filings may be found at: https://www.sec.qov/edqar/searchedqar/companvsearch.html.
Moody's bond ratings may be found at: https://www.moodvs.com/page/looku pa rating, as px
6-3
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products might offer an exemption from variable fuel charges or environmental taxes, which should be factored
into the ultimate price.
¦ Risk. Different purchasing options allocate the risk of price volatility, equipment failure, non-performance and
other potential issues in different ways. Risks can differ by geography and market. It is important to understand
the risks associated with each purchasing option and how they might impact price over time.
¦ Percentage of renewable energy. Green power product resource mixes can range from 1 to 100 percent renew-
able power. Organizations can therefore calculate the percentage of their electricity use served by renewable
power whether they are buying unbundled RECs or RECs bundled with electricity.
Incremental impact. Voluntary buyers want their purchases to make a difference. To do so, their renewable
electricity use must go beyond what otherwise would have been available through the standard electricity mix
or beyond what is required or mandated by law, sometimes referred to as "regulatory surplus." Voluntary buyers
should ensure that the green power purchased voluntarily is not also used by the electricity supplier to meet a
compliance obligation—thus ensuring that the voluntary purchase is incremental or surplus to any requirement
imposed on renewable energy suppliers. Voluntary buyers demonstrate that their green power use is incremen-
tal or surplus to regulation buy owning and retaining renewable energy certificates. By retaining ownership of
renewable energy certificates, a voluntary consumer denies their use for compliance mandates or requirements
by a regulated entity.
Percentage of "new" renewable sources. Many organizations look for opportunities to support new
generation. "New" renewable resources can be defined in different ways, however. Programs such as the
U.S. Environmental Protection Agency's (EPA's) Green Power Partnership and Green-e define "new" as any
renewable power generation that both meets specific environmental criteria and began operation within the last
15 years.2 These purchases help create the aggregate demand necessary for constructing additional renewable
resources while giving projects time to recover their capital costs. Some organizations want to have a more
immediate, direct impact on supply by entering into long-term contracts with a project still under development.
Their purchase contract may help the new project obtain financing and get built, however not all organizations
are large or creditworthy enough to support project finance.
Renewable energy/resource type. Purchasers may have different preferences for the kind of resource(s)
used in green power products. Wind and solar are usually the most environmentally preferred energy sources,
although even these are not without controversy. Some stakeholders are concerned that hydropower dams may
alter river habitats and fish populations, but the impacts are site-specific. Biomass facilities may have air emis-
sions impacts. Geothermal energy has limited environmental impacts, which can vary depending on the type of
technology used. It is also important to check the environmental characteristics of any nonrenewable generation
resources included in the product, as they will contribute to the overall environmental impact of the power
purchased. Ultimately consumers should be concerned with whether their purchase of green power conveys the
legal right to the environmental attributes of the resource, by way of owning and retiring the associated REC
instruments.
Renewable energy resources also have different associated costs. For instance, a green power product gen-
erated from a low-wind resource in one part of the country will generally be more expensive than a similar wind
product generated in regions with higher wind speeds. See Chapter 3 for more on resource costs.
¦ Length of contract. Longer-term contracts, especially with new projects in development, are often attractive
to buyers. Sellers may be willing to offer a discount in exchange for stable revenue that enables them to finance
the project. The longer term of the contract offers greater price stability to the buyer and a greater leadership
opportunity if it supports a new renewable energy project. Long-term contracts come with their own risks, how-
ever, if the buyer misjudges the future market price direction and ends up paying more than the actual market
2 U.S. Environmental Protection Agency, (n.d.). Green power partnership: What is green power? Retrieved from https://www.epa.aov/areenpower/what-areen-power
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price. Technology costs could continue to fall, making shorter-term or smaller contracts attractive, as they leave
future options open. Also, long-term contracts may be beyond the reach of buyers that represent a credit risk, or
that are too small to justify the transaction and legal costs.
Third-party certification and verification. A green power product can be certified and verified by an inde-
pendent third party. A wide range of product options may be certified, including unbundled RECs, retail utility
products, community choice aggregation programs, power purchase agreements with generators, and on-site
generation. Such certification can provide credibility to the product and confirm the product's environmental
value. By purchasing a product that has met specific environmental and consumer protection guidelines adopted
by the certifying entity, organizations will be better positioned to address stakeholder questions about purchase
quality and credibility. Regional REC tracking systems are not an equivalent replacement or substitute for
third-party certification. Visit http://www.green-e.org for more information about certification and verification.
¦ Location of generation. Where the generation occurs may matter to purchasing organizations for several
reasons. Some may prefer to buy locally (e.g., in-state) because the generating project is more visible, has a more
direct economic influence, or creates a better story for local stakeholders. Others may prefer to buy in-state
renewable generation to contribute local environmental benefits.
Location can also matter from the perspective of organizations preparing greenhouse gas (GHG) inventories.
Although GHG emissions are global in impact, purchasing local non-emitting generation might lower the average
emissions from the local electric grid. Long-term, this could be beneficial in an organization's Scope 2 loca-
tion-based emissions calculation. If the organization intends to report avoided emissions (an option under Scope
2 accounting), it might choose to purchase from a region (not necessarily local) with high emissions because
purchasing from this region could likely displace more emissions. For more information on GHG inventories please
see Chapter 8.
¦ Specific generation facility. Some green power options are for power generation at a specific site, such as a
nearby wind farm, rather than a mix of generation from 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. Some buyers will
capitalize on this through naming or branding the facility, reserving the opportunity to provide tours, and other
methods of reinforcing their connection to the project with their stakeholders.
Product complexity. Different product and procurement options require different levels of effort and due
diligence. For example, direct engagement with a project owner can involve lengthy negotiations and significant
transaction costs relative to an off-the-shelf product from a retail electricity supplier. Financial PPAs or physical
PPAs may require additional research on wholesale market prices, legal and accounting advice, and reporting if
the contracts are regulated as a financial product.
The Role of Product Certification
One of the major concerns with buying green power is ensuring that organizations get what they pay for. It can be difficult
to substantiate claims made about the quantity and characteristics of the product purchased. It is also important to ensure
that two organizations are not claiming to have purchased the same green power (e.g., megawatt-hours) and are not double
counting the same green power benefits (e.g., zero emissions electricity). Moreover, organizations may be unable to ensure
public acceptance of their purchase and avoid criticism from external stakeholders without independently verified informa-
tion 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
• Conduct for suppliers, including oversight of supplier advertising claims and regular reporting to the certifying entity
Third-party certification usually also requires independent verification by an auditor to document that green power sellers
have generated or purchased enough renewable energy to match their sales commitments. Regional REC tracking systems
are not an equivalent replacement or substitute for third-party certification.
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Collecting Product Information
A good starting point for collecting information about specific green power options is the suppliers themselves. The
Green-e list of certified products is another way to get started (see Chapter 10 under Finding Green Power Products).
Purchasers should be sure to collect enough information to answer the decision criteria listed earlier, and to collect
information consistently across suppliers and among products to facilitate comparison. A good way to find consistent
information is through an exploratory letter or a request for information (RFI), listing individual criteria and addressed
to specific suppliers.
In many states, competing electricity suppliers are required to provide an electricity label—analogous to a list of food
ingredients or nutrition label—that provides information in a standard format and makes product comparisons easier.
This information is generally available directly from the supplier or from the state's public utility commission (see
Figure 6-1 for an example). Third-party certifiers, such as Green-e, also require standardized product content labels
and provide product content information on their websites.
For direct purchase options,, it can be challenging to find suitable new generation projects under development
that fit the purchasing organization's objectives. Each resource type has its own trade press (e.g., North American
Windpower, Solar Industry Magazine3:) that reports on new projects in the works, so following these media sources
can be informative.
Self-generation options are discussed in more depth in Chapter 7, Planning a Self-Generation Renewable Project.
After collecting data from suppliers, the next step is estimating the full cost over time of the chosen green power
option and calculating relevant financial metrics to present to decision-makers. As mentioned above, the organization
should take care to compare apples to apples, as well as measure goals that are of value to the organization. For
help finding cost data, contact the potential suppliers or do additional research using the sources listed in Chapter 10,
Resources for Additional Information.
Figure 6-1. SAMPLE Environmental Disclosure Label
Residual Mix - Year: 20XX
Fuel %
Nuclear
35.22%
Coal
31.00%
Energy Source
(Fuel Mix)
Gas
Import Mix
Solar
26.01%
5.89%
1.22%
Oil
0.60%
Hydro
0.06%
Total
100.00%
1 1
Emission Type
Lbs. per MWH Relative to State Average
Nitrogen Oxides (NQ^)
0.123 98%
Air Emissions
Sulfur Dioxide (SO,)
Carbon Dioxide (COj.
1.2345 110%
987.6543 108%
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Creating a Procurement Plan
A procurement plan documents the purchaser's decisions and addresses possible challenges in buying green power.
A procurement plan can also help convince others in the organization that purchasing green power fits the overall
corporate strategy.
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 green power project team can show the
costs and benefits of purchasing green power to the organization, it should present the information to management.
Managers may ask about the products the organization would buy, their cost and their benefits and the risks relative
to different parties involved in the transaction. The procurement plan should compare the green power opportunity
to what the organization is currently buying or using for power. The project team may also want to describe to what
extent and how peer organizations are purchasing green power.
Besides providing the information management needs to make a decision, a procurement plan can also help
overcome resistance to green power within the organization. Some organizations have outdated perceptions of the
reliability of renewable energy technologies, misunderstandings about using a variable resource, worries about the
cost, misperceptions of the role and importance of RECs, or different perspectives on certain product types. As part
of the procurement process, the project team will 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
The plan should list the facilities for which green power will be procured, because the quantity of electricity used in
those facilities now and in the future will guide the size and timing of the purchase. Some organizations start out with
a single facility and over time expand to cover their national footprint. The plan should propose the amount of power
that to be purchased (as a fixed quantity, a fixed dollar amount, or a percentage of total power use). If this procure-
ment is a trial that may lead to additional purchases in the future, the plan should spell out the criteria that will be
used to judge the trial's success. The plan should describe whatever is known at this point about future procurement
phases. For example, some organizations may start out with an unbundled REC purchase that is easy and straightfor-
ward and then, as they gain experience and learn more about available green power options, choose to pursue other
supply options such as direct project engagement.
As described earlier, although long-term contracts offer price stability benefits and may help finance a new project,
these benefits must also be weighed against the risk of changing market conditions. Therefore, some organizations
consider a portfolio approach for their procurement. Much as a standard energy procurement strategy seeks to
balance risk over time by considering a variety of suppliers, contract lengths and generation sources, a green power
strategy can also benefit from a portfolio approach. Considering a range of purchasing styles and locking in smaller
purchases or taking advantage of scaled larger purchases over time can be helpful in light of the rapid changes
ongoing in the sector. Organizations operating in a range of geographies will also need to consider how to prioritize
each market or how to aggregate purchases for these different facilities. For example, some organizations may prior-
itize facilities by cost-effectiveness or favorable policy climates, while others may prioritize by impact on greenhouse
gas emissions reductions. Still others prioritize their iconic locations, such as the headquarters or customer-facing
operations, first.
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Expected Benefits
Keeping in mind the general benefits of purchasing green power, the plan should list the particular environmental,
economic and stakeholder benefits expected from buying green power for the organization. Wherever possible, these
benefits should be linked to the organization's goals, such as greenhouse gas reductions, electricity price hedging or
enhanced branding.
Financial Considerations
The procurement plan should also discuss cost and risk. Cost has traditionally been the primary concern with green
power, but there are an increasing number of emerging products and financing models for purchasing green power
that can result in a net economic benefit or risk reduction over the long-term. Negotiating the right supply contract
can have a big effect on the financial costs and benefits of buying green power.
Case Study: Financial PPA with
Renewables
Yahoo has stabilized its energy budget while
helping a new wind farm get built. In 2015,
the digital information company entered into
a financial PPA with a wind farm that was
under development in Kansas. The wind farm
sells the electricity into the regional wholesale
market at spot market prices, while Yahoo's
nationally scattered data centers continue to
purchase electricity from their local suppliers.
The contract is structured as a contract for
differences under which the parties agreed to
a guaranteed settlement price for the sale of
the project's electricity into the market over
the duration of the contract. If the electric-
ity sales income received by the wind farm
is greater than the agreed settlement price,
the wind farm pays Yahoo the difference
between the income and the guaranteed
price. Conversely, if the electricity sales
income is less than the guaranteed price, then
Yahoo pays the wind farm the difference. In
the event of higher wholesale electricity mar-
ket prices, the long-term fixed price provides
savings to Yahoo and a guaranteed revenue
stream for the wind farm. If electricity market
prices are lower that the agreed-upon price,
however, Yahoo may miss the opportunity for
savings. For more understanding of the risks
and benefits of financial PPAs, see Chapter 4,
Green Power Product Options.
Strategies to Manage the Cost of Green Power
Seek a fixed-price contract. Because it requires no fuel
(and hence its cost is predictable), renewable energy may
be available at a fixed price without any future fuel-cost
adjustments. Organizations should check with potential
green power suppliers, particularly if the organization is con-
sidering a utility retail option, to see whether green power
customers are exempted from fuel-cost adjustments.
Buy green power for only part of the organization's elec-
tricity use. Green power does not have to be used for all
electricity consumption. For example, an organization might
buy green power for just 5 or 10 percent of its electricity
use, or for certain production or a specific product line or
part of operations. Buying 10 percent green power may add
less than 1 percent to the organization's electricity costs and
sometimes may cost less and save money. Alternatively,
some lower-percentage renewable electricity products cost
less because they contain less than 100 percent green power.
Make a longer-term purchase. Organizations should consid-
er the term of commitment alongside the quantity and cost
of green power purchased. A short-term contract (typically
less than three years) might offer greater flexibility in the
future but might cost more. Direct project engagement
options such as physical and financial PPAs, utility green
tariffs, and self-generation involve longer-term commitments
(e.g., 10+ years). The security of a long-term commitment
can reduce risk to the supplier, allowing it to offer a lower
price than under a shorter contract, and can offer price pre-
dictability to the purchasing organization. See Chapter 10 for
more resources on PPAs, including contract price escalators
and options for buyouts. Ultimately, the right contract length
depends on the organization's goals and selection criteria.
¦ Consider a financial PPA. A financial PPA allows buyers to lock in stable green power prices and sellers to lock
in stable revenues by agreeing to pay the difference between the actual power price and an agreed upon settle-
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ment or "strike price." It is an effective way for both parties to manage price risk, but financial PPAs are relatively
complex procurements, generally only available to the largest, most creditworthy organizations, and may have
accounting implications that some organizations consider onerous. For example, financial PPAs can be viewed
as a type of financial derivative or swap transaction that may be regulated by the U.S. Commodity Futures
Trading Commission. Such transactions require specialized knowledge about Financial Accounting Standards
Board rules. See Chapter 4 for a fuller discussion of financial PPAs. Some additional resources are referenced in
Chapter 10, but organizations should seek legal and accounting advice for the most current information.
Offset the cost with savings from energy efficiency. Energy efficiency is often the first step in managing
energy costs. Reducing the total amount of electricity purchased helps make green power more affordable.
When reviewing green power providers, organizations may find that some providers also offer energy efficiency
services, with the goal of no net increase in their customers' power bills. The savings may work the other way,
too. Some green power supply options can save on electricity costs, which can then be used to fund energy
efficiency activities.
Use savings from competitive choices. In states with restructured electricity markets, competitive choices of
either green power or commodity electricity can lead to savings on energy costs, which can be used to buy
green power. Alternatively, the extra cost of green power can be limited to the amount of savings resulting from
competition. Switching to less expensive conventional power can also mean dirtier power, so organizations
should ask the electricity supplier for information about the emissions from its product and make sure those
emissions do not erode the benefits of the green power bought with the savings.
¦ Specify a price cap. For example, an organization might say in its request to suppliers, "We want our cost of
energy to be at or below 5 cents per kilowatt-hour." 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 product options available and
the organization's procurement rules. Generally, the greater the load the buyer can bundle together in one purchase,
the more attractive it will be to a supplier. Simply put, a large purchase can result in a lower price per unit and trans-
actional efficiencies for both buyer and supplier.
The following explains typical ways to buy green power. Federal agencies must work within the procurement rules
applicable to the federal government, which are explained further in Appendix A, Green Power Considerations for
Federal Agencies.
¦ Call several sellers. A buyer can keep the procurement process simple by calling a few green power provid-
ers—either REC marketers, utilities, or other electricity providers 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 dis-
cussion, the organization may be ready to negotiate directly with one of the suppliers about product definition,
certification, price and terms. If the organization is planning a large purchase, the suppliers might be willing to
tailor something to the buyer's needs.
Negotiate with the utility. Buying power is simple, though the choices may be limited 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 website and calling to discuss its interest. 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
a green tariff or an integrated energy efficiency and renewable energy package tailored to the organization's
green power goals.
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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 significant negotiations would be
required once the winner is selected that could
require changes to their costs while locking
them into a pricing commitment. Organizations
can ensure broad participation and validate
interest from the market about new purchasing
ideas with an RFI. Based on the results of the
RFI, organizations can either proceed directly
to negotiating with a particular vendor or refine
their procurement goals in order to issue a
detailed RFP that will have a better chance of
multiple qualified bidders.
Request proposals. Large companies and especially
public institutions often issue a formal solicitation or
request for proposals (RFP). This practice is also recom-
mended for direct project engagement options such as
PPAs and self-generation. An RFP requires more time
and effort for preparation, evaluation and negotiation
but 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 solicita-
tion. 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.
A two-step process is possible, in which the organization first issues an RFI and, based on the responses, sends
a more detailed RFP to those suppliers that meet its general requirements. The RFI would be broadcast to a
larger audience, not only to find out who meets the buyer's qualifications, but also to gauge the amount of
interest. Screening qualifications would emphasize experience and would vary according to the type of product
option under consideration. For example, an RFI for a green electricity supplier might ask for the total load
served, number of similar customers served, how long the supplier has been in the green power market and how
many complaints have been made about the supplier to the public utilities commission. A buyer considering a
PPA might want to know the number and size of projects developed previously, how long each project was in
development, the developer's financial strength, and experience obtaining financing for similar projects.
For large purchases, RFPs may be addressed to renewable power generators (wholesale) as well as retail
suppliers. Buying directly from generators might lower the cost but will likely require a longer-term purchase
commitment. Organizations will still need to work with a retail supplier to integrate the wholesale contracts, so
active engagement with a preferred retail supplier will be important.
EPA's Green Power Partnership offers assistance to partners putting together a green power purchase RFP. For
example, the Partnership can provide examples of publicly available RFIs or RFPs.
Contract Considerations
There are many issues that must be covered in green power contracts; those mentioned here are just a few. See
Chapter 10 for more resources on power purchase agreements.
Environmental attribute ownership. RECs embody the environmental attributes of generation. They are essen-
tial to verifying ownership and the right to claim environmental attributes. It cannot be overemphasized that
RECs, as a tracking instrument, must be conveyed to the buyer who claims to consume green power, regardless
of the product option chosen or how green power is procured, including in the case of on-site self-generation
and physical PPAs. If the RECs are owned by the project owner and not conveyed to the electricity consumer,
the consuming organization must purchase replacement RECs, and the green power claim must be based on the
replacement RECs. See the text box on REC Arbitrage in Chapter 4.
Organizations should make sure that the green power they purchase is not also counted by utilities for com-
pliance with regulatory requirements such as renewable portfolio standards, and RECs used for regulatory
compliance claims should also not be sold to voluntary consumers. Utilizing tracking systems and third-party
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certified products can help ensure that RECs are not claimed by more than one party. To avoid potential double
claims on environmental benefits, contracts should be explicit about what environmental attributes are included
with the sale, that the purchase conveys exclusive rights to the attributes, and that they are not being used for
any mandate or regulatory requirement. For more information, see Chapter 2 on renewable energy certificates
and tracking systems.
Evaluate contract price escalators. Some contract prices for delivered power are flat for the life of the contract,
but they may start off higher than the utility rate at the beginning with the expectation that the utility rate will
rise. Other contracts may escalate the price annually by a fixed percentage, leveling off after a specific year. Still
others may index the contract price, offering power at a fixed discount to the local utility rate. Organizations
need to figure out what is best for them.
Consider options for PPA buyouts. Some contracts, particularly for electricity from solar projects, may allow
the purchasing organization to buy the generator after the original developer/owner has obtained any tax
benefits that may be available (e.g., the federal investment tax credit). This approach reduces the investment
capital required and removes the hassle of build-to-own in the first place. If interested in this approach, and if it
is available, the organization should agree on the basis for determining the buyout price.
Termination clauses. Some contracts will define early termination fees and penalties. Fully understanding how
these might constrain future decisions for the company is an important part of risk evaluation.
¦ Transfer of ownership. Generation assets may be sold to a third party, in which case the buyer of the asset will
be responsible for fulfilling the terms of the PPA. The contract should specify under what circumstances such
transfers will be allowed and whether the PPA off-taker has a say in the transfer.
¦ Date of operation. If the organization is counting on a new generator being operational by a certain date, it
should negotiate and specify in the contract when the power must become available and describe penalties or
remedies if full operation does not occur by the specified date.
Interruptions in operation. The generator should be required to notify the purchasing organization of any
malfunction or interruption in supply and be required to make timely, routine and necessary repairs to resume
service.
Default, remedies and damages. The contract should specify what constitutes default and how default may be
remedied.
Special Considerations for Procuring
Green Power
Green power initiatives. Organizations should be aware
of purchasing groups, campaigns and initiatives supporting
green power, along with opportunities to capitalize on
their environmental commitment. These include the U.S
Environmental Protection Agency's Green Power Partnership,
RE100, Sustainable Purchasing Leadership Council, the World
Wildlife Fund and World Resources Institute's Corporate
Renewable Energy Buyers' Principles, and others. By joining
forces with other like-minded organizations, green power
purchasers can leverage their influence on the market and
potentially on public policy. More information can be found in
Chapter 10.
