Buying Green Power in a Deregulated Market
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by Stephen Beam on 05/23/2012
As more U.S. states open up electricity markets to competition there are more choices than ever when it comes to buying clean renewable energy. Most energy users and brokers in deregulated markets understand that they can source green power bundled with their delivered power from a number of different energy suppliers. What many haven’t considered is the potential advantages to sourcing their renewable energy attributes separate from their delivered power contract.
The vast majority of our electricity continues to come from so-called “dirty” sources: coal, petroleum, natural gas, and nuclear generation. A mere 8% of the electric grid is made up from renewables. Granted, this is an improvement; five years ago, only 2% of the grid was from renewable sources. The growth in renewables is a direct result of more and more consumers (both voluntary and compliance) purchasing renewable energy credits, or RECs, the means by which we track and trade renewable energy in North America.
Renewable energy generation isn’t easy. It requires a tremendous investment to build capacity, whether in wind farms, solar arrays, or elsewhere. As a result, few companies choose to generate renewable energy on-site. Their other choice is to purchase RECs.
A renewable energy source, such as a wind farm, is credited with RECs when clean electricity is produced. These RECs represent the environmental attributes associated with the generation of that electricity. The owner of the REC then receives the right to claim the environmental benefits of that clean power. Whether making a voluntary purchase or purchasing clean energy for compliance reasons, RECs are the primary driver behind changes to the national grid.
Many companies purchase renewable energy credits from their utility or energy supplier of choice. These programs are typically offered by the energy provider for an additional cost and are “bundled” with the delivered electricity purchase. From an environmental and practical standpoint, there is no difference in purchasing RECs and delivered power bundled together or separately (other than paying one bill vs. two).
There are a number of benefits to unbundled REC purchases, including:
- Flexibility: Purchasing unbundled RECs gives you much greater choice in the types of RECs that you purchase. You can designate where those RECs are generated geographically and what type of source (e.g. wind or solar) they are generated from.
- Lower Cost: Bundled RECs typically cost more than five times the cost of unbundled RECs. Especially when making a considerable purchase, such as for a large company, this savings can be significant.
- Marketing & Communications: The unbundled purchase of RECs gives companies the freedom to share their commitments with others through a variety of communication means. Renewable Choice provides customized marketing support to our clients to assist them in communicating the value of their purchase to their stakeholders.
With these obvious advantages for the end-use customer, there has been a growing trend among energy brokers and consultants in deregulated markets to offer unbundled REC options to their clients alongside the bundled options. It is simply a matter of embracing the power of competition on the green attribute side of the market in addition to the delivered power side.
Our new webinar Green Power Options in Deregulated Energy Markets goes into greater detail about these benefits and more.
We invite you to view the webinar today!
Stephen Beam is Director of Business Development for Renewable Choice.