Purchasing Green Power: Best Practices and Unique Higher Education Opportunities
by Blaine Collison, Program Director, Green Power Partnership, U.S. Environmental Protection Agency
(This article appears in the June, 2010 issue of The ACUPCC Implementer)
The fundamental economic, environmental and security importance of dramatically increasing the United States’ portion of renewable electricity generation portfolio cannot be overstated. American colleges and universities have compelling and unique abilities to help drive this series of changes through immediate and concrete action; this is Tangible Action 5 of the American College & University Presidents’ Climate Commitment.
This article will review some of the key issues in voluntary green power purchasing, touch on best practices, and briefly consider the enormous potential impact colleges and universities can have on the development of U.S. renewable energy.
Ninety-six colleges and universities are participating in the United States Environmental Protection Agency’s (EPA) Green Power Partnership (GPP), a voluntary program that offers technical support, best practices, and communications resources. The schools are purchasing almost 1.5 billion kWh of green electricity. All told, the GPP includes more than 1,200 organizations which are collectively buying almost 17 billion kWh of green power annually.
U.S. Voluntary Market Sales
GPP Partners’ green power usage comes in three forms: bundled utility products (environmental attributes are included with electric supply), renewable energy certificates (RECs), and on-site systems. Across the GPP, RECs comprise 70% of total green power usage with 20% from utility programs and 5% coming from on-site systems. Because RECs are such a significant percentage of the market, some special consideration will be provided below.
Environmental additionality is a critical issuefor the voluntary market. EPA’s Climate Leaders – the federal government’s top-level corporate greenhouse gas emissions reduction program – and the GPP use a performance-based additionality test. The requirements are detailed here: http://www.epa.gov/climateleaders/documents/greenpower_guidance.pdf
It is EPA’s view that a performance-based approach is more useful than a strict financial additionality test when considering utility-scale green power generation, a 30-40 year capital asset with a complex array of stakeholders and driving factors. Coca-Cola doesn’t build a new bottling plant based on a single purchase – the financial additionality of a discrete transaction – but Coke absolutely builds new capacity based on increased aggregate demand.
The connection between RECs and additionality has received a great deal of attention. Because a REC provides exclusive proof that one megawatt hour (MWh) of renewable energy has been generated, EPA regards RECs as an effective mechanism for organizations and institutions to impact the United States’ energy generation portfolio at a utility scale while providing a critical element of market flexibility that allows a U.S. generation portfolio approach rather than a utility-by-utility approach.
Increased demand – with supply escalating to meet that demand – is the lever by which EPA and its partners are driving construction of new renewable energy in the U.S. There are other market drivers as well. Currently, 29 states and the District of Columbia have renewable portfolio standards (RPS) which require varying percentages of renewable energy usage: according to the National Renewable Energy Laboratory, renewable demand from state RPS programs is expected to be 100 billion kWh in 2010.
Importantly, the voluntary market exists over and above any RPS or other compliance activity, giving the voluntary market an inherent degree of additionality. Green power sold into the voluntary market cannot also be used in the compliance market. So if the voluntary market buys all of the green power intended for a state’s RPS, new supply will have to be created to meet the mandates.
NREL estimates that at the end of 2008, kilowatt-hour sales of renewable energy in voluntary markets represented a generating capacity equivalent of about 7,300 MW, with about 6,300 MW of that from “new” renewable energy sources.
EPA’s best practice recommendations cover four key issues that ensure that purchasers are driving environmental performance: incremental green power supply; generation technology eligibility; generation vintage; and certification. This guidance is fully detailed here, but a quick review may be helpful: http://www.epa.gov/greenpower/documents/gpp_partnership_reqs.pdf.
EPA recognizes only voluntary green power purchases that increase Partners’ green power use above mandatory requirements, such as RPS; mandates placed on utilities; or load-serving entities or consent decrees. All green power purchases counted by the GPP must be incremental to what the Partner would have bought absent proactive green power procurement!
So a university served by a utility which gets 30% of its base-mix supply from hydroelectric facilities cannot claim this 30% hydropower supply as a reduction from its baseline or as a voluntary green power purchase because this supply is part of the utility’s default mix, i.e., there is no environmental additionality here.
EPA standards also address vintage – only renewable energy facilities built after January 1, 1997 are viewed as “new” – and environmental performance: hydroelectric facilities must meet Low Impact Hydropower Institute certification requirements.
To help organizations successfully manage these issues, EPA strongly recommends that partners purchase only certified green power products. Certification ensures that all vintage and resource requirements are met and prevents double-counting. The Green-e certification standard is widely available in the market.
RECs and On-site
Users of on-site systems that sell the RECs associated with the system may no longer claim that the electricity they are using is renewable. The electricity generated from an on-site system where the RECs have been sold does not qualify in meeting EPA standards.
Many schools – and private companies – are selling their on-site systems’ RECs into state compliance markets or the voluntary markets. The financial premiums available for solar RECs can be compelling. However, just as the purchase of RECs from a utility green power program or power retailer gives the purchaser all rights to make the associated environmental claim – and leaves the seller with no such rights – a school’s sale of the RECs associated with an on-campus solar system, for example, means that the school can no longer make a claim to be using solar power. A solar host that is selling the RECs and then making a claim of reducing their emissions is making a claim that is erroneous at best and fraudulent at worst.
Market risk is one of the factors that inhibits accelerated development of new utility-scale green power. Colleges and universities can serve as risk reducers given that they are long-term, stable customers with large loads. The University of Pennsylvania was the first school in the U.S. to execute a 10-year wind power agreement and Penn’s long-term commitment directly helped make possible the construction of a new 12-turbine, 20-MW Pennsylvania wind farm.
The GPP tracks its higher education partners via their athletic conferences:
What would the impact be of every signatory matching the purchasing percentage of its conference leader? How many wind farms could the Ivy League help build? Or the Big 12? Or the Big East? In fact, according to EPA analysis, if all 685 ACUPCC signatories used green power at the same average rate as GPP’s current college and university Partners, more than 11 trillion kWh of additional green power demand would be created; that’s the capacity of more than 3,600 new one MW wind turbines! Schools have the power to create new renewables.
There is a great deal of material here and we’ve moved through quickly. EPA and ACUPCC will be co-hosting a webinar on RECs and green power best practices on July 20 so that we can continue this conversation and continue to positively impact our shared planet. Look for further information soon.