GHG Protocol Scope 2 Guidance. Any organization that
wishes to report its emissions to its stakeholders or to a GFIG
Case Study: Procuring On-site
Generation through a Solar PPA
Amphitheater Public Schools, the school dis-
trict serving Tucson, Arizona, entered into a
solar PPA for a 9.3-MW solar generation proj-
ect located across 25 school sites and support
facilities. The project was completed in 2016
and is expected to generate more than 60
percent of the district's electricity needs in the
first year of operation. The project required no
upfront capital investment from the school dis-
trict. Instead the developer owns and operates
the solar power system, and the district will
purchase the electricity generated by the solar
panels under a 25-year solar services agree-
ment. The project will result in an expected
savings of $11 million to $23 million in energy
cost savings over the term of the agreement.
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emissions registry should know about the Corporate Standard for emissions accounting, specifically the Scope
2 Guidance on how organizations should measure emissions from purchased or acquired electricity, steam, heat
and cooling (called "Scope 2 emissions"). The guidance includes requirements for accounting for emissions from
energy contracts and RECs in greenhouse gas inventories, how to calculate emissions using the location-based
method and the market-based method (using tradable instruments such as RECs), quality criteria that all
tradable instruments must meet to be considered a reliable data source for the market-based method; and
recommendations for transparently disclosing information about energy purchases and use.
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 organization's 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 meeting the metrics described in the procurement plan, producing sav-
ings or providing an economic hedge against rising electricity prices.
¦ How well the organization promoted its green power commitment.
¦ How well the organization educated employees about the green power commitment and actions.
Whether the green power purchase is helping the organization meet its corporate or institutional goals related to
environmental improvement and sustainability.
REC Tracking Systems
A tracking system is an electronic database that is used to track the ownership of RECs or megawatt-hours of electricity,
much like an online bank account. A tracking system issues a uniquely numbered certificate for each megawatt-hour of
electricity generated by a generation facility registered in the system, tracks the ownership of certificates as they are trad-
ed between tracking system account holders, and retires the certificates once they are used or claims are made based on
their attributes or characteristics. Because each REC 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.
RECs in a tracking system can be used to verify compliance with a renewable portfolio standard, to help create environ-
mental 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 and do not
provide assurances related to sales, supply, claims, and state policies affecting benefits; individual retail green power
customers do not generally hold accounts in tracking systems unless they make very large purchases. See Chapter 10 for
details.
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Planning a Self-Generation
Renewable Project
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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An alternative to purchasing or contracting for green power is self-generation, meaning that the organization owns
the generating facilities. Self-generation equipment can be located on-site where the power is consumed, or an
organization may own a generation facility that is located off-site where a larger or more cost-effective installation is
possible.
Depending on the size of the project, installing self-generation can be a longer process than purchasing green
power because installation requires 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 time needed
to get a self-generation project up and running. The following steps, along with the information listed in Chapter 10,
Resources for Additional Information, can help organizations that are considering self-generation options.
Screening the Options
Based on the steps taken at the very beginning of the green power process (Chapter 5, Using Organizational Goals to
Guide Green Power Purchasing), an organization should have an understanding of its energy needs and the renew-
able resources available, whether located at the organization's facilities or off-site.
The next step is to perform a screening analysis to determine the options that are best suited to the site. The U.S.
Department of Energy has resource maps, data and other information on solar, wind, biomass and hydropower at
httDs://enerav.aov/eere/office-enerav-efficiencv-renewable-enerav. The National Renewable Energy Laboratory has
several energy analysis models and tools to help evaluate renewable resource potential. Private developers also offer
resource assessment tools.
Whether to self-generate from a project located on-site (sometimes referred to as customer-sited) or off-site (some-
times referred to as grid-sited) is a major decision for an organization to consider. On-site self-generation at the
organization's facility is a common choice among green power users for the following reasons:
¦ On-site self-generation is convenient if the site is already under the organization's control.
¦ It provides a visible statement of the organization's commitment to renewable energy.
¦ Solar photovoltaic (PV) panels are modular and can be easily adapted to the site (roof or ground-mounted).
If on-site self-generation is not an option, or the renewable resource is insufficient at the site, organizations might
consider off-site self-generation elsewhere on the grid.
¦ Off-site projects can be larger (utility-scale) because more land may be available.
¦ Organizations can develop a project where the renewable resource is stronger and more cost-effective.
¦ Off-site projects may offer more opportunities for using different renewable resources since the organization
would not be limited to the resource available at its facility, but the organization must control the site to be
developed.
Organizations contemplating self-generation should consider whether they are prepared to include the responsibilities
of owning and operating a self-generation project as part of their core business activities. Owning and operating a
project means that the organization will be responsible for equipment maintenance, performance monitoring, inter-
ruptions in generation and troubleshooting. These tasks can potentially be contracted out to a service company, but
someone still has to monitor the work.
Organizations developing large projects should think about their role as electricity sellers. Large projects are often
connected to the transmission grid (rather than the distribution grid), which means that they must participate in the
wholesale electricity market to dispose of their generation. The organization may also be responsible for ancillary
services (e.g. frequency control, spinning reserves and operating reserves) required by the grid to continually balance
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supply and demand. Alternatively, the organization may pay someone else to manage its electricity sales and to
provide the necessary ancillary services.
As with any capital investment, organizations should assess the cost-effectiveness of a self-generation project. First,
the organization needs to determine the approximate size of the project. The size can vary depending on technology,
the load to be served by the project, the organization's capital budget, physical constraints at the site (such as rooftop
area for PV systems or the rate of biomass fuel production), and the incumbent or alternative cost of electricity to
which the cost of self-generation will be compared. A developer or utility representative can help choose the right size
system based on the organization's load and site characteristics, or the organization can also use one of the software
tools listed in Chapter 10, Resources for Additional Information.
At this point in the planning process, it is a good idea to consider whether energy efficiency projects should be imple-
mented together with the renewable generation technologies being considered. Reducing the on-site load via energy
efficiency may allow the project size and cost to be reduced. The organization's site-specific situation determines the
appropriate efficiency measures to include.
The next step in examining cost-effectiveness is to estimate the capital cost based on the assumed size of the project.
This will enable a preliminary calculation of economic feasibility. The analysis should compare the organization's
current and expected future energy costs on a per kilowatt-hour basis with the levelized cost of electricity from the
renewable power project over the life of the project under consideration. This screening should also include other
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.
Utility rate impacts should be investigated carefully. The organization should understand the different components of
its electric bill and perform an analysis to determine how on-site generation will affect the demand charges, time-of-
use rates and any applicable riders. Energy storage in particular, combined with self-generation, should be considered
as a way to reduce electric utility demand charges. The local utility may be able to help with this determination.
The economic analysis will also be affected by whether the renewable generation will be in the form of a combined
heat and power system (e.g., a system using renewable fuel, such as landfill gas and biomass). For these systems, the
expected thermal utilization and associated savings will need to be considered in addition to electricity bill savings
from power generation.
A further refinement to the cost feasibility screening is to consider financial incentives and hidden costs. The analysis
should account for state and federal financial incentives, tax credits and production payments, such as those for net
metering, which may apply. On the cost side, engineering studies, interconnection fees, insurance, operations and
maintenance costs and changes to utility tariffs for distributed generation must be considered.
If the cost feasibility relies significantly on public policy, such as financial incentives, organizations should be sensitive
to the risk of changes in the policy and regulatory environment. In addition, utilities are particularly concerned about
the effect of self-generation on their revenues, and this may lead to policy changes and additional fees to pay for the
back-up services that they provide.
The economic analysis will be affected if the organization wants to include energy storage (e.g., batteries, capacitors,
flywheels). This is a separate decision, however, from the decision to install on-site generation. If energy storage is
included, the additional cost and benefits of the storage system must be considered.
Obtaining Resources and Assistance
If an organization chooses to own and operate its own power system, information resources are available, many of
which are outlined in Chapter 10 of this guide. Technical assistance may be available through the local utility, state
energy offices, energy service providers, energy service companies, consultants, manufacturers and equipment
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vendors. In addition, the U.S. Department of Energy's Federal Energy Management Program (FEMP) offers technical
assistance to federal agencies. Before making a decision, the organization should consider seeking outside experts
who can help with the technical, policy and financial aspects of a renewable power project, especially if it is consider-
ing a remotely sited utility-scale project that will sell electricity in the wholesale electricity market.
The financial details are usually what make or break a self-generation project, so the project team should collect infor-
mation about incentives and financing options (including third-party ownership) that could make the project more
cost-effective. Many states offer financial incentives specifically for customers that install qualified renewable gener-
ation systems. These incentives may take the form of direct payments (rebates or grants), competitive solicitations in
which contract payments are awarded, or tax breaks (either sales or property tax exemptions). In addition, the federal
government currently offers an investment tax credit and a production tax credit for certain renewable resources
(although these are being reduced or phased out over time), and Modified Accelerated Cost-Recovery System
(MACRS) for certain renewable energy investments.1 The organization must ensure that the system is designed to
meet the requirements of the applicable incentive programs.
Barriers may arise as a result of changing economic or policy conditions, such as the availability of tax credits, direct
subsidies, or the climate for loans and project finance opportunities. Many states are reviewing how utilities com-
pensate consumers for net excess energy fed into the grid (e.g., net-metering), and whether utilities will be allowed
to impose standby charges for self-generation. The state energy office, local utility, or renewable energy equipment
vendor should have information about the current status of incentive programs. Organizations should be aware that
the receipt of incentives or participation in certain programs may require the relinquishment of environmental benefits
(e.g., renewable energy certificates) and claims. Close attention should be paid to the terms of participation.
Finally, the organization may want to take advantage of guidance from independent programs such as The Climate
Group's RE100 (companies committed to purchasing 100 percent renewable energy), the World Wildlife Fund and
World Resources Institute's Corporate Renewable Energy Buyers' Principles, Rocky Mountain Institute's Business
Renewables Center, and the Sustainable Purchasing Leadership Council. Some of these programs require membership
to access available resources.
Case Study: Using Incentives to Finance an On-Site Generation System
The University of Washington (UW) partnered with Seattle City Light (SCL) and the Washington State Department of
Commerce (DOC) to install solar panels on three residence halls. SCL's Green Up program contributed $225,000 toward
the purchase of the solar panels. This contribution enabled UW to compete for the DOC Solar Grant Program, which also
gave $225,000 in matching funds. Another $115,000 for the project's smart inverters was provided by another grant from
the U.S. Department of Energy and the Washington DOC. In addition to the solar panels, the project will include advanced
meters, communications equipment, a battery system and control center. The combined installation will act as a testbed
for research on how solar energy can be combined with other demand-side resources such as battery systems, in order to
provide controllable power and voltage support.
Creating a Project Plan
Once the organization has decided on a specific generation technology, it should conduct a detailed feasibility study.
This study will assess the technical, regulatory and financial costs and benefits of the project. The study should be
based on inputs that are as specific as possible to the organization's situation, such as resource and site conditions,
specific utility rules, and quoted prices for equipment and operations and maintenance costs from vendors.
For the investment tax credit, see http://proarams.dsireusa.ora/svstem/proaram/detail/658. For the production tax credit, see http://proarams.dsireusa.ora/svstem/
proaram/detai 1/734. For MACRS, see http://proarams.dsireusa.ora/svstem/proaram/detail/676
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Case Study: Owning an Off-
site Wind Farm
IKEA, the provider of home furnishing
products, has taken bold steps by purchas-
ing two wind farms in the United States, the
98-MW Hoopeston Wind project in Illinois,
and the 165-MW Cameron Wind Farm in
Texas. Both projects came online in 2015.
IKEA's goal is to generate renewable ener-
gy equal to 100% of its total global energy
use by 2020 and to minimize its emissions.
IKEA also has 38 MW of solar capacity
installed on 90% of its buildings across the
United States. IKEA Group fully owns the
wind farms because it wants to control its
exposure to fluctuating electricity costs,
but the projects were constructed and are
managed by a third-party developer.
Technical considerations may include how well the project output
matches the organization's electricity consumption. For net metering,
this has typically meant matching generation and consumption on an
annual basis, but as states review net metering policies and the value
of self-generation, time of use will become more important for distrib-
uted generation and how it is compensated. Organizations should
compare the project's hourly and seasonal generation profile with the
organization's load profile. Energy storage may be a factor in matching
output to consumption and in reducing utility demand charges. For
some renewable resources such as biomass, fuel availability, transpor-
tation and storage may be an issue.
As with any type of development project, the organization must
secure the necessary land-use and building permits required for its
construction. This should take into account space limitations, as well
as fire, safety and zoning requirements. Biomass projects will likely
require air permits from the local air resources control board. The
project plan should account for the time and expense of acquiring
these permits.
For on-site projects, the local utility will have electrical interconnection requirements, which, depending on the size of
the project, may entail significant engineering studies. If the project is off-site and interconnected to the transmission
or distribution grid, more significant studies and fees may be required. Other technical issues that should also be
investigated include power-quality impacts for on-site generation and islanding capability (operating as a stand-alone
microgrid) if there is a power outage.
If the project appears feasible, the project team can then decide on a plan to finance, build and install the renewable
power system.
Procurement Strategy
Self-generation differs from power purchases. Undertaking a self-generation project means that an organization may
buy, own and operate its own generation equipment, as opposed to purchasing green power supply.
An organization can handle the procurement options for self-generation in the following ways:
Act as the general contractor. If the organization has design engineers on staff, they can draw up the spec-
ifications and then solicit bids for equipment and installation. This arrangement works well if the organization
wants to do some of the work in-house. Keep in mind, however, that if the organization has no experience with
renewable energy projects, it runs the risk of ending up with a poorly performing system.
Hire a qualified contractor for a turnkey project. For an on-site project, an organization can use a request for
proposals (RFP) to select an equipment manufacturer, a system designer, or a system installer to help design the
project, to buy the materials, to arrange for installation and to commission the project. There are some compa-
nies (particularly in the PV industry) that are vertically integrated, from manufacturing to design and installation
to operations and maintenance.
Before hiring a contractor, an organization should check with state and local jurisdictions to see what licenses are
required of contractors. If the project is utility-scale and off-site, such as a wind farm, a developer with wind project
experience would be very important, and it would be common for the developer to bring a partially developed
project to the table.
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Alternative: On-site Power Purchase Agreement
When evaluating self-generated green power, some organizations decide not to own the project because of the capi-
tal investment requirement, maintenance responsibilities, or financial returns that fall short of company standards. An
alternative that many organizations consider is an on-site project developed, financed and owned by a third party. The
third-party owner contracts to sell the power, or lease the equipment, to the consumer host. The deal may be structured
so that the monthly payment is slightly less than the cost of electricity. See Chapter 6, Contracting for Green Power.
Relative to ownership, this approach simplifies the host's responsibilities, but it may not be available in states that only
allow electricity to be sold by a qualified utility. Moreover, it is important to consider how the choice of who owns the sys-
tem will affect the availability of tax credits and incentives (for instance, non-taxable entities cannot take advantage of tax
credits).
As with other types of green power purchases, organizations should make sure that the contract also defines the owner-
ship of RECs or generation attributes and therefore the rights to claim the use of renewable electricity. A host that wants
to claim environmental benefits such as the use of electricity from a zero emissions resource will need to own and retire
the RECs (or attributes) that are generated. See Appendix B for more on financing alternatives.
If an organization self-generates, it must retain the renewable energy certificates (RECs) to substantiate claims of
renewable energy use, or for claiming reductions in its emissions footprint. But if it is a solar project in a state with
high solar REC prices, it can sell the RECs and buy replacement RECs from a cheaper source to support environmen-
tal claims. See text box in Chapter 4 on REC Arbitrage.
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 websites for the major trade groups in this area—the Solar Energy Industries
Association and the American Wind Energy Association—offer information about their members' expertise and inter-
ests. Chapter 10, Resources for Additional Information, lists more sources.
The organization should obtain comparative information from each vendor, usually through either an RFP or a request
for information as described in Chapter 6, Contracting for Green Power. An RFP is appropriate if the organization
already has a detailed system design and simply wants a vendor to implement that design. An RFI is better for
comparing vendors' qualifications and experience and should be used to select a vendor to design and implement the
project. Because the design of self-generation projects is site-specific, and because design details are often resolved
differently by different vendors, the RFI approach often leads to a project best tailored to an organization's needs. For
more insights and resources see also https://www.epa.gov/repowertoolbox.
Some factors to consider when choosing a provider for implementing a self-generation project include:
¦ Experience. The vendor's experience and familiarity with the type of project the organization is considering is
extremely important. Also determine the vendor's experience with interconnection issues (if the project 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 projects it has installed.
¦ Performance history. It is very important to check references from previous customers, preferably for projects
similar to the one the organization is considering. Another important factor is whether there are any judgments
or liens against the vendor, which would indicate problems with previous projects.
Licenses and certification. To be eligible for state incentives, some states require that the project be installed
by a licensed contractor, whereas other states certify installers that have received the relevant training. As with
any other capital project, licenses and certifications are an indicator of a contractor's qualifications.
Liability and professional insurance. If any problems arise with the project during installation or operation, it
is important that the contractor have adequate insurance to protect the owner/organization from liability. The
contractor should also be responsible for any problems with interconnecting to the grid.
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Installing and Operating a Renewable Generation Project
Once the organization's generation project has been designed, it is time to put the contracts in place and begin con-
struction. As with any capital project, it is important to stay involved during the construction to resolve any problems
that might arise.
When the construction has been completed, the project team should monitor and verify the system's energy perfor-
mance. Does everything work as planned? What is the actual energy production? If it is not as projected, what can be
done to improve performance? Information about 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 project is tested to make sure that it meets regulatory and
design specifications. The second step is monitoring and verifying the project'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. Economic analysis is also required, since how the system is operating relative to time-of-use rates
and demand charges can sometimes be different than originally assumed.
Finally, ali renewable power projects require periodic maintenance to perform as intended. Self-generation projects
require scheduled maintenance and replacement of critical equipment components. Project owners should plan
for replacement of key system components such as inverters that convert direct current to alternating current.
Organizations should discuss the frequency and cost of such replacements with equipment vendors. Additionally,
the organization must decide whether its staff has the expertise and time to operate and maintain the equipment, or
whether it should contract with the equipment vendor or a service company.
Organizations that own generating projects should plan for equipment end-of- life removal and disposal, and, if appli-
cable, site restoration. Large projects may be permitted only if funds are set aside for this purpose.
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Capturing the Benefits of the
Purchase
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
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DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2.
Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3.
The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4.
Green Power Product Options
Purchase Options
x X
Self-Generation Options
IV
1 \
Green Power Supply Options Summary
Chapter 5.
Using Organizational Goals to Guide Green Power Purchases
I
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
L
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There are many potential benefits to purchasing green power: environmental, economic, stakeholder relations and
development of domestic energy resources. Some of them may be benefits internal to your organization, such as
price stability or predictability, cost savings, or increased reliability, which are intrinsic to the purchase itself. Others
may be satisfying organizational goals for 100 percent renewable energy, reducing the organization's emissions
footprint, or enhancing employee satisfaction, which require the organization to be more proactive in communicating
results.
For some of these accomplishments, an organization may want to measure and record its accomplishments in a
registry or corporate annual report, or through a third-party group campaign or initiative. Companies may also
seek recognition for their actions as part of branding, public relations, or product differentiation—and to contribute
publicly to the momentum around purchasing green power. In all cases, an organization must own the renewable
energy certificates (RECs) to substantiate its green power claims and to take credit for the benefits of its green power
purchases. This chapter addresses several ways to capture the environmental and stakeholder relations benefits:
emissions inventories, emission reductions, building certification, promotion of purchases and best practices in
advancing public claims about environmental benefits.
The Environmental Benefits
The environmental benefits stemming from an organization's purchase of green power depend on a number of
factors, including the quantity of zero-emissions energy purchased and consumed. As a start, organizations should
compare the amount of green power purchased or generated and consumed to the full amount of energy used across
their facilities. Percentage of green power use is the basis of many environmental claims, and organizations must be
able to substantiate and document these claims.
Value of Emissions Inventories
Concerns about climate change have prompted many organizations to complete an emissions inventory. An inventory
is a detailed quantitative calculation of emissions by source and type of greenhouse gas, usually expressed in metric
tons of carbon dioxide equivalent (MTCO,e).
An inventory serves many purposes, including the following:
¦ Identifying opportunities for reducing and managing emissions.
¦ Participating in reporting programs and reduction initiatives.
¦ Documenting an organization's emission reductions as a basis for promoting these actions to customers and
other stakeholders.
An inventory also allows organizations to record their emission information in a formal registry. Several emissions
registry programs have been established to record emissions inventories, including The Climate Registry (TCR),
CDP (formerly the Carbon Disclosure Project), and Wisconsin's Voluntary Emissions Reduction Registry. The U.S.
Environmental Protection Agency's (EPA's) Center for Corporate Climate Leadership provides resources and guidance
on preparing a corporate emissions inventory.1 Most registries will refer the prospective user to the Greenhouse
Gas (GHG) Protocol at www.ahaprotocol.org for guidance on how to calculate emissions that will be reported in the
registry. Although methods may be based on the GHG Protocol, many registries have their own reporting rules and
requirements.
1 U.S. Environmental Protection Agency, (n.d.). EPA Center for Corporate Climate Leadership greenhouse gas inventory guidance. Retrieved from https://www.epa.gov/
climateleadership/center-corporate-climate-leadership-greenhouse-gas-inventorv-guidance
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Avoided Emissions Claims
When an organization buys and uses green
power, the renewable generation affects the
operation of other generators on the grid
and may reduce emissions. While avoided
emissions are conveyed by RECs, organi-
zations must exercise care when making
avoided emissions claims because the RECs
or generation attributes do not convey tons
of emissions reductions. Also, the owner of
each generating source that is affected by
the organization's use of green power is ulti-
mately responsible for its direct emissions
and has the right to claim any resulting tons
of direct emissions reductions. There are cir-
cumstances, however, where an organization
may optionally report its avoided indirect
emissions impact under its greenhouse gas
inventory. Organizations should understand
these subtleties before making avoided
emissions claims. See the Scope 2 Guidance
referenced in Chapter 10 for more information.
The authoring organizations of this document
are available to help organization better
understand making avoided emissions claims.
Accounting for Emissions
The GHG Protocol, supported by the World Resources Institute
(WRI) and the World Business Council for Sustainable Development,
works with organizations around the globe to create accounting and
reporting platforms for greenhouse gas emissions. It has established
comprehensive and standardized frameworks for measuring and
managing emissions. The GHG Protocol is the world's most widely
used emissions accounting standard for companies.
In particular, the GHG Protocol Corporate Standard provides
requirements and guidance for companies and other organizations
preparing an organization-level emissions inventory.2 This standard
and supplemental reporting protocols have been adopted by the
largest emissions inventory platforms in the world, including CDP
and TCR. The idea is that an emissions inventory is a strong basis for
setting emission reduction goals and for measuring progress toward
those goals.
Capturing the benefits of emission reductions entails creating
an inventory and reporting the organization's emissions, usually
in a public registry. If the organization does not want to create a
comprehensive emissions inventory, it may simply report that it is
purchasing low- or zero-emissions green power (see environmental
claims best practice below).
The GHG Protocol provides guidance for accounting for direct emissions (called Scope 1) that are under the direct
control of the reporting organization; indirect emissions (called Scope 2) resulting from the organization's purchase of
electricity, steam and heat; and other indirect emissions (called Scope 3), which are emissions from the organization's
supply chain.
An organization that owns or controls electricity generation facilities is directly responsible for the emissions, and
if it creates an emissions inventory, would report those emissions as Scope 1 emissions. If it sells that electricity and
its environmental attributes (or the attributes alone) for use by someone else, the purchaser of the electricity and
attributes becomes indirectly responsible for those emissions and would report them as Scope 2 emissions. An
organization can use zero emissions REC-based green power in place of fossil-fired generation that emits emissions to
reduce its Scope 2 emissions responsibility, i.e., its footprint.'
Per the Scope 2 Guidance, organizations in a market where electricity supplier or product choices are available must
report emissions calculated using two different methods. The location-based method calculates emissions using
average emission factors from the grid region(s) where an organization's operations take place, regardless of any
direct purchases or contractual agreements an organization may use to purchase green power. The location-based
method can show an organization's "business-as-usual" scenario, absent any specific choices of energy supply. It can
also show location-specific risks associated with conventional power use, such as air pollution from coal combustion.
The market-based method calculates emissions using emission factors that reflect any specific energy choices an
organization makes or any contractual agreements it uses to purchase power (e.g., unbundled RECs, power purchase
agreements (PPAs), or differentiated utility products). An organization will account for its reduced Scope 2 emissions
from green power purchases as part of the market-based method. Regardless of the green power procurement
2Greenhouse Gas Protocol, (n.d.). Corporate standard. Retrieved from http://ahaprotocol.ora/corporate-standard
3 The GHG Protocol Scope 2 Guidance explains how to account for green power purchases correctly. Greenhouse Gas Protocol. (2015). Scope 2 guidance. Retrieved from
http://www.ahaprotocol.ora/scope 2 guidance
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Case Study: Using Green
Power for Promotion and
Branding
Church & Dwight features the Green-e logo
on a number of products and brands, includ-
ing Arm & Hammer, Vitafusion, Lil Critters,
and First Response. The Green-e logo
represents that these products have been
made at manufacturing plants that purchase
renewable energy to match 100% of the
facilities' annual electricity load. Church &
Dwight continues to explore ways to utilize
renewable energy for their operations. In
addition to other environmental initiatives,
the company has committed to achieving
carbon neutral status by the end of 2025.
option used, each purchase must include the renewable attributes
of the energy purchased including the emissions factor of renew-
able source of generation - as reflected in RECs - in order to be
claimed in the market-based Scope 2 figure.
Green Buildings Certification
Renewable energy purchases and on-site generation may earn
building owners credit toward a variety of green building standards.
For example, the U.S. Green Building Council 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
proportional to generation and purchase amount. For purchased
renewable energy, LEED requires that renewables meet the Green-e
standard, or equivalent.
Promoting the Organization's Purchase
Environmental responsibility has become a major factor in the purchasing decisions of many consumers. Purchasing
green power, reducing one's emissions footprint and publicly promoting those purchases and emission reductions
can improve an organization's brand and increase the level of trust among environmentally conscious customers.
Promotion can motivate an organization's employees by showing them that sustainability is more than a buzzword
and that the organization is willing to walk the talk. Promoting green power purchases positions an organization as a
market leader and amplifies the environmental impact beyond the organization by influencing customers, suppliers
and policymakers.
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" or "sustainability" news in internal publications. Internal publications, such as newsletters
or online employee portals, are valuable ways of communicating information to an organization's employees,
stakeholders and affiliates. They also help 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 organization-wide program. A staff adoption program should
create incentives, provide information, set milestones for staff purchases over time and recognize individual
achievements.
Identify ways to measure increased customer attraction and retention from green power purchases.
Many customers prefer doing business with companies that take visible action to protect the environment.
Organizations might consider performing surveys of customers to gauge the importance of the organization's
green power purchase to them. They should communicate the results to management to show the bottom line
impact of green power purchases and ensure continued commitment.
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RECs are Not Offsets
Organizations should take care not to confuse RECs with project offsets. This confusion may arise because RECs and proj-
ect offsets are both tradable instruments commonly used in U.S. energy markets to account for GHG emissions. However,
RECs and project offsets serve different purposes and represent different claims.
• A REC is measured in megawatt-hours and represents the environmental attributes (including emissions from the
generating facility) associated with the generation of 1 megawatt-hour of renewable electricity. The organization that
purchases REC-based electricity can claim use of zero or low emissions (depending on the actual emissions at the gen-
erating facility) electricity, as part of its indirect, or Scope 2, emissions accounting, but RECs are not a basis for claiming
global, or Scope 1, direct emission reductions.
• A project offset is measured in metric tons of carbon dioxide equivalent (MTC02e) and represents a direct reduction of
global GHG emissions that can compensate for or offset emissions made elsewhere. Project offsets may be created from
a variety of actions not necessarily related to energy production, such as energy efficiency or changes in land use. While
a project offset allows its owner to claim direct global emissions reductions, offsets do not support claims of renewable
energy use.
For more information regarding the differences between RECs and Project Offsets please see EPA's white paper titled
"Offsets and RECs: What's the Difference?" https://www.epa.gov/greenpower/offsets-and-recs-whats-difference.
External Promotion
Strategic external public relations maximize the positive publicity surrounding an organization's purchase of green
power. In addition to the public relations benefits, the purchase can motivate additional green power purchases by the
general public, the organization's customers and its supply chain, thereby extending the impact of the initial purchase.
To be effective, organizations must be sure to substantiate any claims made, per Federal Trade Commission (FTC)
marketing guidelines (see Chapter 10).
Construct a public relations plan. Organizations may construct a plan to communicate their purchases or
installations to target audiences. The plan should include strategies for using existing distribution channels
such as email, social media, blogs, websites and direct mail to promote the organization and its commitment
to renewable energy. An organization can create special print materials and press releases for distribution and
conduct email campaigns that distinguish it as an innovative leader. Retail companies sometimes circulate spe-
cial offers and coupons and even host events—such as renewable energy celebrations—at stores to attract new
customers and communicate the benefits of their green power purchases.
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 environ-
mental writers and publications to encourage feature stories about the organization and its commitment to 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. Providing presentation slides
or other collateral for executives to use when speaking publicly can be effective for reaching audiences other
than customers, such as investors or trade press.
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 organization's
environmental commitment. These opportunities might include marketing the organization's purchase on its
products and encouraging its suppliers and affiliates to also buy green power. Commercial organizations can
offer retail customers the opportunity to sign up for green power at point of sale, and reward them with benefits
such as discounts or gift cards, merchandise or collateral products (e.g., T-shirts, hats) that tout the company as
an environmental leader.
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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. They can share accomplishments throughout networks of peer companies and oth-
ers. Often, other green power purchasers will acknowledge or echo the initial accomplishment on social media
or elsewhere. All the organizations sponsoring this guidebook help their partners and companies publicize their
achievements in buying green power. Members of EPA's Green Power Partnership and those who participate
in Green-e Marketplace can also use these programs' respective logos in their outreach and communication
materials.
Participate in awards competitions. A number of entities recognize leadership in the purchase of renewable
energy through an awards program, including EPA's Green Power Partnership and the Center for Resource
Solutions' Green-e program as part of the annual Renewable Energy Markets Conference. Once an organization
wins such an award it can highlight the award on its website, press releases and other communication materials.
Example Claims
The FTC and RE100 have guidelines on how to market and promote green power purchases in ways that are not
deceptive for consumers, with several examples of deceptive claims. These resources may be found in Chapter 10.
Below are some example claims organizations might make regarding their use of renewable energy and purchases of
green power.
Legitimate
¦ A manufacturer that self-generates half of the electricity for a manufacturing plant while also retaining the
associated RECs from its onsite solar array and that also purchases additional RECs to match nonrenewable
consumption for the remaining half of the plant may promote on its website that the products manufactured at
this plant are manufactured using 100 percent renewable electricity.
¦ An owner of a local warehouse that sources 100 percent of the warehouses' energy consumption from wind
energy via a PPA and maintains ownership of the wind project RECs may promote on its website and in meet-
ings with customers that the warehouse is fully powered by wind.
Deceptive
¦ A retail store has a sticker on its front entrance claiming, "Powered by renewable electricity" when only half of
the store's electricity use has been matched with purchased RECs.
¦ A commercial real estate firm advertises to prospective tenants that a building is powered by green power, when
the firm has only purchased green power for the common areas and not for the tenant spaces throughout the
building.
¦ A company enters into a PPA with a renewable energy facility for enough power to cover 100 percent of its
operations and promotes to customers that it uses renewable energy, but it does not own the RECs associated
with the power, which are retained by the project and sold to a compliance entity for the state's renewable
portfolio standard program.
Best Practices
Making unsubstantiated and inaccurate claims about use of green power could lead to legal and financial risks
while damaging an organization's reputation. Hence, it is important for organizations to make credible claims and
substantiate them through REC ownership and retirement. Organizations can follow the below guidance in making
environmental claims:
Ensure contractual right to make claims. The ability of an organization to make claims of using green power is
contingent upon its ownership of the environmental attributes associated with the electricity it consumes. In the
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United States, RECs represent these environmental attributes. Thus, an organization must ensure it possesses
exclusive and full rights to the RECs associated with its electricity consumption to make environmental claims.
This rule applies in all cases, whether the organization owns the renewable system or is purchasing the green
power from a third-party owned system through an agreement like a physical PPA, financial PPA, or utility
program.
Ensure green power purchases do not count towards a mandate. A long-standing consumer requirement of
the voluntary market is that buyers want to know that their individual investments in and use of green power
do not go towards supporting a mandate that would have otherwise occurred absent the voluntary consumer's
proactive use of green power. The concept of going beyond what is mandated is sometimes referred to as
"regulatory surplus." Most states prohibit electricity suppliers from counting voluntary demand towards their
compliance obligations, but it is worth checking with the supplier.
From a different perspective, some organizations may want to consider the nonvoluntary renewable energy
component of their standard electricity service when setting a corporate renewable energy goal. Organizations
should be aware that disaggregation of the resource components of the standard electricity supply for corpo-
rate renewable energy goal-setting purposes may not be accepted by different programs or for commercial
marketing claims. For more information, please see the GFIG Protocol and FTC guidance on making renewable
electricity use claims.
Limit claims to match the scope of the purchase. If an organization is buying green power to meet only part
of its energy consumption or just for a subset of the organization, then the organization's environmental claims
must also accurately reflect this scale or scope of the green power purchase.
Retain ownership of the RECs from self-generation supply options. Ownership and/or operation of a
renewable energy project on-site does not automatically guarantee claims to the associated RECs, unless the
organization retains them. If an organization sells the RECs from its project, it must purchase replacement RECs
to support its environmental claims.
Retire the RECs associated with green power purchases to prevent double claims. Making an environmental
claim constitutes a retirement of the REC; selling or transferring RECs after making environmental claims leads
to double counting, as two different parties will claim the same environmental benefits from the green power
purchase. Once the organization makes a green power purchase claim, it must retire the associated RECs (or
ensure the RECs are retired on its behalf). The organization can consult with its green power supplier or tracking
system representatives on the formal REC retirement options.
Buy certified green power to support claims. Organizations should strive to buy green power products that
are certified and verified by independent third-party entities. Certification provides credibility and affirmation of
the environmental benefits associated with a green power purchase. The verification process involves auditing
by an independent entity, which avoids double counting of environmental benefits while accurately accounting
for the quantity and quality of the green power product. Thus, certified and verified green power products
bolster credibility and substantiate the environmental claims made by an organization.
Limit claims to indirect emissions (Scope 2 emissions). Organizations should be cautious when making claims
related to emission reductions. Purchase of green power reduces only indirect emissions or Scope 2 emissions.
Indirect emissions are based on power that an organization buys from an electricity service provider. The
emissions factor from the power generator is the critical environmental attribute included in RECs. EPA advises
organizations to limit their environmental claims to reduction of emissions footprint, and avoid claims of reducing
total organizational emissions emitted into the atmosphere.4
4 For further guidance, please refer to the GHG Protocol Scope 2 Guidance. Greenhouse Gas Protocol. (2015). Scope 2 guidance. Retrieved from http://www.ahaprotocoI.
ora/scope 2 guidance
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Avoid claiming emissions not included in purchases. Organizations must limit their claims to only attributes
included in the purchase of green power. Claiming emission reductions of nitrogen oxides (NOx) and sulfur
oxides (SOx) might necessitate a purchase of those emission allowances independent of the REC purchase.
In markets where NOx and SOx are regulated by cap and trade programs, an organization must purchase
separate NOx and SOx emission allowances and retire them in order to claim the associated emission reduction.
Similarly, in regions with (CO,) cap-and-trade programs, though an organization can nevertheless claim receipt
of zero-emissions RE and scope 2 reductions, an organization must ensure that allowances have been retired in
order to claim avoided grid emissions.
Use the terms "REC" and "offset" correctly in claims. RECs are not project offsets. Using RECs and offsets as
interchangeable terms for environmental claims is not an acceptable practice. The definition of offsets can vary
across greenhouse gas registries and programs. In regulated cap-and-trade programs, offsets have specific legal
meaning as a noun. In voluntary markets, offsets refer to verifiable emission reductions achieved by individual
projects, which demonstrate global emissions reductions beyond a baseline, and often are not even related to
renewable energy. Offset instruments do not convey a renewable electricity use claim to their owner. Similarly, a
REC does not convey a metric ton of global emissions reduced to its owner.
Be able to substantiate claims. An organization's environmental claims must be substantiated at the time they
are made. This means that the organization is able to prove, through legal ownership of generation attributes or
RECs (or retirement of same on their behalf by their green power provider), its unique right to make the claim.
This demonstration may be made through an audit of contracts to show chain of custody, or by purchasing RECs
registered and retired in an independent and transparent REC tracking system.
Avoid project claims of "additionality." Claims of additionality are often made by consumers to imply project
causation and enhanced direct global emissions reduction benefits. Organizations should avoid using the
terms "additionality" or "additional" in the context of green power use and renewable energy project develop-
ment unless the green power project has been shown to meet offset project quality criteria for additionality.
Organizations, are encouraged to make verifiable "impact" claims, when such claims are included and conveyed
through their chosen supply option or purchase.
Follow available market guidance. The FTC provides important market guidance for environmental claims
included in labeling, advertising, promotional materials and all other forms of marketing, whether implied or
stated explicitly. Organizations should be familiar with this guidance. The FTC Green Guides cover all claims on
environmental attributes for a wide range products and services across all organizational sectors
Many of these best practices can be achieved by purchasing a certified product and ensuring that claims are verified
by a third party. Organizations can make informed decisions on environmental claims by consulting the market guid-
ance documents of the FTC, EPA, RE100, WRI, Center for Resource Solutions and others listed in Chapter 10.
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n
CHAPTER
Conclusion
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
is
¦ ¦¦¦<• Bill
9-1
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DOCUMENT MAP
Summary
Chapter 1. Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
-------
Conclusion
Purchasers of electricity can have a significant impact on the way that power is produced, both now and in the future.
Businesses, governments and nonprofit organizations have an unprecedented range of options for purchasing, gen-
erating and using green power. Although the rules vary from state to state, these organizations can choose how their
electricity is produced, either by selecting an off-the-shelf product, by negotiating with their utility or other electricity
supplier, by directly contracting with a renewable energy generator, or by participating in aggregate purchasing.
Organizations that wish to purchase green power have more options now than ever before. Additionally, the decline in
renewable energy equipment costs has significantly increased the economic viability of self-generation projects.
Over the past decade, renewable energy purchasing has proliferated in the United States, in part due to the voluntary
green power market. As a result of this growth, project developers, utilities and businesses have gained a wealth of
experience as they purchased unbundled RECs, entered power purchase agreements, or installed green power gener-
ation. Businesses in the commercial sector are principal drivers in today's markets as they use green power to realize
their economic and environmental goals while improving relations with customers and shareholders.
Renewable energy technologies, a greater variety of procurement models and self-generation options are becoming
mainstream, allowing organizations everywhere to support green power and reduce their environmental impact.
Organizations that act in their own—and in society's—best interests can take advantage of the strategies outlined in
this guide to help move the United States towards a more sustainable energy future.
9-3
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CHAPTER
Resources for Additional
Information
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
-------
DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
-------
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 works with hundreds of partner organizations 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 governments; and colleges and universities. In addition to the
Green Power Partnership, EPA hosts other websites and tools that provide support for initiatives on clean power or
energy efficiency.
U.S. EPA's Green Power Partnership:
www.eDa.aov/areenDower
U.S. EPA's Green Power Partnership Requirements.
https://www.epa. qov/qreenpower/qreen-
power-partnership-reauirements
U.S. EPA's Green Power Leadership Awards:
https://www.epa.gov/qreenpower/qreen-
power-leadership-awards
Clean Energy:
https://www.epa.gov/enerqv/clean-enerqy-
proqrams
Center for Corporate Climate Leadership:
www.epa.gov/climateleadership
GRID Database:
www.epa.gov/climateleadership
ENERGY STAR:
www.energvstar.gov
Landfill Methane Outreach Program:
www.epa.gov/lmop
Power Profiler:
https://www.epa.gov/energy/power-profiler
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 federal
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
technology services and decision support services. All of these services are available to federal agencies deploying
renewable technologies.
¦ Federal Energy Management Program:
https://energv.gov/eere/femp/federal-energv-management-program
¦ FEMP Renewable Energy Procurement:
https://energv.gov/eere/femp/renewable-energy-procurement-federal-agencies
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 six critical goals that the world must achieve by 2020 in order to secure a sustainable future:
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¦ Climate. Protect communities and natural ecosystems from damage caused by greenhouse gas emissions, and
generate opportunities for people by catalyzing a global transition to a low-carbon economy.
¦ Energy. Drive the scale-up of clean, affordable power systems throughout the world to deliver sustainable
socio-economic development.
¦ Food. Ensure the world's food systems reduce their impact on the environment, drive economic opportunity
and sustainably feed 9.6 billion people by 2050.
¦ Forests. Alleviate poverty, enhance food security, conserve biodiversity and mitigate climate change by reduc-
ing forest loss and restoring productivity to degraded, deforested lands.
¦ Water. Achieve a water-secure future by mapping, measuring and mitigating global water risks.
Sustainable Cities. Improve quality of life in cities by developing and scaling environmentally, socially and
economically sustainable urban and transport solutions.
WRI has been engaging the private sector on sustainability and clean energy for more than a decade. Beginning with
the original Green Power Market Development Group, WRI has been at the forefront of expanding corporate procure-
ment of green power. Today, WRI's Electricity Initiative convenes an action-oriented group of member companies
with utilities to expand clean energy in China, India, the United States and across Southeast Asia and Latin America.
The initiative drives alignment and investment in electricity markets to deliver on consumer demand for an affordable
transition to clean energy. WRI is also a founding partner of the Renewable Energy Buyers Alliance.
¦ World Resources Institute Electricity Initiative:
http://www.wri.ora/our-work/proiect/electricitv-initiative
¦ Greenhouse Gas Protocol:
http://www.ahaprotocol.ora/
Green-e Certification Programs
Center for Resource Solutions' Green-e certification program is the leading certification and verification program
for renewable energy in the United States and Canada. It is a voluntary consumer-protection program that certifies
superior renewable energy options offered by utilities and marketers in the voluntary renewable energy market. It is
administered by Center for Resource Solutions, a nonprofit based in San Francisco. All Green e standards are stake-
holder-driven, and all requirements and auditing protocols are publicly available. Green-e also works with businesses
to certify renewable energy and climate commitments, verify claims, and provide accurate promotional tools. Green-e
also certifies carbon offset products.
Renewable energy products that meet the Green-e standards, as well as businesses recognized by Green-e that are
using certified renewable energy and products made with certified renewable energy, are identified by the Green-e
logo.
The Green-e website, https://www.areen-e.org. is a widely used resource that allow consumers to find certified prod-
ucts by state and to select the superior green power option that meets their needs.
¦ Center for Resource Solutions:
https://resource-solutions.org
¦ Green-e:
https://www.green-e.org
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Additional Resources
The Additional Resources section is not intended to be
an exhaustive list of all resources on a certain subject,
but rather an introduction to a topic of interest.
Why Purchase Green Power
Business Renewables Center: A member-based plat-
form, hosted by Rocky Mountain Institute, that aims to
accelerate corporate purchasing of off-site, large-scale
wind and solar energy, http://businessrenewables.org/
Climate Savers: World Wildlife Fund program encourag-
ing businesses as leaders of the low-carbon economy.
http://climatesavers.org/
Corporate Renewable Energy Buyer's Principles: An
effort to communicate what buyers need from the
marketplace and how much renewable energy they are
seeking.
http://buversprinciples.org/
RE100: Amplifying the voice and supporting the largest
companies with a goal to buy 100 percent renewable
energy, http://there100.org/
Renewable Energy Buyers Alliance: A network of
non-profit organizations helping companies understand
the benefits of moving to renewables, connecting
corporate demand to renewable energy supply, and
helping utilities better understand and serve the needs
of corporations, http://rebuvers.org/
Current State of Green Power Markets
Lazard. (2017). Lazard's levelized cost of energy anal-
ysis—version 10.0. Retrieved from https://www.lazard.
com/media/450337/lazard-levelized-cost-of-ener-
gy-version-110.pdf
O'Shaughnessy, E., Heeter, J., Cook, J., and Volpi, C.
(2017). Status and trends in the U.S. voluntary green
power market (2016 data) (p. 21). National Renewable
Energy Laboratory. Retrieved from https://energv.gov/
eere/analvsis/downloads/status-and-trends-us-volun-
tarv-green-power-market
States with Customer Choice of
Suppliers
Borenstein, S., and Bushnell, J. (2015). The U.S. elec-
tricity industry after 20 years of restructuring. Energy
Institute at Haas. Retrieved from https://ei.haas.berke-
lev.edu/research/papers/WP252.pdf
U.S. Department of Energy. /I primer on electric utilities,
deregulation and restructuring of U.S. electricity markets
(2002). Retrieved from http://www.pnl.gov/main/publi-
cations/external/technical reports/PN NL-13906.pdf
Purchasing Guidance
Center for Resource Solutions. (2017). Green-e renew-
able energy standard for Canada and the United States.
Version.3.1 Retrieved from https://www.green-e.org/
docs/energv/Green-e%20Standard%20v3.1%20US.pdf
RE100. (2015). The Journey to 100%. Retrieved from
http://media.virbcdn.com/files/d4/0d785368ea4e15c5-
RE100briefing-reportre100websitev3.pdf
Sustainable Purchasing Leadership Council. (2016).
Principles for leadership in sustainable purchasing, v
2.0. Retrieved from https://www.sustainablepurchasing.
org/public/SPLC Principles for Leadership in
Sustainable Purchasing vl O.pdf
U.S. Environmental Protection Agency. (2017). Green
power partnership requirements. Retrieved from
https://www.epa.gov/sites/production/files/2016-01/
documents/gpp
partnership reas.pdf
Finding Green Power Products
Green-e. Find Green-e certified products and com-
panies: http://www.green-e.org/certified-resources/
products-companies
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Making Appropriate Environmental
Claims
Center for Resource Solutions. (2017). Renewable
Energy Certificate (REC) Claims and Ownership.
Retrieved from httDs://resource-solutions.ora/learn/
rec-claims-and-
ownershio/
RE100. (2016). Making credible renewable electricity
usage claims. Retrieved from https://resource-solutions.
org/
document/makina-credible-renewable-electricitv-
usaae-claims/
U.S. Environmental Protection Agency. (2017). Guide to
making claims about your solar power use. Retrieved
from https://www.epa.gov/sites/production/files/2017-
09/
documents/gpp-auidelines-for-makina-solar-claims.pd
U.S. Environmental Protection Agency. (2017). Solar
Power Use Claims Flow Chart. Retrieved from.
https://www.epa.gov/sites/production/files/2017-09/
documents/qpp-solar-claims-f low-diaaram.pdf
U.S. Federal Trade Commission. (2017). Guides for the
use of environmental marketing claims. Retrieved from
https://www.ftc.aov/sites/default/files/attachments/
press-releases/ftc-issues-revised-areen-auides/areen-
auides.pdf
Physical Power Purchase Agreements
(Physical PPAs)
Cory, K., Canavan, B., and Koenig, R. (2009). Power
purchase agreement checklist for state and local
governments. National Renewable Energy Laboratory.
Retrieved from, https://financere.nrel.aov/finance/
content/power-purchase-
aareement-checklist-state-and-local-aovernments
Deloitte. (2016). Powering up the new leases
standard. Retrieved from http://www.nortonrose-
fulbriaht.com/knowledae/publications/157593/
financing-proiects-with-
virtual-ppas
Federal Energy Management Program. Federal onsite
renewable power purchase agreements: https://enerav.
aov/eere/femp/federal-site-renewable-power-pur-
chase-aareements
Merry, L., and Wood, E. (2008). The customer's guide to
solar power purchase agreements. The Rahus Institute.
Retrieved from http://mv.solarroadmap.com/userfiles/
PPA-Customers-Guide.pdf
National Renewable Energy Laboratory. NREL Finance
Team Publications: https://financere.nrel.gov/finance/
content/nrel-finance-team-publications
Solar Energy Industries Association. Solar power
purchase agreements: https://www.seia.ora/
research-resources/solar-power-purchase-aareements
Terms of service commercial 1.1. (n.d.) https://financere.
nrel.gov/finance/content/terms-service-commercial-11
U.S. Environmental Protection Agency. Solar power pur-
chase agreements: https://www.epa.aov/areenpower/
solar-
power-purchase-aareements
World Bank Group. Power purchase agreements (PPAs)
and energy purchase agreements (EPAs): http://ppp.
worldbank.org/public-private-partnership/sector/
enerav/enerav-
power-aareements/power-purchase-aareements
Financial PPAs (Virtual PPAs,
Contracts for Differences)
Business Renewables Center: Tools and resources (avail-
able to members) http://businessrenewables.org/
Giji, M. John, Sachdev, R., Sherman, L., and Spielberg,
D. (2016). Corporate PPAs: Market trends and oppor-
tunities. Orrick Herrington & Sutcliffe LLP. Retrieved
from http://s3.amazonaws.com/cdn.orrick.com/files/
Corporate-PPAs-Market-Trends-and-Qpportunities.pdf
Gurch, M.J. (2017). Financing projects with virtual PPAs.
Project Finance Newswire. (p. 14) Retrieved from, http://
www.nortonrosefulbright.com/knowledge/
publications/157593/financing-proiects-with-virtu-
al-ppas.
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Mickelsen, S. (2016). Dodd-Frank compliance for
corporate VPPA buyers. Futures and Derivatives Law
Report. 36, 4. Retrieved from https://3deareesinc.com/
WD-content/uDloads/2016/05/GLFDLR4 Article-1.pdf
Turk, G. (2007). How market dynamics impact PPA,
VPPA contracts. Smart Energy Decisions. Retrieved
from https://www.smarteneravdecisions.com/
columns/2017/03/09/how-market-dvnamics-im-
pact-ppa-vppa-contracts
U.S. Environmental Protection Agency, (n.d.)
Introduction to virtual power purchase agreements.
https://www.epa.aov/sites/production/files/2016-09/
documents/webinar kent 20160928.pdf
Community Solar/Community
Renewables
Interstate Renewable Energy Council. Shared renew-
ables: http://www.irecusa.ora/reaulatorv-reform/
shared-
renewables/
National Renewable Energy Laboratory. Solar technical
assistance for states: https://www.nrel.gov/technical-
assistance/states.html
National Renewable Energy Laboratory. (2010)./I guide
to community shared solar: Utility; private and nonprofit
project development. Retrieved from http://www.nrel.
qov/docs/fv12osti/54570.pdf
National Renewable Energy Laboratory. (2014).
Community shared solar: Policy and regulatory consid-
erations. Retrieved from https://www.nrel.aov/docs/
fvMost iZ67367.pdf
National Renewable Energy Laboratory. (2015). Shared
solar: Current landscape, market potential and the
impact of federal securities regulation. Retrieved from
https://www.nrel.gov/docs/fv15osti/63892.pdf
Rocky Mountain Institute. Shine: Community scale solar:
https://www.rmi.org/our-work/electricitv/shine-
communitv-scale-solar/
Solar Energy Industries Association. Shared renewables/
community solar: http://www.seia.org/policv/distribut-
ed-solar/shared-renewablescommunitv-solar
Writing RFPs for Green Power
National Renewable Energy Laboratory. (2016).
Writing solar requests for proposals (RFPs): Lessons
from NREL's university PV implementation assistance
program. Retrieved from http://www.nrel.gov/docs/
gen/fv16/66369.pdf
The World Resources Institute Green Power Market
Development Group (n.d.). Guidelines for writing a REC
request for proposal and sample contract for renewable
energy certificates. Retrieved from
www.thegreenpowergroup.org/tools.cfm?loc=us
The Solar Foundation. (2012). Steps to a successful solar
request for proposal. Retrieved from
https://www.thesolarfoundation.org/steps-to-a-suc-
cessful-solar-reauest-for-proposal/
U.S. Environmental Protection Agency. Toolbox for
renewable energy project development: https://www.
epa.gov/repowertoolbox
Self-generation (On-site)
Bolinger, M. (2009). Financing non-residential photo-
voltaic projects: options and implications. Lawrence
Berkeley National Laboratory. Retrieved from https://
iointventure.org/images/stories/pdf/lbnl.financing.
pv.pdf
California Energy Commission. (2001). A guide to photo-
voltaic (PV) system design and installation. http://www.
energv.ca.gov/reports/2001 -09-04 500-01-020.PDF
California Energy Commission. (2003). Buying a
photovoltaic solar electric system: /I consumer guide.
Retrieved from http://abcsolar.com/pdf/2003-Q3-
11 500-03-014F.pdf
Hassett, T. C., and. Borgerson, K.L. (2009). Harnessing
nature's power: Deploying and financing on-site renew-
able energy. World Resources Institute. Retrieved from
http://pdf.wri.org/harnessing natures power.pdf
FEMP. (2002). Using distributed energy resources:
/I How-to guide for federal facility managers. U.S.
Department of Energy. DOE/GO-102002-1520.
Retrieved from http://smartenergv.illinois.edu/pdf/
Archive/Using Distributed EnergyResources.pdf
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Gagnon, P., Govindarajan, A., Bird, L., Barbose, G.,
Darghouth, N., and Mills, A. (2017). Solar + storage
synergies for managing commercial-customer demand
charges. Lawrence Berkeley National Laboratory and
the National Renewable Energy Laboratory. Retrieved
from https://emp.lbl.gov/sites/default/files/solarstor-
aqe synergies report.pdf and https://emp.lbl.gov/sites/
default/files/solarstorage-execsummarv.pdf.
Midwest region consumer's guide to buying a solar
electric system, (n.d.). Retrieved from https://www.
itasca-mantrap.com/sites/itascamantrap/files/PDF/
Consumer Guide to Solar Systems MNDOC.pdf
U.S. Department of Energy. (2007). Small wind electric
systems: A U.S. consumer's guide. Retrieved from
https://energv.gov/sites/prod/files/2013/12/f5/
small wind guide.pdf
WINDExchange:
http://apps2.eere.energy.gov/wind/windexchange/
On-site Renewable Generation
Financial Analysis Tools
Each of the many available tools offers different fea-
tures, which should be examined closely to determine
whether they are appropriate to the particular situation.
Carbon Value Analysis Tool
Developer: World Resources Institute.
A screening tool to help companies integrate the value
of carbon dioxide emissions reductions into ener-
gy-related investment decisions: http://www.wri.org/
publication/carbon-value-analvsis-tool-cvat
PV Watts
Developer: NREL
Provides estimated system output and savings calcu-
lations based on customizable system specifications
and in the field system performance data. User inputs
system information and selects a system in the general
area of the user's own site to provide calculations:
http://pvwatts.nrel.gov/
RETFinance
Developer: Energy Analysis Team at NREL
Simulates a 30-year nominal dollar cash flow for
renewable projects, including earnings, debt payments,
levelized cost-of-electricity, after-tax internal rate of
return and debt service coverage ratio (net operat-
ing income divided by total debt service): https://
cleanenergvsolutions.org/resources/renewable-ener-
gy-technologies-financial-model-ret-finance
RETscreen International:
Developer: Natural Resources Canadas CANMET Energy
Diversification Research Laboratory (CEDRL).
Assesses the economics of various renewable energy
installations: www.retscreen.net
Interconnection with the Grid
DSIRE database lists state interconnection rules:
www.dsireusa.org/
The Federal Energy Regulatory Commission (FERC)
has issued standard procedures and a standard
interconnection agreement for the interconnection of
generators to the transmission grid. The rules differ
depending on whether the generator is larger or smaller
than 20 megawatts. This site lists the applicable rules:.
https://www.ferc.gov/industries/electric/indus-act/gi/
small-gen.asp
Standards Board of the Institute for Electrical and
Electronics Engineers, Inc. (IEEE). (2015). Standard 1547:
Standard for interconnecting distributed resources with
electric power systems: http://grouper.ieee.org/groups/
scc21/1547/1547 index.html
Varnado, L., and Sheehan, M. (2009). A guide to
distributed generation interconnection issues, Sixth
Edition. N.C. Solar Center and Interstate Renewable
Energy Council. Retrieved from http://www.irecusa.org/
wp-content/uploads/2014/11/Connecting-to-the-Grid-
Guide-6th-edition1.pdf
Measurement and Verification of
Renewable System Performance
The regional tracking systems' operating procedures
specify how generators must measure, verify and report
generation to be issued certificates. See links under
Tracking Systems.
Cory, K., Coughlin, J., and Coggeshall, C. (2008). Solar
photovoltaic financing: Deployment on public property
by state and local governments. National Renewable
Energy Laboratory. NREL/ TP-670-43115. Retrieved
from
http://www.nrel.gov/docs/fv08osti/43115.pdf
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U.S. Department of Energy, Federal Energy
Management Program. (2015). M&Vguidelines:
Measurement and verification for performance-based
contracts version 4.0. Federal Energy Management
Program. Retrieved from https://enerav.aov/sites/prod/
files/2016/01/f28/mv guide 4 O.pdf
Renewable Energy Certificates (RECs)
American Bar Association, American Council on
Renewable Energy, and Environmental Markets
Association. Master Renewable Energy Certificate
Purchase and Sale Agreement: http://emaha.org/
node/29
Center for Resource Solutions. (2016). Flow renewable
energy certificates make a difference. Retrieved
from https://resource-solutions.ora/wp-content/
uploads/2016/03/Flow-RECs-Make-a-Difference.pdf
EPA's Green Power Partnership. Renewable Energy
Certificates: https://www.epa.gov/greenpower/
renewable-energv-certificates-recs
EPA's Green Power Partnership. (2017) Renewable
Energy Certificate (REC) Arbitrage. Retrieved from
https://www.epa.gov/greenpower/renewable-ener-
gy-certificate-rec-arbitrage
Flamrin, J., and Wingate, M. (2006). Regulator's hand-
book on tradable renewable certificates. Center for
Resource Solutions. Retrieved from http://regulation-
bodvofknowledge.org/wp-content/uploads/2013/04/
Flamrin Regulators Flandbook on.pdf
Jaineel, A., and Lau, C. (2008). Bottom line on renew-
able energy certificates. World Resources Institute.
Retrieved from http://www.wri.org/sites/default/files/
pdf/bottom line renewable energy certs.pdf
Jones, T., Quarrier, R., and Kelty, M. (2015). Center
for Resource Solutions. The legal basis for renew-
able energy certificates. Retrieved from https://
resource-solutions.org/wp-content/uploads/2015/07/
The-Legal-Basis-for-RECs.pdf
Renewable Energy Tracking Systems
APX: https://apx.com/registries/nar/
Electric Reliability Council of Texas (ERCOT): www.
ercot.com: www.texasrenewables.com/
International REC Standard (l-REC Standard):
http://www.internationalrec.org/
Michigan Renewable Energy Certification System
(MIRECS): http://www.mirecs.org/
Midwest Renewable Energy Tracking System (M-RETS):
www.mrets.org
New England Power Pool Generation Information
System (NEPOOL GIS): www.nepoolgis.com/
New York Generation Attribute Tracking System
(NYGATS): https://www.nvserda.nv.gov/nvgats
North American Renewables Registry (NAR):
www.narecs.com
North Carolina Energy Tracking System (NC-RETS):
http://www.ncrets.org/
PJM Generation Attribute Tracking System (GATS):
https://www.pim-eis.com
U.S. Environmental Protection Agency. Green Power
Partnership renewable energy tracking systems:
https://www.epa.gov/greenpower/renewable-energv-
tracking-svstems
Western Renewable Energy Generation Information
System (WREGIS): www.wregis.org/
Renewable Energy Associations
American Council on Renewable Energy:
www.acore.org
American Solar Energy Society: www.ases.org
American Wind Energy Association: www.awea.org
Geothermal Energy Association: www.geo-energy.org
Geothermal Resources Council: www.geothermal.org
Interstate Renewable Energy Council: www.irecusa.org
Low Impact Flydropower Institute: www.lowimpacthv-
dro.org
Midwest Renewable Energy Association:
https://www.midwestrenew.org/
National Flydropower Association: http://www.hvdro.
org/
National Wind Coordinating Collaborative:
www.nationalwind.org
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North Carolina Clean Energy Technology:
https://nccleantech.ncsu.edu/
Northeast Sustainable Energy Association: www.nesea.
org
Renewable Energy Markets Association:
www.renewablemarketers.org
Smart Electric Power Alliance: www.sepapower.org
Solar Energy Industries Association:www.seia.org
Utility Variable Integration Group: www.uvig.org
Windustry: http://www.windustrv.org/
Greenhouse Gas Accounting and
Inventories:
California Energy Commission. California climate
change: www.climatechange.ca.gov/
CDP (formerly Carbon Disclosure Project): www.cdp.net
Center for Resource Solutions (2016). The greenhouse
gas benefits of renewable energy purchases. Retrieved
from https://resource-solutions.org/wp-content/
uploads/2016/11/GHG-Benef its-of-RE-Purchases.pdf
The Climate Registry: www.theclimateregistrv.org
Greenhouse Gas Protocol. (2004). A corporate account-
ing and reporting standard. Retrieved from
http://www.ghgprotocol.org/corporate-standard
Greenhouse Gas Protocol, (2015). Scope 2 guidance.
Retrieved from
http://www.ghgprotocol.org/scope 2 guidance
Heilmayr, R. (2008). Bottom line on GHG emissions
registries. Washington, DC: World Resources Institute.
http://pdf.wri.org/bottom line ghg emissions regis-
tries. pdf
Metzger, E, (2008). Bottom line on climate policy
terminology. World Resources Institute. Retrieved
from http://www.wri.org/publication/bottom-line-cli-
mate-policv-terminoloav
The Regional Greenhouse Gas Initiative: www.rggi.org/
rggi
U.S. Environmental Protection Agency, Center for
Corporate Climate Leadership: https://www.epa.gov/
climateleadershio
World Resources Institute Carbon Value Analysis Tool:
www.wri.org/publication/carbon-value-analvsis-tool
World Wildlife Fund's (WWF) Climate Savers: https://
www.worldwildiife.org/partnerships/climate-savers
10-10
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I
Glossary
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
-------
DOCUMENT MAP
Summary
Chapter 1. Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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This glossary defines some of the important terms used
in this guide. More definitions can be found at
httDs://www.eDa.aov/areenDower/areen-Dower-Dart-
nershiD-tools-and-resources.
Additionality. A quality criterion for emissions
reduction (offset) projects stipulating that the project
would not have been implemented in a baseline or
"business-as-usual" scenario. Additionality is often
applied to greenhouse gas project activities, stipulating
that project-based emission reductions should only
be quantified if the project activity "would not have
happened anyway"—i.e., that the project activity would
not have been implemented in its baseline scenario.
Additionality is a test(s) used only for project offsets
that result in direct emissions accounting and not for
RECs or green power purchases. See Chapter 8 for
more information.
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.
Balancing power. The power purchased or provided
by the electric grid system operator to match the
power supply with grid demand for maintaining voltage
frequency of electricity service delivery.
Behind the meter. Connection of an on-site generating
facility to the electrical grid on the energy consumer's
property before the energy reaches the main electrical
panel, rather than on the utility side of the panel.
Bundled RECs. Renewable energy certificates (RECs)
that are sold by a power marketer with electricity to
an end-use consumer. For a retail electricity sale to be
considered green power, it must include transfer of the
RECs. See unbundled RECs.
Certification. A program or process in which an inde-
pendent third party assures environmental standard
compliance, quality and ownership of a green power
product. Thus, certification bolsters the credibility and
affirmation of the environmental benefits associated
with a green power purchase.
Combined heat and power (CHP). An electricity
generation technology, also known as cogeneration,
that recovers waste heat from the electric generation
process to produce simultaneously other forms of
useful energy, such as usable heat or steam. On
average, two-thirds of the input energy used to make
electricity is lost as waste heat. In contrast, CHP
systems are capable of converting more than 70
percent of the fuel into usable energy.
Commodity electricity. Generic electricity not associ-
ated with a particular power generation source.
Community solar. A procurement option in which a
solar or renewable-electric system provides power and/
or financial benefit to, or is owned by, multiple commu-
nity members. The green power purchaser will typically
receive utility bill credits and associated RECs for its
share of the community/shared project output.
Community choice aggregation (CCA). A policy that
enables local governments to aggregate electricity
demand within their jurisdiction and the authority
to pursue and negotiate bulk electricity purchase
contracts (primarily renewable power) on behalf of
participating end users.
Competitive markets. Electricity markets in which
consumers can choose from among several competing
retail electricity suppliers. In the late 1990s and early
2000s, several states restructured their electricity
markets to allow competition for retail customers,
according to price or environmental preferences. In
contrast, many states have continued traditional reg-
ulation of their electricity markets. In these regulated
utility markets, customers may procure green power
through separate green tariffs from their utility - which
procures the green power from a renewable energy
project, on behalf of their customers (see Chapter 4,
Green Power Product Options).
Conventional power. Power produced from nonre-
newable fuels such as coal, oil, natural gas and nuclear
fuels. These fuels are a finite resource that cannot be
replenished once they have been extracted and used.
Direct purchase. A procurement option in which
the purchasing organization contracts directly with a
specific generator to purchase REC-based green power.
Physical and financial power purchase agreements
(PPAs) are examples of direct purchase. These options
are generally customized products negotiated between
the consumer and supplier and involve long-term com-
mitments by consumers to purchase a volume tied to
the output of a pre-determined generation capacity.
11-3
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Distributed generation. Small, modular, decentralized,
grid- connected or off-grid energy systems located in
or near the place where energy is used.
Electricity supplier. A generic term encompassing
regulated utilities as well as non-utility electricity mar-
keters that provide retail generation service.
Energy efficiency. Using less energy to provide the
same of better energy service (e.g., heating, cooling,
lighting) than conventional products or systems.
Energy efficiency saves energy, saves money on utility
bills and helps protect the environment by reducing the
amount of electricity that needs to be generated (and
associated environmental impacts).
Financial power purchase agreement (PPA). A con-
tract in which a generator and purchaser agree upon
a predetermined reference electricity price (also called
a "strike price"), but the power is sold into the local
wholesale electricity market near the generator rather
than directly to the power purchaser. The generator
and the purchaser compensate each other on the dif-
ference between the previously agreed-upon reference
electricity price and wholesale market prices, providing
both with stable income and expense. Financial PPAs
are also referred to as contracts for differences, virtual
power purchase agreements (VPPAs), or synthetic
PPAs.
Green power. Electricity generated or used from
renewable energy sources with low or no environmen-
tal impacts. Green power implies a lesser environmental
impact than that from conventional electricity gen-
eration and some forms of renewable energy. Large
hydropower or municipal solid waste are generally
not considered green power despite being renewable
energy resources due to their environmental impacts.
Green Power is renewable electricity that goes above
and beyond what is otherwise required by mandate or
requirement - it is voluntary or surplus to regulation.
For more details, see Chapter 2, Introducing Green
Power.
Green power products. Electricity supply options
generated from renewable resources. Options include
electricity products purchased from electricity sup-
pliers, community choice aggregators and renewable
energy generators, as well as renewable energy that is
self-generated.
Interval meter. An electricity meter that measures a
facility's energy usage in short increments (typically 15
minutes). These meters are useful for determining elec-
tricity 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 gener-
ated with fewer environmental impacts than large-scale
hydropower, by meeting criteria such as minimum
river flows, water quality, fish passage and watershed
protection. These hydropower facilities may be certified
by the Low Impact Flydropower Institute and often
operate in a "run of the river" mode, in which little or no
water is stored in a reservoir.
Net metering. A policy that allows owners of certain
on-site power generation systems to export the net
excess electricity to the utility grid and accrue credit
for it on their electric bills. 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 (either
at the retail price or the avoided cost of electricity
generation, carried over to a future billing period, or
ignored. Presently many states are reconsidering the
compensation mechanism for net metering.
New renewable generation facilities. Facilities built
in the recent past or that will be built to meet the
growing market demand for green power. Currently,
new generation must be from renewable energy gen-
erating facilities that began operation within the past
15 years (a moving window), according to the Green-e
Energy certification standard and EPA Green Power
Partnership requirements.
Offsets. A project offset is measured in metric tons of
carbon dioxide equivalent (MTCO,e) and represents
a direct reduction of global GFIG emissions that can
compensate for or offset emissions made elsewhere.
Project offsets may be created from a variety of actions
not necessarily related to energy production, such
as energy efficiency or changes in land use. While a
11-4
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project offset allows its owner to claim direct global
emissions reductions, offsets do not support claims of
renewable energy use. However, output from a project
that is used to create RECs cannot also be claimed for
offset purposes.
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.
Physical power purchase agreement (PPA). A
contract for the purchase of power and associated
RECs from a specific renewable energy generator (the
seller) to a purchaser of renewable electricity (the
buyer). Physical PPAs, which are usually 10- to 20-year
agreements, define all of the commercial terms for the
sale of renewable electricity between the two parties,
including when the project will begin commercial
operation, schedule for delivery of electricity, penalties
for underdelivery, payment terms and termination. The
project may be located onsite at the user's location,
or be off-site with the electricity being grid-delivered
to the user. Physical PPAs by non-utility consumers
are generally only allowed in competitive electricity
markets, and the renewable energy generator and
customers must be located in the same power market
to allow for physical delivery of electricity. Compare to
financial PPA.
Power marketer. An entity that buys and sells power
generated by others. Power marketers exist at the
wholesale market level, buying and selling power from
generators and to retail resellers such as utilities. Power
marketers at retail level distribute and sell power to end
users. A green power marketer is an electricity supplier
that offers a green power product.
REC arbitrage. When there is significant discrepancy
in REC prices in different REC trading markets, an
organization can gain financially by selling its RECs
(generated from a renewable system it owns) in the
higher priced (usually compliance) market and purchas-
ing replacement RECs in the lower priced market. This
is commonly referred to as REC arbitrage (also known
as a REC swap). Under REC arbitrage, an organization
would have to claim the attributes of the replacement
RECs it purchases rather than the attributes of the
RECs it sells.
Renewable electricity. Power generated from renew-
able energy resources. See Chapter 2, Introducing
Green Power.
Renewable energy certificates (RECs). A REC is a
tradable instrument that represents the environmental
attributes of the generation of 1 megawatt- hour (MWh)
of electricity from a renewable energy source. RECs
serve two purposes-one as a tracking instrument to
substantiate and verify green power and environmental
claims (either to meet a compliance obligation or to
satisfy a voluntary goal), and one as a key component
of all green power product options. As a component
of green power products, RECs can be sold separately
from electricity (as unbundled RECs), sold with electric-
ity service (as bundled RECs), or retained as an output
of a renewable energy project. Each REC denotes
the underlying generation energy source, location of
the generation, year of generation (a.k.a. "vintage"),
environmental emissions and other characteristics
associated with the generator.
Renewable energy resources. Resources that are
continuously replenished on the Earth, such as such
as wind, solar, geothermal, hydropower and biomass.
Some definitions include other types renewable
resources, such as municipal solid waste. See green
power.
Renewable portfolio standard (RPS). Sometimes
called a renewable electricity standard. A regulatory
mandate or target stating that a minimum percentage
or amount of each electricity supplier's resource portfo-
lio must come from renewable energy.
Self-generation. A procurement option in which an
energy consumer installs and owns generation to
supply all or a portion of its electricity needs, either
on-site or off-site.
Shared renewables. An emerging model allowing
multiple customers to buy, lease or subscribe to a
portion of a shared renewable electricity system that
is located away from their homes or businesses. The
model is especially appealing to customers who do not
have sufficient renewable resource, who rent, or who
are otherwise unable or unwilling to install renewables
on their residences or commercial buildings. Shared
renewables can be in the form of 'community-owned'
projects or third party-owned renewable electricity
generators whose electricity is shared with multiple
customers. Consumers must receive the renewable
11-5
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energy certificates from a shared renewables project in
order that they can claim use of renewable electricity.
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 gen-
erated 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.
Unbundled RECs. Renewable energy certificates
(RECs) that are purchased separate from electricity; in
other words, RECs and electricity are purchased from
two different suppliers. See bundled RECs.
Verification. A third-party audit of a green power
purchase that accurately accounts for the quality and
quantity of the product and protects against dual
claims or double counting of the green power pur-
chase's environmental benefits. Verification may be a
requirement of a certification program.
Virtual power purchasing agreement (VPPA). See
financial PPA.
11-6
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APPENDIX
Green Power Considerations for
Federal Agencies
Authored by the U.S. DOE Federal Energy Management Program
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
mr—.til
¦III .i III!
A-l
-------
DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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Introduction
Since the federal government is the largest consumer of electricity in the United States, with an annual electricity bill
of nearly $4.75 billion in fiscal year 2016,1 the ability of federal agencies to save money, increase resilience and diver-
sify their energy supply through the use of renewable energy is significant.2 This appendix provides renewable energy
information and considerations specific to federal agencies, as well as available resources.
By reading this guide and taking advantage of the technical and procurement support provided by the U.S.
Department of Energy's (DOE) Federal Energy Management Program (FEMP), energy managers can help the federal
government achieve its energy goals.
Information in this Appendix is subject to change. Please contact FEMP or the appropriate organization for updated
information.
Federal Goals and Renewable Usage Information
Section 203 of the Energy Policy Act of 2005 (EPAct 2005, 42 U.S.C. 15852 Federal Purchase Requirement) directs
that federal agencies meet renewable energy consumption goals of not less than 7.5 percent of the electric energy
consumed in fiscal year 2013 (FY2013) and each fiscal year thereafter. Section 203 of EPAct 2005 defines renewable
energy as "electric energy generated from solar, wind, biomass, landfill gas, ocean (including tidal, wave, current,
and thermal), geothermal, municipal solid waste, or new hydroelectric generation capacity achieved from increased
efficiency or additions of new capacity at an existing hydroelectric project" (42 U.S.C. 15852).
Visit the Federal Energy Management Program (https://www.enerav.gov/eere/femp/federal-enerav-manaae-
ment-proaram) websites for current statutory requirements and mandates for renewable energy goals. Consult with
FEMP for calculation procedures and additional information.
Tables A-l and A-2 show the type of electric and non-electric renewables used by federal agencies, in mega-
watt-hours (MWh). Figure A-l shows federal renewable use from 2010 through 2016.
Table A-1: Federal Government Renewable Electric Energy by Source, FY2016 (MWh)
Wind
3,240,640
Wood and Wood Residuals
1,216,486
Solar Photovoltaic
827,268
Biogas (Captured Methane)
505,735
Ground Source Heat Pump
443,917
Incremental Hydropower
308,142
Agricultural Byproducts
162,613
Geothermal
85,623
Renewables through Serving Utility (mix of resources)
72,789
Municipal Solid Waste
16,976
Concentrating Solar Power (CSP)
7,995
Total
6,888,182
U.S. Department of Energy. Comprehensive annual energy data and sustainability performance, (n.d.). Retrieved from 1 itt p://ctsedwweb.ee.doe. gov/Annua I/Report/
SiteDeliveredEnergvUseandCostsbvEndUseSectorAndEnergvTypeBvFederalAgencvNativeUnitsAndBillionBtu.aspx.
2 The federal government uses the term "renewable" instead of "green" in this Appendix because "renewable energy" is defined in federal law (see 42 U.S.C. § 15852).
-------
Table A-2: Federal Government Renewable Non-electric Energy by Source, FY2016 (MWh)
Wood and Wood Residuals
2,145,250
Municipal Solid Waste
1,886,197
Solar Thermal (including water and space conditioning)
332,831
Biogas (Captured Methane)
302,097
Daylighting
15,140
Geothermal
14,104
Ocean/Aquifer
300
Mechanical (i.e., direct water pumping)
7
Total
4,695,927
Figure A-l. Federal Government Renewable Electricity Use
REC Replacement Bonus for Federal/Indian Land
Direct Bonus for Federal/Indian Land
Renewable Energy Certificate Purchases (Off-Site)
Purchases and Remote Agency-Owned (Off-Site)
Agency-Owned (On-Site)
15%
12%
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Benefits from Federal Renewable Power Purchases
In addition to the benefits discussed earlier in this guide, federal renewable use provides economic and other benefits
including the following:
¦ Cost savings. On-site renewable power purchase agreements (PPAs) and purchases from off-site renewable
projects can provide low-cost power at a fixed price.'
¦ Budget certainty. Low-cost power at a fixed price provides a federal agency with budget certainty for a
percentage of its electricity use, which can insulate the agency from commodity electricity price fluctuations
experienced with open market purchases.
Accomplishment of an agency's organizational mission. Renewable energy use supports the mission of many
federal agencies.
Energy security/resilience. The Department of Defense (DoD) and other federal agencies are becoming
increasingly concerned with ensuring the energy resilience/security of their facilities. On-site renewable projects
can improve energy resilience if they are configured to remain operational during a grid outage.
Federal leadership. Federal renewable use helps the federal government lead by example.
Compliance with federal goals. In addition to helping agencies meet the EPAct 2005 renewable energy goal
(42 U.S.C. § 15852), on-site renewable projects and off-site renewable purchases may also help federal agencies
meet other federal mandates.
Federal renewable energy purchases also include societal benefits:
National security. National security is one of the principal responsibilities of the federal government. By
purchasing domestically produced renewable energy and implementing on-site renewable projects, federal
agencies can contribute to the nation's energy security.
Market transformation. Due to the large volume of electricity consumed by the federal government, even small
increases in renewable use can positively impact the overall market and result in societal and transformative
market benefits.
Renewable Procurement Authorities and Regulations
Federal procurements are governed by the Federal Acquisition Regulation (FAR) as well as agency-specific regula-
tions. Below is a discussion of some of the important FAR clauses and other regulations that are pertinent to federal
on-site renewable projects and off-site renewable purchases. Federal regulations restrict the allowable contract
length for renewable projects and purchases. This section contains long-term contract option information, as does
the "On-Site Renewable Projects" section. Agency legal and contracting staff should be consulted early in the process
regarding agency-specific regulations, policies and viable contracting options.
FAR Part 41 Utility Services (40 U.S.C. 501)
FAR Part 41 provides 10-year General Services Administration (GSA) purchasing authority that may be used for both
on-site and off-site renewable procurements. Certain agencies have received delegation to use this authority; all other
agencies interested in using this authority must seek delegation from GSA. Alternatively, an agency may ask GSA, the
Defense Logistics Agency (DLA Energy) or another entity with GSA delegation to conduct a renewable procurement
on its behalf.
3 Often a fixed price with an escalation rate.
-------
Applicable Legislation
Energy Policy Act of 2005
Section 203 of EPAct 2005 (42
U.S.C. 15852) directs that federal
agencies meet renewable energy
consumption goals of not less
than 7.5 percent of the electric
energy they consume in FY2013
and each fiscal year thereafter.
10 U.S.C. 2922a Contracts for Energy or Fuel for
Military Installations
The 10 U.S.C. 2922a authority is only available to DoD and allows for 30-year
contracts. Secretary of Defense approval is required.4 This authority can be used
for both on-site projects and purchases of off-site renewables.
Project Financing Authorities—Energy Savings
Performance Contracts (ESPCs) and Utility Energy
Service Contracts (UESCs)
ESPC (42 U.S.C. 8287, et seq.) and UESC (42 U.S.C. 8256) contracts may be used for on-site renewable projects.5 See
the "On-site Renewable Projects" section for additional information.
Western Area Power Administration (WAPA)
In marketing renewable electricity to other federal agencies, the Western Area Power Administration (WAPA) must
follow many laws, regulations, orders and policies, including the following statutes:
¦ The Reclamation Act of 1902, 32 Stat. 388 ¦ Flood Control Act of 1944, 58 Stat. 887
¦ The Economy Act, 31 U.S.C. 1535 ¦ DOE Organization Act of 1977, 91 Stat. 565
¦ The Reclamation Project Act of 1939, 53 Stat. 1187 ¦ Energy Policy Act of 1992 (Public Law 102-486)
The reclamation statutes cited above allow WAPA to enter into power marketing contracts of up to 40 years in dura-
tion.
FAR Part 12 Commercial Items
FAR Part 12, which covers purchase of commercial items,6 is typically used by DLA Energy and GSA for the purchase
of off-site renewable power and may also be used for other renewable procurements, often in conjunction with other
authorities including FAR Part 41. Policies and procedures for solicitation, evaluation and award prescribed in Part 13,
Simplified Acquisition Procedures; Part 14, Sealed Bidding; or Part 15, Contracting by Negotiation, shall be used, as
appropriate for the particular acquisition. Market research, per FAR Part 11 or other regulation, may help determine if a
desired service should be considered a commercial item.
Third-Party Certification and Renewable Energy Certificate (REC) Tracking
Systems
Third-party certification provides value to the federal government through verification and annual audits to eliminate
double counting of renewable products. REC tracking systems (electronic databases that are used to track REC
ownership) provide information that is often used by certification organizations as part of their certification process.
Information regarding REC tracking systems is available in Chapter 2 of this guide and at https://www.epa.gov/areen-
power/renewable-enerav-trackina-svstems.
4 Contact DoD leadership for the current approval process.
5 Other authorities apply; contact FEMP for support with performance contracts.
6 Under FAR Part 12 commercial items are broadly defined as goods and services sold competitively in the commercial marketplace in substantial quantities (FAR subpart
2.101).
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Renewable Procurement Approaches
There are four primary options for federal agencies seeking renewable energy:
1. On-site renewable projects that are government-owned.
2. On-site renewable projects that are privately owned.
3. Purchase of electricity from off-site renewable projects.
4. Purchase of RECs.
On-site projects receive a bonus towards the EPAct 2005 42 U.S.C 15852 if federal renewable energy is produced on
federal lands or facilities or Indian land and used at a federal facility (EPAct 2005, Sec. 203(c)).7
REC ownership should be clearly articulated in contracts involving private ownership of a renewable project. If the
local REC market price is high, the contractor can monetize the project RECs and reduce the contract price.
If the agency does not purchase the project RECs, "replacement" RECs must be purchased for credit towards the
federal renewable goal.8
Below is information regarding the various renewable procurement approaches.
On-Site Renewable Projects
On-site renewable projects can be either government-owned or privately owned. Below is a summary of these
ownership options. For additional details contact FEMP or visit the FEMP website at http://enerav.gov/eere/femp/
financina-mechanisms-federal-renewable-enerav-proiects.
NOTE: It is very important to notify the serving electric utility of any on-site renewable energy project under consider-
ation. The utility will provide information on mandatory interconnection requirements, the interconnection agreement,
available incentives, whether the project will result in potential increases or decreases to your utility bill or a change
in the applicable utility tariff, and metering or other applicable policies. In addition to the information the utility will
provide, the agency must analyze and address numerous other considerations including, but not limited to, the
National Environmental Policy Act, the National Historic Preservation Act, future site plans, security issues and other
similar requirements.
Government-Owned Renewable Projects
Agencies can purchase on-site renewable systems using appropriated funds. There is a GSA Supply Schedule (SIN
871-209, Innovations in Renewable Energy9) for complete solar project delivery, including all hardware, design,
installation and other services. On-site systems that are government-owned can also be procured through a variety of
private financing mechanisms including ESPCs, ESPC ENABLE, and UESCs.
Privately Owned Renewable Projects
Federal agencies can also implement renewable projects that are privately owned, with the electricity from the
renewable project purchased by the federal site through a PPA, as described in Chapter 4 of this guide, or other
7 This does not mean that a project generates twice as many RECs; the bonus is only for federal renewable goal accounting purposes
8 Based on renewable goal guidance at the time this document was published.
9 U.S. General Services Administration, (n.d.). Contractor listing. 03FAC — Facilities maintenance and management. Energy management, water
conservation and support services. 871 209 Innovations in renewable energy. Retrieved from http://www.asaelibrarv.asa.aov/ElibMain/sinDetails.
do?scheduleNumber=03FAC&flaa=&specialltemNumber=871+209.
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similar arrangements.10 One challenge the federal government faces is that private-sector PPA contracts are typically
20 years; however, civilian agencies have limited long-term contract authorities (see the "Renewable Procurement
Authorities and Regulations" section).
ESPC Energy Sales Agreements (ESPC ESA)
An ESPC energy sales agreement, or ESPC ESA, uses long-term ESPC authority to implement an on-site renewable
project energy conservation measure (ECM) on federal buildings and/or land, with the agency purchasing the elec-
tricity for the term of the contract.
The ESPC ESA must meet all ESPC legal requirements (See, e.g., 42 U.S.C. 8287, et seq.), including the requirement
that the agency pay for the cost of the ESPC ESA from energy savings generated each year over the life of the
contract. In addition to ESPC requirements, the title retention and other annual scoring requirements of Office of
Management and Budget Memo M-12-21 apply. Thus, the government must take title by the end of the contract term;
and the purchase must be fair market value for compliance with the IRS Revenue Procedure 2017-19. Note that tax
incentive due diligence is the responsibility of the energy service company, not the government.
Contact FEMP for additional information regarding the ESPC ESA model and implementation options.
Other Options
See "WAPA Renewable Services" for another long-term contract option. As mentioned earlier, DoD can use authority
under 10 U.S.C 2922a for long-term contracts.
Federal agencies can also host privately owned renewable projects with some or all of the electricity sold to another
party. These projects use some type of real property arrangement such as a lease, easement or other instrument. The
contract could be with the serving utility or a renewable developer.
A federal agency may be able to contract with its serving utility for the purchase of electricity from an on-site renew-
able project that is owned by the utility/partner.
Off-Site Renewable Purchases
Competitive Electricity Markets
Federal agencies can purchase electricity from an off-site renewable project in a competitive electricity market.
GSA and DLA Energy (and in some cases, WAPA) should be used as contracting agents due to their expertise in
conducting electricity procurements, and because they can aggregate federal agency procurement requirements (for
example, by state or distribution utility service territory) when desirable to take advantage of economies of scale.
Fully Regulated Markets
Where retail competition is not available, federal agencies may be able to buy renewable power through a green
pricing, green tariff program or other utility renewable product (see description in Chapter 4 of this guide) offered
by their serving utilities. Agencies should carefully research the price and other product information, such as whether
RECs are included in the product or whether the product includes unbundled RECs purchased by the utility without
the underlying electricity, as well as the specific participation requirements. Agencies can purchase utility renewable
products via the GSA Areawide Contract. In very limited cases WAPA may be able to help with off-site renewable
purchases in regulated markets (see the "WAPA Renewable Services" section).
10 Determine whether PPAs are legal in the state and utility service territory before pursuing this type of arrangement.
A-8
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RECs
Federal agencies can buy RECs throughout the country in the voluntary REC market. Since numerous suppliers offer
RECs, full and open competitive solicitation procedures should be followed. GSA and DLA Energy can assist federal
agencies with REC procurements. Federal agencies that are existing WAPA preference power customers can request
assistance from WAPA for the purchase of RECs.
GSA, DLA Energy, and WAPA Services
The organizations listed below can provide renewable procurement assistance to federal agencies. Contact FEMP to
discuss the best option for a specific project or purchase.
GSA Procurement Services
GSA has assisted many federal agencies in the procurement of on-site and off-site renewables, and its ability to
aggregate renewable procurement requirements for many agencies could result in lower prices. GSA's support to its
federal customers for energy-related products is provided by the GSA Energy Division. Through this division, GSA
negotiates and signs Areawide Contracts with utility companies across the country. GSA customizes its competitive
electricity and natural gas procurements to meet the financial and physical supply requirements of its federal and
non-federal agency clients. Visit httD://www.asa.aov/Dortal/cateaorv/21093 for more information.
DLA Energy Procurement Services
DLA Energy's Installation Energy Program offers acquisition support for electricity, RECs, and on- and off-site
renewable power projects. DLA Energy is involved in retail electricity purchases in states that have approved and
implemented deregulation or restructuring. RECs can be purchased nationwide. DLA Energy's offerings include com-
petitive purchases for on- and off-site renewable generation that are financed, owned, operated and maintained by a
third party.
Under its Installation Energy Program, DLA Energy:
¦ Procures electricity for DoD and federal civilian activities.
¦ Uses aggregation to attract market interest without customer cross-subsidization.
¦ Acts as procurement agent for on- and off-site PPA projects.
¦ Works with customers to develop requirements, identify risk preferences and develop risk-mitigation plans.
¦ Tailors each solicitation to market conditions and customer requirements.
¦ Conducts "best value" and "low-price technically acceptable" acquisitions, depending on requirements and
customer preference.
¦ Contracts for load response services.
¦ Uses various pricing methods: fixed price, block and index, and locational marginal pricing.
¦ Has extensive experience procuring power for the federal government.
¦ Performs all contract administration functions
DLA Energy's program uses commercial practices for its solicitations and procurement strategy, which has been
central to successfully engaging the market. In addition, DLA Energy's program is flexible enough to support unusual
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customer requests and requirements while complying fully with applicable procurement regulations. DLA Energy is
also involved in ESPC and LJESC procurements on behalf of DoD and federal civilian agencies.
WAPA Renewable Services
If a federal agency has a physical site for a renewable energy project within the WAPA territory (see Figure A-2
below) and is willing to host a third-party owned system, WAPA can facilitate the purchase of energy from that
project on behalf of the agency under a long-term contract.11
For a federal agency that is an existing WAPA preference'customer, WAPA may be able to buy and deliver renewable
energy to the federal site. Agency costs include renewable power generation, transmission (if needed), related ancil-
lary services, distribution (if needed), and program administration. If the agency receives power from another utility,
the agency will generally need to obtain the cooperation of that utility before arrangements can be made to obtain
renewable energy from WAPA.
Federal agencies that are existing WAPA preference power customers can request assistance from WAPA for the
purchase of RECs.
An agency pays for the renewable energy at cost, plus a fee to cover the administrative cost of acquiring the renew-
able resources from a supplier. For more information about these programs, visit WAPA's web site at https://www.
waDa.aov/Renewables/ForFederalAaencies/Paaes/federal-aaencies.asDX. To request assistance from WAPA, contact,
Ron Horstman, Energy Services Program Manager at 720-962-7419 or horstman@waDa.aov. and complete the
non-binding statement of intent at https://www.wapa.gov/Renewables/Documents/RR S0lfeds13.pdf.
Figure A-2. WAPA Territory, Including Regions
Billings
Loveland •
#
Lakewood
Fo som
Phoenix
Sierra Nevada Region
Desert Southwest Region
Colorado River Storage Project Management
Center
Rocky Mountain Region
Upper Great Plains Region
State Boundaries
Regional Office
Headquarters
Colorado River Storage Project Management
Center Office
11 WAPA evaluates each request based on its current workload, among other considerations.
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Key Elements of a Successful Renewable Procurement
The following lessons have emerged based on federal agency experience with on-site renewable projects and off-site
renewable purchases.
Stakeholder Involvement
A cross-functional team with representatives from across the organization will result in the best renewable project.
Approval from management and other key decision-makers is crucial before moving forward with a project or
purchase. Stakeholders must participate in the process and make reasoned, balanced decisions. It is important to be
honest and clear about the renewable project's benefits. External stakeholders, such as the serving utility, should also
be consulted.
Cost-effectiveness
Most federal agencies are not willing to pay more for renewable energy, so renewable projects and purchases should
result in cost savings at the time of award. Government-owned renewables can be bundled with energy efficiency
projects in an ESPC or UESC, resulting in a shorter payback period.
Developing an Effective Solicitation
FEMP recommends that agencies use procurement documents from a previous solicitation (DLA Energy, GSA, other)
or a FEMP template as a starting point, to take advantage of lessons learned from prior renewable projects and pur-
chases. This will minimize the effort required to complete a renewable procurement. Agencies should consult with the
assigned contracting officer and attorney early in the process regarding required clauses and the document review
process. The request for proposals (RFP) should include the site electricity consumption data (at least monthly; in
some cases, interval data may be beneficial) and other pertinent information as attachments. The RFP should be well
publicized (typically posted on the federal business opportunities website FedBizOpps (https://www.fbo.gov). and a
pre-proposal conference is recommended.
Load Aggregation
As mentioned earlier, federal on-site renewable purchase requirements can be aggregated to achieve lower costs
through economies of scale. There are also opportunities to save money by aggregating federal load for the purchase
of electricity from off-site renewable projects. Both GSA and DLA Energy have significant experience with aggregat-
ing federal loads for electricity procurements. An aggregated procurement may involve one award or multiple awards.
Contact FEMP for aggregation recommendations.
Publicizing Renewable Projects and Purchases
After successfully completing a renewable project or purchase, a federal agency may want to publicize its efforts
through ribbon-cutting ceremonies, press conferences or press releases. It is important to be careful regarding the
environmental claims made in any public documents if the renewable project RECs are sold (even if replacement
RECs are purchased). Only the entity owning the project RECs can make claims regarding use of the renewable
energy generated by the project. The Federal Trade Commission has established rules in this area to ensure that
organizations do not make erroneous claims.12
12 U.S. Federal Trade Commission. (2012). "FTC issues revised 'Green Guides'". Retrieved from https://www.ftc.aov/news-events/press-releases/2012/10/ftc-issues-revised-
qreen-auides.
A-11
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Agencies with exemplary energy management programs and projects are eligible for FEMP awards, which enhance
an agency's image both inside and outside the government. A federal agency can also join the Environmental
Protection Agency's (EPA's) Green Power Partnership (GPP) if its project or purchase meets the EPA GPP require-
ments (see https://www.epa.gov/greenpower). The EPA GPP lists its top 10 federal government partners on the same
website.
Information for Potential Suppliers to the Federal Government
Federal government procurements are typically competitive, and most federal RFPs are posted on the FedBizOpps
website. Companies can register on FedBizOpps to receive notification when certain RFPs are released (based on
designated parameters such as NAICS industry classification code, agency and keyword). WAPA RFPs are posted on
WAPA's website,
https://www.wapa.aov/Renewables/ForFederalAaencies/Paaes/solicitations.aspx.
Resources
FEMP Renewable Assistance
FEMP provides training as well as technical and procurement assistance to help federal agencies with on-site renew-
able energy projects, purchases from off-site renewable projects, and REC purchases.
To request assistance from FEMP, please visit FEMP's Assistance Request Portal:
https://www4.eere.enerav.gov/femp/assistance/.
Technical Assistance
FEMP offers technical assistance to federal agencies throughout the entire project development process. For
example, FEMP works with agencies at the very beginning of this process, as they assess renewable energy oppor-
tunities at their site(s) through a renewable energy screening. A renewable energy screening combines renewable
energy resource data, energy costs, incentives, economic inputs, and other site-specific constraints to identify
renewable energy technologies that most cost-efficiently meet defined energy goals. The screening provides a rec-
ommended set of solutions including a combination of technologies, system sizes, associated capital costs, operation
and maintenance costs, savings, and net present value.
Once cost-effective renewable energy opportunities are identified at a site, FEMP can provide technical assistance
for further project validation, such as feasibility studies. FEMP can provide technical assistance for projects deciding
on a procurement vehicle or entering into a procurement process. Such technical assistance may include developing
or reviewing an RFP, reviewing response, and drawing design. Lastly, FEMP can provide technical assistance such
as commissioning and operations and maintenance support during the construction and performance period of the
project.
Technical assistance funding may not be used for equipment or labor costs. For more information, visit FEMP's
Renewable Energy website: http://enerav.aov/eere/femp/federal-renewable-enerav-proiects-and-technoloaies. For
assistance, visit the FEMP Assistance Request Portal, or contact the following staff:
¦ Rachel Shepherd, DOE FEMP, (202) 586-9209, rachel.shepherd@ee.doe.gov
¦ Andy Walker, National Renewable Energy Laboratory, (303) 384-7531, andv.walker@nrel.gov
¦ Emma Elgqvist, National Renewable Energy Laboratory, (303) 275-3606, emma.elggvist@nrel.gov
A-12
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Procurement Assistance
FEMP also offers renewable energy procurement assistance to federal agencies for on-site renewable projects,
purchases from off-site renewable projects and REC purchases. The FEMP team provides information on the available
procurement vehicles for the desired renewable product and assists with selecting the optimal approach. Then the
FEMP team describes important considerations, participates in team conference calls or meetings and provides assis-
tance with the development of the RFP and other procurement documents. Once an RFP is issued, the FEMP team
can assist with the pre-proposal conference, answering potential offeror questions and/or assisting with proposal
evaluation.
For more information, visit FEMP's website: http://energv.gov/eere/femp/renewable-energy-procurement-
federal-aaencies. For assistance visit the FEMP Assistance Request Portal or contact:
¦ Rachel Shepherd, DOE FEMP, 202-586-9209, rachel.shepherdcaee.doe.gov
¦ Chandra Shah, National Renewable Energy Laboratory, (303) 384-7557, chandra.shahcanrel.gov
¦ Gerald Robinson, Lawrence Berkeley National Laboratory, (510) 486-5769, GTRobinson@lbl.gov
¦ Mike Warwick, Pacific Northwest National Laboratory, (503) 417-7555, mike.warwick@pnl.gov
FEMP Training
Visit FEMP's training website: http://energy.gov/eere/femp/federal-energy-management-program-training for
information regarding FEMP's renewable training courses. FEMP is accredited by the International Association for
Continuing Education and Training (IACET) and awards continuing education units upon the successful completion of
select courses.
FEMP Tools
FEMP's Federal Energy Management Tools website, http://energv.gov/eere/femp/federal-energy-management-tools.
includes links to various tools such as software, calculators, data sets and databases created by DOE and other
federal organizations. These tools are intended to support energy managers and their teams in identifying and devel-
oping a renewable energy project. After identifying but before initiating a project, project champions should consult
an expert for a professional evaluation.
Other FEMP Resources
The ESPC ESA Toolkit provides federal agency contracting officers and other acquisition team members with
information that will facilitate the timely execution of ESPC ESA projects implemented as site-specific/stand-alone
ESPCs. Toolkits for ESAs for an indefinite delivery/indefinite quantity contract or ENABLE are under development.
The toolkit includes a process diagram, project checklist, team member descriptions, project considerations and
other information. At the end of the toolkit are a series of appendices that contain reference documents and editable
templates such as an RFP, site access agreement, acquisition plan and source selection plan. The acquisition plan
and source selection plan are available to federal agency staff upon request. Some of the toolkit information is useful
for any renewable project, regardless of implementation method. Federal agency staff should contact FEMP when
utilizing a mechanism other than a stand-alone ESPC ESA for recommendations on the appropriate use of the toolkit
and recommended modifications.
FEMP developed a technical specification template for solicitations for on-site solar photovoltaic. This document pro-
vides sample language and considerations that address technical factors for three sections of the Uniform Contract
Format, which is the most commonly used format in the federal sector. Section C: Descriptions/Specifications/
Statement of Work is the main section covered in this document. Flowever, Section E: Inspection and Acceptance and
A-13
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Section M: Evaluation Factors for Award are addressed as well. To obtain a copy, go to: https://enerav.gov/sites/prod/
files/2017/01/f34/solar pv procurement.pdf.
Contact FEMP for the latest information regarding contract options and FEMP resources.
Other Resources and Contacts
Federal Acquisition Regulation (FAR): www.acauisition.aov/far
DLA Energy: Andrea Kincaid (703) 767-8669, andrea.kincaid@dla.mil
http://www.dla.mil/Enerav/Offers/Products/lnstallation-Enerav/
¦ General Services Administration
enerav@asa.gov
http://www.asa.aov/portal/cateaorv/21093
¦ Western Area Power Administration (WAPA)
Renewable Resources for Federal Agencies Program
Ron Horstman. Energy Services Program Manager, 720-962-7419 or horstman@wapa.aov
https://www.wapa.aov/Renewables/ForFederalAaencies/Paaes/federal-aaencies.aspx
A-14
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APPENDIX
Commercial Solar Financing
Options
Authored by Alison Holm and Jenny Heeter, National Renewable Energy Laboratory
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
mr—.til
¦III .i III!
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DOCUMENT MAP
Summary
Chapter 1. Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
Chapter 4.
Chapter 5.
Chapter 6.
Chapter 7.
Chapter 8.
Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product information
Creating a Procurement Plan
Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
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Introduction
The U.S. solar photovoltaic (PV) market has expanded dramatically in the past decade, with cumulative installed PV
capacity in 2016 registering at 140 times greater than in 2006. PV installations across all sectors, including utility,
residential, and nonresidential,1 totaled 104 megawatts (MW) in 2006 and rose to 14,762 MW by the end of 2016,
with nearly half of that capacity (7,261 MW) coming online between 2015 and 2016 alone.2 With the number of PV
installations increasing, system costs have continued to decrease. As of 2017, commercial PV systems cost an average
of $1.85/Watts dc (Wdc) (a 65 percent decrease since 2010). For comparison, utility-scale fixed-tilt systems averaged
$1.03/Wdc in 2017 (a 74 percent reduction since 2010) and residential systems average $2.80/Wdc (a 61 percent
reduction over the same period).3
As the solar PV market in the United States has evolved, so too have the financing mechanisms associated with it.
Third-party ownership (TPO) models, which include power purchase agreements (PPAs) and leases, in addition
to loans and cash purchases, are the historical mainstays of the solar financing spectrum. Relatively more recent
additions include property-assessed clean energy (PACE) financing and green bonds, among others. This appendix
provides a snapshot of the current commercial solar financing arena and an overview of existing financing mecha-
nisms. While there is significant overlap in solar financing options among the residential, government, and commercial
sectors, this report focuses on options and considerations for commercial entities only. Performance contracting
mechanisms commonly used by federal agencies and also available to the private sector, including energy savings
performance contracts (ESPCs) or utility energy service contracts (UESCs), are briefly mentioned in the final section
of this appendix but are discussed in more detail in Appendix A, Green Power Considerations for Federal Agencies.
For potential commercial solar energy consumers, the menu of available financing options often depends on whether
the PV system is developed on-site or off-site. As corporations, universities, and other potential consumers have
begun introducing or expanding renewable energy and carbon reduction goals, many are required to pursue off-site
opportunities in order to approach the scale of renewable energy development needed to actually meet those goals.
Traditional solar financing models are thus being adapted to encompass these increasingly complex relationships
between solar energy consumers and solar development. As new options emerge for financing solar projects, it is
important for commercial consumers to consider the role of renewable energy certificates (RECs) in their transac-
tions. The number of RECs associated with a renewable energy project is based on the megawatt-hours of electricity
generated and can be sold either together with or separately from the underlying electricity. Commercial consumers
that do not keep the RECs associated with a solar energy project—even if they are purchasing electricity from or oth-
erwise own that installation—will not be able to make a claim to the environmental benefits represented by the RECs.
In other words, if a consumer does not retain the RECs from a solar project, the consumer will not be able to count
that project toward any renewable generation, carbon reduction or other environmental goals.
Initial Considerations
Though not purely financial, determining whether to pursue on-site versus off-site development and evaluating other
location-based factors are critical for commercial solar consumers. Incentives and financing structures may apply
differently depending on where the electricity is generated versus consumed and whether PV systems are located
on- or off-site. Another potential issue for commercial consumers is whether or not they own the property where they
wish to site a solar energy system. Institutions leasing their buildings, for example, generally will not have the authori-
ty to make decisions regarding rooftop solar installations.
1 Nonresidential may include commercial, industrial, and other midscale-market installations.
2 GTM Research & Solar Energy Industries Association. (2017). Solar market insight report 2016 year in review. Retrieved from https://www.qreentechmedia.com/research/
subscription/u.s.-solar-market-insight
3 Fu, R„ Feldman, D„ Margolis, R„ Woodhouse, M„ and Ardani, K. (2017). U.S. solar photovoltaic system cost benchmark: Q1 2017. National Renewable Energy Laboratory.
NREL/TP-6A20-68925. Retrieved from http://www.nrel.gov/docs/fv17osti/68925.pdf.
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Additionally, larger consumers (such as governments, commercial property owners and universities) may need to
seek off-site PV development in order to meet significant portions of their electricity load with solar. The percentage
of a building's annual electricity load that can be offset with rooftop solar PV depends on available roof space, solar
resource availability, and annual electricity consumption, as well as local net metering laws and limits. A National
Renewable Energy Laboratory (NREL) analysis of representative commercial buildings found that the percentage of
annual energy loads that can be reduced with PV systems that fill a building's total available roof area ranges from
less than 5 percent (for hospitals) to up to 100 percent (for warehouses).4 For institutions with less available rooftop or
other solar development space, impact at scale will stem from engaging in larger off-site projects.
Institutions have a number of factors to consider when selecting a financing option for their solar purchase. Table
B-l outlines some of these key financing considerations. In addition, organizations will need to evaluate the role of
RECs in their solar procurement strategies. While selling RECs to another party can lower the cost of procurement,
the procuring institution then cannot legally make a renewable energy claim for that transaction. Organizations could
consider a "swap" or "arbitrage" transaction, where they buy renewable energy from a different region or resource
type, at lower cost. Renewable claims under a swap transaction will be based on the renewable energy purchased,
not the RECs sold.5
Table B-l. Commercial-Sector Solar Financing Considerations 8
Financing
Considerations
Details
Desired level of
solar PV system
ownership
Under loan-financed or cash purchase options, the solar consumer directly owns the PV system(s) and
receives all associated tax benefits and incentives. Under TPO arrangements, these benefits still go
to the owner of the system, in this case the third-party. Ownership requires a relatively large upfront
capital investment, enough taxable income to benefit from tax breaks, and an understanding of poten-
tial risks and uncertainties inherent to owning solar PV.
Building owner-
ship and lease
terms
Tenant-landlord relationships and building lease terms add layers of complexity to solar financing
options. Solar consumers that lease property will likely need to work with the property owner in some
capacity to install solar. Discrepancies between building lease timeframes (e.g., 6-8 years) and the
lifetime of a solar PV asset (20-plus years) are another challenge that solar consumers will need to
consider when obtaining solar financing.
4 Davidson, C., Gagnon, P., Denholm, P., and Margolis, R. (2015). Nationwide analysis of U.S. commercial building solar photovoltaic (PV) breakeven conditions (p.7). National
Renewable Energy Laboratory. NREL/TP-6A20-64793. Retrieved from http://www.nrel.aov/docs/fv16osti/64793.pdf
5 Center for Resource Solutions. (2016). Solar energy on campus; Part II: solar purchasing options and communicating renewable energy use. Retrieved from httos://
resource-solutions.ora/wp-content/uploads/2016/09/Solar-Enerav-on-Campus-ll.pdf
6 Feldman, D„ and Lowder, T. (2014). Banking on solar; An analysis of banking opportunities in the U.S. distributed photovoltaic market (pp.14). National Renewable Energy
Laboratory. NREL/TP-6A20-62605. Retrieved from http://www.nrel.qov/docs/fv15osti/62605.pdf(p. 14)
7 Bird, L, Gagnon, P., and Heeter J. (2016). Expanding midscale solar; Examining the economic potentialbarriers, and opportunities at offices, hotels, warehouses, and
universities. NREL/TP-6A20-65938. Retrieved from http://www.nrel.gov/docs/fv16osti/65938.pdf
8 The office supply retailer Staples provides a case study in financing and installing solar on leased buildings. See: Feldman, D„ and . Margolis, R.. (2014). To own or lease
solar; Understanding commercial retailers' decisions to use alternative financing models. NREL/TP-6A20-63216. Retrieved from http://www.nrel.aov/docs/fv15osti/63216.
pdf
9 The Database of State Incentives for Renewables & Efficiency (DSIRE) provides information on programs and policies on a state-by-state basis. Solar consumers can refer
to the database to determine the applicable policies in their location. DSIRE is available at http://www.dsireusa.ora/.
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Table B-1. Commercial-Sector Solar Financing Considerations (continued)
Financing
Considerations
Details
Liability and
maintenance
costs associated
with solar PV
system owner-
ship
Historically, one of the primary selling-points for TPO models is that the third party-owner will cover
all operations and maintenance (O&M) functions, including equipment replacement and possibly
production guarantees, whereas the solar consumer incurs those costs and liabilities under loan or
cash purchase models. However, the introduction of stand-alone O&M and other services packages
are expanding the options available to solar consumers who wish to directly own their PV systems but
contract out for O&M services.
Credit require-
ments
Solar consumers with a poor credit rating or no credit history may find it more difficult to secure PPAs
or loans and, based on assessed risk, might face higher interest rates. Either cash purchases or PACE
financing, which is generally assessed based on property value rather than the borrower's credit score,
are potential alternative options.
Tax credits and
other incentives
Tax incentives represent the largest public investment in solar energy, but consumers must have the
requisite tax appetite to monetize tax credits. Commercial consumers may also benefit from accelerat-
ed depreciation benefits (i.e., the Modified Accelerated Cost Recovery System, or MACRS). Tax-exempt
entities, including many universities and other not-for-profit organizations, cannot directly use tax
incentives. For these consumers, partnering with a third-party owner that can monetize the tax credits
is one way to indirectly benefit from these incentives, assuming the third party passes on the associat-
ed cost savings via lower PPA or lease prices.
Payback and
contract terms
For both loan and TPO configurations, the contract terms can have a significant impact on the total
cost of solar financing. Longer contract periods will generally result in lower individual payment install-
ments, but can also increase the overall cost of financing, depending on interest rates. In addition to the
contract length, other factors such as down payments or pre-payment can influence financing costs.
State policy and
electricity market
structures
State policies and electricity market structures also dictate what types of financing mechanisms are
available. For example, on-site third-party PPAs, or direct PPAs, are not available in all states. State and
local financial incentives and utility rates vary by location, all of which influence the cost and economics of
solar projects. These factors may impact the relative attractiveness of different financing mechanisms on
a place-by-place basis.
The following pages provide summaries of common solar finance models.
Third-Party Ownership Models
Under TPO arrangements, which include PPAs and leases, a third party owns, installs, and operates a solar PV system
and either sells the power output (PPA) or leases the system to a solar consumer. Under a PPA, a third-party owner
sells electricity generated from a solar PV system, usually on a per kilowatt-hour (kWh) basis, to a solar consumer over
a fixed contract period. PPAs are considered off-balance-sheet transactions, an attractive feature to some entities.10
PPAs can make solar PV (or electricity more generally) accessible to consumers at a known price that parallels (but is
10 Feldmari, D., and R. Margoli.s, Jo own or/ease solar t.p. 24).
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sometimes less than) retail electricity rates, depending on the sector, market and contract terms.11 There are two vari-
eties of solar PPAs: on-site (or "physical") PPAs, in which the electricity generated from a solar PV facility is directly
tied to the consumer's meter, and off-site (or "financial") PPAs, under which a consumer still agrees to pay a fixed
price per unit of electricity generated from a solar PV installation, but the arrangement is purely financial rather than a
physical transfer of electricity. Both types of PPAs are discussed in more detail in subsequent sections.
Under any of the TPO configurations, the third-party owner, not the commercial solar consumer, is investing the
upfront capital to develop the system. TPO models offer an attractive risk-return balance for many consumers.
Advantages include:
¦ No upfront costs. There are no upfront costs associated with TPO for the solar consumer.12
Reduced exposure to risk. TPO arrangements incorporate services that historically have not been included
under direct ownership, allowing consumers to reduce their exposure to risks related to PV underperformance,
O&M costs, and delays in receiving incentives or grid-connection approval® However, as the commercial solar
market evolves, installers and companies specializing in after-market operations may provide more of these
services to solar consumers who elect to directly own their PV system(s).14
Access to technical and market expertise. Consumers can access technical and market expertise of third-party
PV owners, which can facilitate more rapid PV deployment. Due to the somewhat fragmented nature of current
federal, state, and local solar policies, navigating the various tax and incentives programs can be a complex
undertaking.
¦ Potential cost savings. For tax-exempt or other entities that cannot directly monetize solar tax incentives,
working with a third-party owner can facilitate cost savings if the third party takes the tax incentive and inte-
grates the associated cost savings into the PPA or lease prices.
The benefits of TPO do come with tradeoffs. The financing mechanism selected can have a significant impact on the
overall system costs of the solar investment. TPO options may offer several advantages, but do not provide the same
long-term cost benefits associated with direct ownership alternatives.15 As shown in Figure B-l, the modeled levelized
cost of energy (LCOE) for commercial PV systems under loan configurations are lower than they would be under a
TPO PPA arrangement, due to the higher cost of capital required for sponsors and tax-equity providers under PPAs.16
Figure B-1. LCOE of Commercial PV Systems, Financed Under a PPA or Loan17
$0.15
$0.12
-£=
| $0.09
tS $0.06
LU
8 $0.03
—I
$0.00
5-year Loan 10-year Loan 20-year PPA
11 Feldman, D„ and Lowder, T„ Banking on solar (p. 14)
12 Coughlin.J. and Kandt, A. (2011). Solar schools assessment and implementation project; Financing options for solar installations on K-12 schools (p.16). National Renewable
Energy Laboratory Retrieved from https://www1.eere.enerav.aov/office eere/pdfs/51815.pdf
13 Feldman, D„ and Margolis, R„ To own or lease solar (p. 3)
14 Feldman, D„ and Lowder, T„ Banking on solar (p. 14)
15 Feldman, D„ and Margolis, R„ To own or lease solar (p. 24)
16 FFeldman, D„ and Lowder, T„ Banking on solar (p. 28)
17 Feldman, D„ and Lowder T„ Banking on solar (pp. 28-29)
B-6
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REC ownership is another potential tradeoff for solar consumers under a TPO arrangement. TPOs typically retain
Ownership of and monetize RECs associated with the solar project. Institutions seeking to claim environmental
benefits to meet renewable energy or carbon reduction goals may not be able to do so under a TPO arrangement,
depending on the flexibility of the third-party's contract terms.
On-Site Power Purchase Agreement (PPA): Physical PPA
Description
On-site PPAs can be considered "physical" PPAs, because the electricity production is tied to the consumer's meter,
directly reducing the amount of electricity purchased from the utility (Figure B-2). Some organizations have also
structured off-site "physical" PPAs, where the solar is contractually delivered to the consumer; those structures are far
less common and therefore not addressed here.
Figure B-2. Overview of On-Site PPA
Fixed payment
per month
Reduced use of grid mix
electricity and reduced
utility payment
Commercial Solar Consumer
Third-Party Owner*
'In this scenario, the third-porty
owner gets the tax benefits.
Utility/Electric Service Provider
N
-------
may not apply unanimously to all systems, Some policies, for example, only authorize third-party owned systems that
are on-site or net metered.
Figure B-3. Status of Third-Party PPA Authorization20
Guam usv| nm|
M Third-party PPAs allowed or otherwise in-use
IH Third-party PPAs disallowed or restricted
Status unclear
Contract Risks
¦ Solar consumer only pays for production of system, thereby eliminating performance risk
¦ Solar consumer's exposure to electricity price fluctuations is directly reduced
Target Consumer & Example
Non-taxpaying organizations (e.g., nonprofit organizations, governments) that cannot directly use tax incentives
¦ Organizations with good credit ratings
¦ Organizations not wanting or not able to make a capital investment
Staples worked with SunEdison to deploy solar on its buildings using a PPA model. Staples is a public company with
a good credit rating and large balance sheet, but it preferred not to assume the risks associated with solar ownership.
Staples has worked with SunEdison to install solar on 37 of its U.S. facilities, totaling 14 MW.s
Contract/Cost Implications
¦ Off-balance sheet
Typically 15-20 year contracts
Annual price escalators of around 2 percent
20 DSIRE Database. 3rd Party Solar PV Power Purchase Agreement (PPA). Retrieved from http://ncsolarcen-prod.s3.amazonaws.com/wp-content/uploads/2018/03/
DSIRE 3rd-Partv-PPA March 2018.pdf.
21 Feldman, D. and Margolis, R, To own or lease solar (p.6)
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RECs
RECs should be defined in the PPA and ownership should be assigned to one party. In higher-priced REC markets
and in territories where utilities are offering incentives for RECs, commercial consumers typically sell the RECs to the
utility or project developer in order to lower the cost of the transaction, but in doing so they relinquish environmental
claims.
Off-Site Power Purchase Agreement (PPA): Financial PPA
Description
Under financial PPAs, which are a common arrangement for an off-site generation PPA, the consumer does not take
delivery of the electricity. Rather, the consumer agrees to pay a fixed price per unit of electricity generated from the
solar facility, and the electricity producer sells the power to the electric grid and is compensated at the market rate.
If the market rate the electricity producer receives is different than the negotiated PPA settlement price per unit of
electricity, the difference is paid for via a stipulation in the PPA contract referred to as a contract for differences. If the
market power rate exceeds the fixed PPA price, then the electricity producer pays the consumer the difference; if the
market power rate is less than the PPA price, the consumer pays the electricity producer the difference. This transac-
tion typically occurs monthly. The consumer's on-site electricity consumption is not affected. See Figure B-4.
Figure B-4. Overview of Off-Site PPA
Set price per kWh
solar produced
(PPA)
Commercial Solar Consumer
Variable
wholesale
electricity
market price
Same use of grid mix
electricity and utility
payment as before
financial PPA
Third-Party Owner*
Utility/Electric Service
Provider
Electricity
sales
Variable
wholesale
electricity
market price
Purchases and/or
sales of wholesale
electricity
Wholesale Electricity Market
"In this scenario, the third-party owner gets the tax benefits.
Typical teaa MS fa20 y«»
B-9
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Market Insights
Through July 2017, financial PPAs represented 43 percent of the total off-site contracts (in terms of cumulative MW of
renewable energy contracted) signed by corporate consumers (Figure B-5X® Procurement in 2015 was likely higher
than 2014 and 2016 because of uncertainty around the production tax credit and investment tax credit extensions.
Figure B-5. Contracted Solar MW23
1,200
1,000
3
I 800
fTJ
w
5
s
| 600
TS
o
ru
« 400
200
0
Policy Drivers
With financial PPAs, the generator must be able to sell into a wholesale spot market (Figure B-6). The generator and
the consumer are typically located in the same power market in order to ensure the best hedge against rising electric-
ity prices. This is because the consumer would want the wholesale price the generator is receiving to track the retail
price the consumer is paying its existing utility as closely as possible, so that if retail rates increased, the consumer
would also receive a higher payment from the renewable generator selling into the wholesale market. With solar proj-
ects built in areas not served by a regional transmission organization or organized wholesale market, developers and
consumers may find it difficult to agree upon a market price index, since there is less market transparency.
22 Green tariff or bilateral contracts are those in which the commercial consumer is contracting with the utility for renewable generation; the utility then signs a separate
contract with the renewable generator. For more on green tariffs, see: Heeter, J., Cook, J., and Bird, L. (2017). Charting the emergence of corporate procurement of utility-
scale PV. NREL/TP-6A20-69080. Retrieved from https://www.nrel.aov/docs/fv17osti/69080.pdf
23 Heeter, J., Cook, J, and Bird, L, (2017). Charting the Emergence of Corporate Procurement of Utility-Scale PV. National Renewable Energy Laboratory https://www.nrel.
aov/docs/fv17osti/69080.odf.
Green Tariff or Bilateral
m
Physical PPA
Other/Unknown PPA
m
Financial PPA
Contracted Solar MW (cumulative)
8% 296
¦i 13%
_L
_L
_L
_L
<2008 2009 2010 2011 2012 2013 2014 2015 2016 July 2017
B-10
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Figure B-6. Map of Regional Transmission Organizations and independent System Operators
Contract Risks24
The consumer will assume locational basis risk if the project is being settled at the busbar (point of interconnec-
tion) rather than the hub (the average of multiple busbars).®
¦ Setting a price at the busbar may offer greater opportunity for the consumer to earn greater returns than setting
a price at the hub because of the minimized transmission congestion costs, but it comes with more risk.
Target Consumer & Example
¦ Organizations with finance and legal expertise, or interest in working with partners to understand complex
transactions
¦ Organizations with limited space available for on-site generation
¦ Organizations with large electrical loads
¦ Organizations with good credit ratings
¦ Organizations not wanting or not able to make a capital Investment
24 For more discussion of financial PPA risks, see Schwabe, P., Lowder, T, Feldman, D„ Fields, J., and Edward Settle. (2017). Wind energy finance in the United States: Current
practice and opportunities. National Renewable Energy Laboratory. NREL/TP-6A20-68227. Retrieved from https://www.nrel.aov/docs/fv17osti/68227.pdf: and Renewable
Choice Energy. (2017) Proactively managing risks to accomplish your long-term energy goals using renewable PPAs. Retrieved from http://www.renewablechoice.com/
wp-content/uploads/2017/0l/White-Pa per-Risk-Mitiaation-2017.pdf.:
25 Locational basis risk is the difference between where the renewable generator sells power and the location at which the contract price is set, as defined in the financial
PPA.
B-11
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Massachusetts Institute of Technology, Boston Medical Center, and Post Office Square Redevelopment Corporation
executed a financial PPA for 60 MW of solar from a facility to be built in North Carolina. This transaction represented
one of the largest solar financial PPAs ever, as most financial PPAs executed as of 2017 have been for wind. Although
the price hedging opportunity may not be perfect since the project is located in a different region than the con-
sumers, the project partners cited other benefits, including that North Carolina had larger stretches of contiguous
available land for solar development than the Boston area, and that the project would contribute to reducing green-
house gas emissions in North Carolina, which has a higher grid carbon intensity than New England *
Contract/Cost Implications
¦ Off-balance sheet
Typically 10-15 year contracts
May have annual escalator payment to electricity producer
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)®1 may have recordkeeping,
reporting and other implications for financial PPAs.
The financial PPA structure will determine if Dodd-Frank compliance is required and can be configured so that
reporting and recordkeeping responsibilities are assigned to the seller; responsibilities will vary depending on the
PPA structure.
RECs
RECs should be defined in the financial PPA and ownership should be assigned to one party. In many cases, financial
PPAs are being signed where the commercial solar consumer is keeping the RECs to make a renewable energy claim,
however, there are cases where the consumer sells the RECs or engages in a REC swap.
26 Massachusetts Institute of Technology. (2016). MIT to neutralize 17 percent of carbon emissions through purchase of solar energy. Retrieved from http://news.mit.
edu/2016/mit-neutralize-17-percent-carbon-emissions-throuqh-purchase-solar-enerqv-1019.
27 Dodd-Frank Wall Street Reform and Consumer Protection Act. (2010). Pub. L. 111-203.124 Stat. 1376. 21. Retrieved from https://www.sec.gov/about/laws/
wa list reet reform -cpa.pdf.
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Lease
Description
Solar leases also fall under the TPO model and mirror other common lease arrangements, such as an automobile
lease. Generally, a solar consumer leases a solar PV system from a third party for a monthly rate over a pre-de-
termined contract period (typically 10-20 years) (Figure B-7). The defining characteristic of a solar lease that
distinguishes it from a PPA is the fixed monthly payment—consumers are making fixed payments every month rather
than paying for the power generated. Because monthly costs are fixed, leases typically include production guaran-
tees. Lease terms and prices vary depending on a number of factors, including physical location, PV system size, roof
specifications (for rooftop installations), and the consumer's credit score, among others. Depending on how the lease
is structured, consumers may also have the option of pre-paying a portion of the lease to reduce monthly payments.
Figure B-7. Overview of Lease
Fixed monthly
payment
Commercial Solar Consumer
Reduced use of grid mix
electricity and reduced utility
payment
Third-Party Owner*
*lr this scenario, the third-party
owner gets the tax benefits.
Utility/Electric Service Provider
jra'tejTiSSli#! term isgj to® SBIts.
Market Insights
In 2015, third-party owned systems, including commercial leases, made up 65 percent of the nonresidential solar
market; GTM Research projects TPO market share to increase to 74% in 2020.28
Policy Drivers
The TPO model of solar leases allows tax-exempt organizations to partner with other entities to monetize tax benefits
but is currently not available in all states.
Contract Risks
The solar lessee assumes performance risk, which is typically mitigated by including a performance guarantee.
ftessatrih CUfareriiiiiwwfiflwiii laridB»p*2SSB-2023
B-13
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Target Consumer & Example
Non-taxpaying organizations (e.g., nonprofit organizations, governments) that cannot directly take advantage of
tax incentives
¦ Organizations already using equipment leases
¦ Organizations with good credit ratings
¦ Organizations not wanting or not able to make a capital investment or that take a long time to make capital
budgeting decisions
Luther College installed a 280-kilowatt (kW) solar PV array in 2012 under a lease agreement with Decorah Solar Field,
LLC. The leasing company was able to take advantage of accelerated depreciation and federal grants under the 1603
Treasury Program to reduce project costS.*9
Contract/Cost Implications
Typically includes an annual escalator
In order for a solar lease to qualify for the federal investment tax credit (ITC), both parties (e.g., the third-party
owner and the lessee) must be taxpaying entities. Non-taxpaying entities may also enter into solar leases with a
third-party owner but risk losing the ITC in that scenario. Taxpaying entities can use operating and capital leases
to monetize tax credits directly.
An operating lease ("tax lease") is an off-balance sheet transaction which, for accounting purposes, closely
resembles a traditional lease or rental. Under an operating lease, the lessor remains the owner of the asset
and takes the tax credit. Operating leases are more common and are structured assuming the lessee will not
necessarily assume direct ownership of the system in the future.
Conversely, a capital lease is an on-balance-sheet transaction that shares many characteristics of a rent-to-
own or direct ownership arrangement and assumes the lessee will eventually own the system outright; the
lessee is the owner for tax purposes.®
RECs
RECs should be defined, in the lease and ownership should be assigned to one party. In higher-priced REC markets
and in territories where utilities are offering incentives for RECs,. commercial consumers typically sell the RECs to the
utility or project developer in order to lower the cost of the transaction, but in doing so they relinquish environmental
claims.
Loan
Description
Solar-specific loans provide a pathway to direct ownership, which offers the benefit of free or low-cost electricity
after the loan is paid off. and spreads the system cost out over a number of years (usually 5-15, depending on the loan
terms), reducing upfront costs (Figure B-8). Solar loans are an ownership model—the consumer is paying for the PV
29 Aznar, A., Mathur, S, Kim, A., Schramm, J.M. (2016). Non-power purchase agreement (PPA) options to financing solar deployment at universities. National Renewable
Energy Lab. Retrieved from https://www.nrel.aov/technical-assistance/assets/pdfs/nonppa-universities-webinar-2016-oct4.pdf.
30 Bolinger, M. (2009). Financing nonresidential photovoltaic projects: Options and implications. Lawrence Berkeley National Laboratory. LBNL-1410E, Retrieved from
https://eta.lbl.aov/sites/all/files/publications/report-lbnl-1410e.pdf.
B-14
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panels, not for the electricity production, thus the risk of poor performance falls to the commercial solar consumer.
Solar loans are typically structured in two parts to allow consumers to take advantage of the 30 percent federal ITC.
For example, the loan can be split into a 12- to 18-month zero-interest (also known as "same as cash") bridge loan for
30 percent of the project, and then a second longer-term, fully amortizing loan for the remaining 70 percent. Under
this scenario, the solar consumer would pay the full amount of the ITC bridge loan upon receiving the tax benefit. The
longer-term loan would be paid back with interest over the loan period. As these loan packages have evolved, some
now also include service packages, often covering the same O&M coverage historically associated with TPO models.
Figure B-8. Overview of Loan
Fixed monthly
payment
Bank/Lending Institution
N
-------
Target Consumer & Example
¦ Smaller organizations, which PPA providers may not serve or require an interest rate of the organization that is
unfeasible, may be able to get a loan through their banks or credit unions.
¦ Organizations not wanting or not able to make a capital investment
¦ Organizations able to take on operations and maintenance responsibilities or to contract for those services
Solar loans are used by small commercial consumers; the products are similar to those used by residential households
installing solar. Many large solar developers offer solar loan products in addition to PPA or lease options.
Contract/Cost Implications
Interest rates vary depending on factors like the borrower's credit score, length of the loan, and the loan provid-
er, but generally fall in the 2.99 to 8 percent range.35
¦ On-balance sheet; may limit organization's borrowing potential
RECs
Banks and financial institutions may examine potential revenue from selling RECs; commercial solar consumers may
monetize their RECs to make the loan terms more favorable, but they relinquish environmental claims if they do so.
Cash Purchase
Financing Option Description
Cash purchases are the most straightforward solar financing option: the solar consumer directly purchases, owns
and is responsible for maintaining the solar Installation (Figure B-9). Although PV system costs have fallen in recent
years, purchasing a solar PV system outright requires significant upfront capital outlay, making this option unrealistic
for many consumers, but appealing to others. Cash purchases also represent the most direct procurement type when
selling or transferring an asset because it is already paid off. Owners typically assume all O&M costs and related
expenses, but also maintain control over a long-term, high-quality assets Because cash purchase is a direct sale,
there are fewer entities involved in the transaction than there are with loan or TPO options and the solar consumer
does not incur financing costs (e.g., interest on a loan or the cost of capital)#® This generally results in a higher rate
of return over the lifetime of the PV system, although consumers typically will not see immediate economic benefits
under a cash purchase—depending on the configuration, commercial solar consumers may see a negative cash flow
for the first 5-11 years of system ownership®*
33 Feldman, D„ and Bolinger, M. (2016). On the path to SunShot: Emerging opportunities and challenges in financing solar (p. 40). National Renewable Energy Laboratory.
NREL/TP-6A20-65638. Retrieved from http://www.nrel.gov/docs/fv16osti/65638.pdf
34 Feldman, D, and Margolis, R., To own or lease solar (p. 2)
35 Feldman, D„ and Margolis, R„ To own or lease solar (p. 2)
36 GTM Research. U.S. commercial solar landscape 2016-2020
B-16
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Figure B-9. Overview of Cash Purchase
Reduced use of grid mix
electricity and reduced
utility payment
Commercial Solar Consumer*
Utility/Electric
Service Provider
*ln this scenario, the consumer owns
the system and gets the tax benefits.
Market Insights
Consumer-owned systems accounted for 35 percent of the commercial solar market in 2015; GTM research projects
that this figure will decrease to 26 percent by 3620 ®
Policy Drivers
Some institutions (universities, for example) may be able to utilize internal funding, bond financing, grants and
incentives, including rebates or donor funding, as potential revenue streams for cash purchases. However, tax-exempt
entities may not be able to take advantage of tax benefit incentives if opting for direct financing, which could impact
the economic viability of solar projects.
Contract Risks
Purchaser assumes performance risk, including risk of delayed interconnection
Target Consumer & Example
¦ Organizations with available capital
¦ Organizations with access to grants, bond financing or donor funding (e.g., universities, nonprofit organizations)
¦ Organizations with tax liability
IKEA, a home furnishing retailer, decided to purchase solar installations outright based on several factors: it believed
it would get a better rate of return than it would under a PPA, it was comfortable with a longer payback period, and
it had the capacity to finance the PV system through the company's available balance sheet. IKEA did initially work
with outside partners (including an engineering, procurement and construction contractor) while focusing on building
internal, institutional knowledge about managing solar PV systems and learning to navigate the solar policy, financing
and risk landscape.
Contract/Cost Implications
¦ On-balance sheet
37 Feldman, D., and Margolis, R„ To owtrorJeasesoJar (p 9)
B-17
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RECs
Organizations may examine potential revenue from selling RECs; they may monetize their RECs to ensure shorter
payback periods, but they relinquish environmental claims if they do so.
Property-Assessed Clean Energy (PACE)
Financing Option Description
PACE financing, which was first introduced in California in 2008, is a financing option for renewable energy,
energy efficiency and water conservation upgrades in certain locations where the state has authorized and local
governments have implemented PACE programs. Under PACE financing, a third party finances (but does not own)
PACE-eligible projects on behalf of a property owner and, after the project is completed, an assessment for the
project costs (plus administrative expenses and interest) is attached to the property. Property owners repay the
assessment over time as part of their property taxes (Figure B-10).
Figure B-10. Overview of PACE
Fixed payment on
property tax bill
Commercial Solar Consumer*
*ln this scenario, the consumer owns
the system and gets the tax benefits.
mi
Local
Government
Reduced use of grid mix
electricity and reduced
utility payment
Utility/Electric
Service Provider
repayment
Pays solar installer
PACE financier
11 % T#pKBl$iiii <3-jfpf8jrs
PACE financing is unique in being property-based—PACE liens are typically evaluated against the underlying property
value rather than the borrower's credit score—and transferable, meaning that if a property owner decides to seli.
the PACE lien stays with the property and any subsequent owner. PACE can also be used to pay for solar leases and
PPAs, in which cases the potential tax benefits associated with TPO arrangements may be combined with the proper-
B-18
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ty-based advantages of PACE financing, though this option is not as widely used as a PACE-only product^'Because
the PACE assessment is typically senior to the mortgage loan attached to a property, PACE programs typically
require commercial PACE (C-PACE) projects to obtain consent from the mortgage lender.
Market Insights
As of May 2017,1,030 properties had used C-PACE, totaling $400 million in investment; 34 percent of the funding
went to renewable energy projects, 51 percent to energy efficiency projects and 15 percent to mixed projects.*'
Policy Drivers
PACE financing is currently enabled in 33 states and Washington, D.C.; of those, 20 states and Washington D.C. have
an active PACE program (Figure B-ll).
¦ Consumer assumes performance risk, including risk of delayed interconnection
38 The Connecticut Green Bank, for example, is offering a PACE PPA product. See http://pacenation.us/pace-talk-pace-power-purchase-agreements-ppa-is-a-qame-
changer-for-con n ect icut-a nd- bevo n d.
39 PACEMation (2017). PACE market data. Retrieved from http://pacenation.us/pace-market-data/.
40 PACENation. (2018). Commercial PACE Near You. Retrieved from http://pacenation.us/pace-proarams/commercial.
Figure B-ll. Status of Commercial PACE Programs40
PACE Enabled with Active or Launched C-PACE Program(s)
M PACE Enabled
PACE Enabled with C-PACE Program(s) Under Development
PACE Not Enabled
Contract Risks
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Target Consumer & Example
¦ Organizations with poor credit or no credit history
¦ Organizations that may be moving before the end of the expected life of a solar system
¦ Building owners who lease their space, or organizations that own and use their building but expect to leave in
less than 10 years (e.g., office buildings, hotels)41
A wholesale distribution facility operator in Chico, California, utilized C-PACE financing to install a 77.74-kW rooftop
solar PV system. The building had ample roof space and did not require additional energy efficiency modifications.
The annual PACE assessment is $265,458, with an interest rate of 7.99% over 20 years. In this case, the availability of
tax incentives and rebates for solar PV systems also factored into the project economics.42
Contract/Cost Implications
¦ May be considered off-balance sheet, depending on accounting practices43
¦ Repayment is tied to the property; does not affect the organization's creditworthiness
RECs
Banks and financial institutions may examine potential revenue from selling RECs; commercial solar consumers may
monetize their RECs to make the loan terms more favorable, but they relinquish environmental claims if they do so.
Other Financing and Solar Purchasing Options
There are several additional solar financing or purchasing options that may be available in certain markets, some of
which can be used in conjunction with the mechanisms presented in the previous section.
Bond financing. Public institutions, governments and corporations have the option of issuing bonds to raise revenue
to finance solar purchases.44 Green bonds are an emerging subset of bonds specifically dedicated to financing envi-
ronment-related projects, such as energy efficiency, renewable energy, water conservation and similar measures.45
Direct investments. In limited cases, direct investments such as grants, donor funding, endowments or internal
capital funds may be available to facilitate solar cash purchases, particularly for larger institutions. Dedicated sus-
tainability or renewable energy funds, such as those collected through student fees at some universities, represent
another potential funding stream.
Energy performance contracting. Energy performance contracting mechanisms are structured to allow govern-
ment agencies and commercial institutions to pay for renewable energy upgrades over time using money saved on
energy bills resulting from energy-saving measures. Energy performance contracting structures are used extensively
by federal agencies and are also open to the private sector. They include ESPCs and UESCs. Under both types of
agreements, the company providing the energy efficiency or renewable energy service upgrades—an energy service
41 For more on the implications of leased spaces on solar procurement, see Bird, L, Gagnon, P., and Heeter, J. (2016). Expanding midscale solar: Examining the economic
potential, barriers, and opportunities at offices, hotels, warehouses, and universities. NREL/TP-6A20-65938. Retrieved from http://www.nrel.aov/docs/fvl6osti/65938.
pdf.
42 PACENation. Wholesale distributor. Retrieved from http://pacenation.us/proiects/wholesale-distributor/.
43 Bird, L„ Gagnon, P., and Heeter, J. (2016). Expanding midscale solar: examining the economic potential, barriers, and opportunities at offices, hotels, warehouses, and
universities NREL/TP-6A20-65938. http://www.nrel.gov/docs/fv16osti/65938.pdf.
44 For more information on bonds, see Cory, K„ Coughlin, J., Coggeshall, J. (2008). Solar photovoltaic financing: Deployment on public property by state and local
governments NREL/TP-670-43115. Retrieved from http://www.nrel.aov/docs/fv08osti/43115.pdf.
45 For more information on federal clean renewable energy bonds see https://enerav.aov/savinas/clean-renewable-enerav-bonds-crebs.
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company (ESCO) under ESPCs or the utility in the case of UESCs—guarantees reduced energy expenditures resulting
from energy-saving projects. The ESCO or utility typically conducts a building energy audit, identifying specific
energy conservation measures. Once the ESCO or utility and the building owner agree on the course of action, the
ESCO or utiiity arranges project financing and makes the upgrades. The building owner then repays the ESCO or
utility using its normal operating budget and the freed-up money from reduced energy costs stemming from the
energy conservation measures. ESPCs and UESCs are discussed further In Appendix A, Green Power Considerations
for Federal Agencies •
Green tariffs. Green tariff programs are an emerging product among utilities that allow consumers (usually larger
commercial and industrial entities) to purchase renewable power directly from the utility, typically under a long-term
contract. Consumers opting into these programs may purchase electricity at the green tariff rate, which typically
replaces the standard electricity rate and may result in cost savings to the consumer over the contract term. Typically,
the utility's green tariff will specify key terms and conditions, then consumers will sign an individual contract with the
utility specifying the costs. As of April 2017, five utilities had a subscribed green tariff, with 900 MW of renewable
capacity committed.47
Conclusion
The solar PV financing landscape continues to evolve and expand, with new products and configurations affording
solar consumers a variety of potential options. Specific financing mechanisms offer different combinations of advan-
tages and challenges. A consumer's tax profile, location, and access to upfront capital, among other factors, will
impact the viability and relative attractiveness of the different approaches. Individual solar consumers will need to
carefully consider solar financing options within their specific contexts. Table B-2 summarizes the overarching advan-
tages and challenges associated with the different financing mechanisms and identifies the types of end users that
may benefit most from the respective financing options-.
46 For more information on the basics of ESPC, see the DOE Office of Energy Efficiency and Renewable Energy's overview at https://enerav.aov/eere/slsc/enerav-savinas-
pe rformance-contractina.
47 World Resources Institute. (2017). Grid transformation: Green tariff deals. Retrieved from http://www.wri.ora/resources/charts-araphs/arid-transformation-areen-tariff-
deals: for more on green tariffs, see Heeter,- J„ Cook, J., and Bird, L. (2017). Charting the emergence of corporate procurement of utility-scale PV. NREL/TP-6A20-69080.
Retrieved from https://www.nrel.gov/docs/fy17osti/69080.pdf.
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Table B-2. Summary of Solar Financing Mechanisms
Financing
Mechanism
Advantages
Challenges
Which end users benefit most?
On-site,
Physical
PPAs
• Little or no upfront
capital investment
• Tax-exempt consumers
can take advantage of
tax benefits, including
MACRS
• Consumer only pays for
production
• Reduces consumer
exposure to electricity
price fluctuations
• O&M responsibilities
covered by TPO
• Utility bills reduced by
amount the PPA covers
• Off-balance sheet
• Not available in all states
• Requires long-term contract for
power
• Consumer must have good credit
• Potential transfer issues at prop-
erty sale
• RECs must be assigned to one
party; selling RECs may lower
transaction costs, but consumer
then cannot claim environmental
benefits
• Consumers with little or no tax
appetite
• Consumers with limited access or
interest in spending upfront capital
• Organizations With good credit
Off-site,
Financial
PPAs
• Same advantages as
on-site PPAs, plus:
• Option for consumers
where physical PPAs are
not allowed
• Often issued for shorter
contract terms (TO
years) than on-site PPAs
• Complex financial arrangement;
consumers may experience
steep learning curve in executing
contracts
• Consumer continues to pay exist-
ing electricity bill; may not provide
perfect hedge against rising utility
rates
• Electricity producer must be
located In restructured markets
• Consumer must have good credit
• Dodd-Frank Wall Street Reform
and Consumer Protection Act may
have recordkeeping, reporting and
other implications
• RECs must be assigned to one
party; selling RECs may lower
transaction costs, but consumer
then cannot claim environmental
benefits
• Consumers in restructured elec-
tricity markets
• Consumers with distributed loads
• Consumers with Interest and
ability to learn about new financial
products
• Large electricity users
• Consumers with limited space
available for on-site solar devel-
opment
• Consumers in restructured elec-
tricity markets
• Consumers with distributed loads
• Consumers with Interest and
ability to learn about new financial
products
• Large electricity users
• Consumers with limited space
available for on-site solar devel-
opment
• Organizations with good credit
rating
• Consumers with little or no tax
appetite
• Consumers with iimited access
to or interest in spending upfront
capital
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Table B-2. Summary of Solar Financing Mechanisms (continued)
Financing
Mechanism
Advantages Challenges Which end users benefit most?
Lease
• Little or no upfront
capitai investment
• Can work with existing
equipment lease finan-
cial partners
• Fixed payments monthly
• Lease may impact balance sheet,
depending on the structure
• Consumer assumes performance
risk
• RECs must be assigned to one
party; selling RECs may lower
transaction costs, but the consum-
er then cannot claim environmental
benefit
• Non-taxpaying organizations (e.g.
nonprofit organizations, govern-
ments)
• Organizations already using
equipment leases
• Organizations with good credit
ratings
• Large corporations with aversion
to debt
• Organizations not wanting or not
able to make a capital investment
or that take a long time to make
capital budgeting decisions
Solar Loan
• Reduced upfront costs
• Consumer enjoys ben-
efits of ownership after
loan is paid off
• Typically lower cost to
consumer than TPO
models
• Consumer must have good credit
• Consumer assumes risk of nonpro-
duction
• On-balance sheet
• Consumers in states that disallow
third-party PPAs
• Organizations not wanting or not
able to make a capital investment
• Organizations able to take on
operations and maintenance
responsibilities, or contract for
those services
Cash
Purchase
• Owner avoids financing
charges and interest
payments
• May expedite the solar
installation process
• May expedite property
sale or transfer
• Competing uses for organizations'
funds
• No accelerated depreciation bene-
fits: (residential consumers)
• Tax-exempt entities may not be
able to monetize tax benefits
• Owner responsible for O&M (or
contract out for those services)
• Consumers with available upfront
capital
• Organizations with access to
grants, bond financing, or donor
funding (e.g. universities, nonprof-
it organizations)
• Organizations with tax liability
PACE
• Little or no upfront
capital Investment
• Transferable to subse-
quent property owners
• Financing is primarily
property-based rather
than credit-based
• Limited availability
• PACE requires clear communica-
tion with underlying mortgage
lender
• Building owners who lease their
space, or organizations that own
and use their building but expect
to leave in less than 10 years
• Public-sector consumers
• Organizations With poor or no
credit history
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Resources
PPAs
National Renewable Energy Laboratory. (2016). Using power purchase agreements for solar deployment at universi-
ties. National Renewable Energy Laboratory. NREL/BR-6A20-6556777. Retrieved from http://www.nrel.gov/docs/
aen/fv16/65567.ndf.
Leases
National Renewable Energy Laboratory. (2014). Homeowners guide to leasing a solar electric system. National
Renewable Energy Laboratory. NREL/BR-7A40-60972. Retrieved from http://www.nrel.aov/docs/fv14osti/60972.pdf.
Standard PPA and Lease Contracts
National Renewable Energy Laboratory, (n.d.). Renewable energy project finance. Retrieved from https://financere.
nrel.qov/finance/content/solar-securitization-and-solar-access-public-capital-sapc-workinq-qroup#standard con-
tracts.
Solar Financing Market and Trends
Heeter, J., Cook, J., and Bird, L. (2017). Charting the emergence of corporate procurement of utility-scale PV. NREL/
TP-6A20-69080. Retrieved from https://www.nrel.qov/docs/fv17osti/69080.pdf.
Feldman, D., Friedman, B., and Margolis, R. (2013). Financing, overhead, and profit: An in-depth discussion of costs
associated with third-party financing of residential and commercial photovoltaic systems. National Renewable Energy
Laboratory. NREL/TP-6A20-60401. Retrieved from http://www.nrel.qov/docs/fv14osti/60401.pdf.
Feldman, D., and Bolinger, M. (2016). On the path to SunShot: Emerging opportunities and challenges in financing solar
(p. 40). National Renewable Energy Laboratory. NREL/TP-6A20-65638. Retrieved from http://www.nrel.gov/docs/
fv16osti/65638.pdf.
Feldman, D., and Margolis, R. (2014). To own or lease solar: Understanding commercial retailers' decisions to use alter-
native financing models. NREL/TP-6A20-63216. Retrieved from http://www.nrel.gov/docs/fv15osti/63216.pdf.
Feldman, D., and Lowder, T. (2014). Banking on solar: An analysis of banking opportunities in the U.S. distributed pho-
tovoltaic market (p. 14). National Renewable Energy Laboratory. NREL/TP-6A20-62605. Retrieved from http://www.
nrel.gov/docs/fv15osti/62605.pdf.
Energy Savings Performance Contracting
U.S. Department of Energy. (2017). Energy savings performance contracting. Retrieved from https://energy.gov/eere/
slsc/energy-savings-performance-contracting.
PACE Financing
U.S. Department of Energy. (2014). Chapter 12: Commercial property-assessed clean energy (PACE) financing U.S.
Department of Energy Clean Energy Finance Guide. Retrieved from https://energy.gov/sites/prod/files/2014/06/f16/
ch12 commercial pace all.pdf
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U.S. Department of Energy. (2017). Property-assessed clean energy programs. Retrieved from https://enerav.gov/
eere/slsc/propertv-assessed-clean-enerav-programs.
Other Financing Options
National Renewable Energy Laboratory. (2016). Non-power purchase agreement (PPA) options for financing solar
deployment at universities. National Renewable Energy Laboratory. NREL/BR-6A20-67111. Retrieved from http://
www.nrel.aov/docs/fv17osti/67111.pdf
Cory, K., Coughlin, J., and Coggeshall. J. (2008), Solar photovoltaic financing: Deployment on public property by state
and local governments. NREL/TP-670-43115. Retrieved from http://www.nrel.gov/docs/fv08osti/43115.pdf.
Renewable Energy Claims
Solar Energy on Campus Past I -1V
https://resource-solutions.ora/wp-content/uploads/2016/08/Solar-Enerav-on-Campus-l.pdf
https://resource-solutions.ora/vvp-content/uploads/2016/09/Solar-Enerav-on-Campus-ll.pdf
https://resource-solutions.ora/wp-content/uploads/2016/12/Solar-Enerav-on-Campus-IILpdf
https://resource-solutions.ora/wp-content/uploads/2016/12/Solar-Enerav-on-Campus-IV.pdf
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Purchasing renewable energy as a
residential customer
Co-Authored by the U.S. DOE and U.S. EPA
To view the full Guide, visit https://www.epa.qov/greenpower/quide-purchasinq-qreen-power
I
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DOCUMENT MAP
Summary
Chapter 1.
Introduction
Chapter 2. Introducing Green Power
What is Green Power?
Introduction to Renewable Energy Certificates
Introduction to the Voluntary Market
Certification and Verification
Tracking Systems
Chapter 3. The Benefits and Costs of Green Power
The Benefits
The Costs
Public Relations Considerations
Chapter 4. Green Power Product Options
Purchase Options
Self-Generation Options
Green Power Supply Options Summary
Chapter 5. Using Organizational Goals to Guide Green Power Purchases
Setting Goals
Identifying Key Decision-Makers
Gathering Energy and Facility Data
Choosing Green Power Options
Chapter 6. Contracting for Green Power
Developing Criteria for Screening Green Power Suppliers and
Products
Collecting Product Information
Creating a Procurement Plan
Chapter 7. Planning a Self-Generation Renewable Project
Screening the Options
Obtaining Resources and Assistance
Creating a Project Plan
Installing and Operating a Renewable Generation Project
Chapter 8. Capturing the Benefits of the Purchase
The Environmental Benefits
Promoting the Organization's Purchase
Chapter 9. Conclusion
Chapter 10. Resources for Additional Information
Glossary
Appendix A. Green Power Considerations for Federal Agencies
Appendix B. Commercial Solar Financing Options
Appendix C. Purchasing renewable energy as a residential customer
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Residential consumers can drive demand for green power
Residential electricity consumers looking to reduce their environmental impacts and increase the demand for cleaner
sources of power can contribute to the growing green power industry. Depending on their location, there are several
ways that residential electricity consumers can purchase green power and drive demand-side change on the grid.
Renewable Energy Certificates (RECs) are used in the United States to track the delivery and consumption of renew-
able energy and substantiate all green power generation and use claims, something that would otherwise not be
possible on a shared distribution network or utility grid. Each REC represents the environmental attributes associated
with one megawatt-hour (MWh) of renewable energy generation, and can be sold together with or separately from
physical electricity. These energy attribute certificates include the location and type of generation (e.g. wind, solar,
geothermal, hydropower) and any emissions associated with generation source. In aggregate and over time, RECs
allow electricity consumers to choose renewable energy, which can drive change in the electricity market through the
increased development of renewable energy source to meet increasing REC demand.
All green power purchasing options must include RECs in order for consumers to claim the environmental attributes
and use of green power and to have an impact on transforming the market towards cleaner sources of energy. The
options below allow consumers to purchase green power from the electric grid without having to install renewable
generation equipment themselves, such as rooftop solar photovoltaic panels.
Purchasing Options for Residential Consumers
Purchasing green power through a retail electricity supplier
In some areas of the U.S., residential customers may be able to sign up for an optional green power service to procure
a bundled electricity and REC product from their utility or default service provider. These types of default utility
provider supply options are called "green pricing programs" and are often structured in a range of ways to include a
small premium of up to a few cents per kilowatt-hour above the utility's standard electricity service, be sold in blocks
of kilowatt-hours or as a percentage of the consumer's total electricity use at a fixed cost.
In other areas of the country, some residential customers have the option to choose an electricity provider who may
not always be their local distribution utility. Consumers that can competitively choose a retail supplier who is not their
local distribution utility do so through "green power marketing programs." Consumers will often pay a premium for
green power marketing products, though in some regions, competitive green power products may be price competi-
tive with default electricity options.
In either case, suppliers will often offer a range of green power products, allowing customers to choose levels of
renewable energy often up to 100% green power. In either case, all green power products involve renewable energy
certificates. Many consumers will seek out suppliers and products that are third-party certified (see below).
Receiving green power through a community choice aggregation
Some residential customers may be automatically enrolled in a green power option that has formed under a "commu-
nity choice aggregation." This occurs in a few states where policy or legislation have authorized community choice
aggregation, which allows a municipality or local jurisdiction to purchase green power on the behalf of the community
at-large. Community choice aggregations are generally structured as an "opt-out" option for residential customers,
meaning that residential consumers will receive green power unless they choose to not participate, which tends to be
uncommon. Due to the ability of community choice aggregations to drive scale, some customers may receive their
green power service at or below standard electricity rates. Residential consumers generally have little to no control
C-3
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over the green power selected under a community choice aggregation approach., including the ability of the consum-
er to choose the resource type or location.
Direct Purchase of Renewable Energy Certificates
All electricity consumers have the option to purchase renewable energy certificates as a stand-alone product that
are unbundled, or sold separately, from the physical electricity delivered to the consumer over the grid. Because
RECs can be unbundled from the underlying electricity at the point of generation, RECs can be sold and consumed
anywhere within the U.S. electricity market. REC instruments help solve the challenge of knowing the origin or source
of the electricity delivered over the grid, since physical electricity is undifferentiated (e.g., it all looks the same). REC
instruments are used to assign ownership to generation delivered to the grid, while offering consumers the flexibility
to specify among other things, exactly what type of resource and the location of the generator they prefer to have
serving their demand. Buying RECs separately does not affect the consumer's existing utility service relationship,
but does result in two separate billings from both their electricity and REC suppliers, unlike retail utility supply options
that involve bundled products. Consumers that buy RECs as a green power product can legally claim to be using
renewable electricity based on the attributes conveyed by the RECs and the generator that produced them to meet
demand. All green power supply options include RECs, so there is little difference if you purchase the REC bundled or
unbundled from the underlying electricity.
Figure C-1IL U.S. Residential Green Power Purchasing Options
Utility Green Power Programs
Competitive Electricity Suppliers
Notes
1. Unbundled Renewable Energy Certificates (RECs) are available nationally
2. Community Choice Aggregation (CCA) programs are available in CA, IL, MA, NJ, NY, OH, and Rl
3. Not all indicated options are available statewide
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Verification and Certification
Because voluntary sales and purchases of renewable energy are not subject to governmental oversight, it is important
that residential customers look for green power options that are certified by an independent third party. The non-
profit Center for Resource Solutions developed the Green-e standard and certification program to help consumers
identify high quality renewable energy products. Green-e verifies that all green power product sales are substantiated
with RECs and that ultimately each REC is only issued to one buyer or consumer. This also involves making sure that
RECs purchased by voluntary residential consumers are also not counted towards a mandate, which gives consumers
assurances that their purchase goes above and beyond what would otherwise have occurred due to regulation (also
known as regulatory surplus). Finally, Green-e requires that customers receive accurate and transparent disclosures
about what they are purchasing (including resource types and facility locations). Additionally, Green-e conducts
regular reviews of marketing and promotional materials for truth in advertising by certified suppliers. It is considered
a consumer best practice to seek out third party certified green power products from eligible suppliers. To learn
more about Green-e or find a certified product in your area, visit http://www.areen-e.org.
Green Power Purchasing Preferences
Residential customers may express preferences for certain green power options and products in terms of the follow-
ing:
¦ Resource Type - for example, generation from solar, wind, geothermal, or low-impact hydropower.
¦ Resource emissions rate - for example, a resource type that generates electricity at a low or zero emissions rate.
¦ Facility Location - for example, a specific project, generation from the same state, a certain region of the coun-
try, or national (no preference).
¦ Facility Age - for example, generation from facilities that were built in the last 5 to 10 years or that are new or
yet to be built.
¦ Facility Size - for example, generation from large, utility-scale facilities vs. small, distributed generation.
¦ Length of Commitment - for example, enrollment in a utility program to pay monthly with the option to opt out
at any time vs. entering into a 5-year purchase contract vs. making a one-time purchase of unbundled RECs.
¦ Other Considerations - for example, supporting generation from renewable facilities that may have broader sys-
tem effects such as job, security, and reliability benefits. Some buyers may choose to support local renewable
facilities or facilities in regions where the grid is considered to be more polluting.
¦ Cost - the cost of green power will vary based on all of the preferences listed above, as well as other factors.
Residential consumers may also find some of the information in the Guide to Purchasing Green Power useful when
selecting a supply option despite the Guide being focused on non-residential consumers.
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