Is Your State Missing Out on Corporate Renewable Energy Purchasing? Here’s How It Can Catch Up

Posted by Caitlin Marquis on May 28, 2019 12:30:00 PM

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Corporate renewable energy transactions have accelerated rapidly since companies first recognized and seized upon the advantages of low-cost, abundant resources like solar and wind, reaching a record 6.5 GW contracted in 2018. But the 15 GW of commercial and industrial (C&I) customer deals signed since 2014 aren’t spread evenly across the country. In fact, 16 states have no C&I renewable energy projects operational or in development, and another 10 states have fewer than 50 MW (or less than 1% of the total). While resource potential plays a role, it is far from the whole story; policies that facilitate corporate procurement to drive renewable energy development are also key. Which means that the 26 states that currently account for less than 10% of the market can play catch-up. Our recent guide from the Advanced Energy Buyers Group shows how.

The report, Renewable Energy Offerings that Work for Companies: A Practical Guide to Meeting Corporate Renewable Energy Demand in Vertically Integrated Markets, outlines steps for states to unlock corporate renewable energy purchasing options and transform themselves from laggards to leaders in this growing market, which is important when it comes to location decisions made by companies with corporate sustainability commitments. The report focuses on both utility offerings and competitive market solutions; while it does not argue for any particular solution, it points out that, while every state’s electricity market is unique, there are a lot of best practices and lessons learned that translate across state lines.

Designing utility renewable energy offerings

Often called “renewable energy tariffs” or “green tariffs,” utility renewable energy offerings targeted at C&I customers come in many shapes and sizes, but the general idea is the same: these programs offer large customers an opportunity to purchase bundled renewable energy (electricity plus renewable energy certificates, or RECs) through their utility. Despite variation in program design, there are features that are important to customers, and relevant for any utility in any state.

States or utilities considering development of utility programs should keep in mind the following:

  1. Rate Structure: Models for structuring a renewable energy tariff range from a rider that captures the cost (or savings) from renewable energy (as in Consumers Energy’s Large Customer Renewable Energy Program in Michigan) to a renewable energy-specific rate built from the ground up (as in Public Service New Mexico’s Schedule No. 47). But all such rate structures should avoid imposing permanent premiums for renewable energy, regardless of what happens in the market, whether that means passing the fluctuating costs or savings benefits from renewable energy to the customer or giving the customer a fixed rate regardless of fluctuations. ;
  2. Program Cap & Expansion: Start with an initial offering large enough to enable C&I customers to make meaningful progress toward their renewable energy goals, while also including clear mechanisms for expansion to meet growing demand (examples include Rocky Mountain Power’s Schedule 34 in Utah and Ameren’s Renewable Choice Program in Missouri);
  3. Customer eligibility: Ensure that all C&I customers are eligible to participate in at least one renewable energy program that aligns with their needs (one example is Portland General Electric’s Green Future Program in Oregon);
  4. Resource Selection: Rely on competitive procurement for resources to meet program needs, and give customers the option to source projects directly (Dominion Energy’s Schedule RG in Virginia is an example);
  5. Term Options: Give customers options of different lengths, including a mid-range version of 10-15 years (such as Georgia Power’s C&I Renewable Energy Development Initiative program);
  6. REC Treatment: Transfer RECs to customers, or retire them on customers’ behalf (Puget Sound Energy’s Green Direct program in Washington allows both);
  7. Administrative Fees: Adopt reasonable and cost-based administrative fees (like those charged under Xcel Energy’s Renewable*Connect program in Colorado);
  8. Termination: Include clear, fair, and flexible termination provisions that allow for transfer to a different account (Ameren’s Renewable Choice Program in Missouri is one example).    

Designing competitive direct access or retail choice offerings

Direct access programs and full retail choice markets allow customers to meet their renewable energy needs through flexible, tailored solutions suited to their individual preferences. States that wish to pursue these options also have many examples to draw from.

States that currently allow or are considering full retail choice should pay attention to the following aspects of renewable energy purchasing:

  1. Customer protection: Ensure customers, especially residential customers, are protected from unfair marketing practices and other potential harm; and
  2. Customer control: Let C&I customers to directly contract with electric service providers to meet their needs, rather than allowing only bulk purchases on behalf of blocks of customers.

States or utilities that do not offer full retail choice, but would consider a direct access (DA) program for C&I customers should also consider the following:

  1. Size: Allow all interested C&I customers to participate, regardless of size, to avoid creating an uneven playing field for businesses (examples can be found in Oregon and Virginia);
  2. Customer eligibility: Allow all interested nonresidential customers to participate, rather than just certain types of customer (examples include Michigan and California);
  3. Transition costs: Fairly assess any stranded generation or supply costs resulting from DA customers no longer being served by the utility and assign costs equitably to the departing DA customer (examples include the five-year “Consumer Opt-Out Charge” in Oregon);
  4. Duration: Avoid time-limited programs to ensure customers are able to pursue long-term PPAs of 10 to 30 years (as is the case in California, Virginia, and Michigan);
  5. Renewable energy requirements: Where restrictions around resource type are contemplated, maintain full customer flexibility to pursue renewable or carbon-free resources through technologies and contracts that meet specific customer needs (Virginia’s restrictive direct access law, which disallows direct contracting by customers if the utility offers a 100% renewable energy option, whether or not that option meets particular customers’ needs, is the kind of provision that should be avoided).

In sum, no matter which path a state picks, there is no reason to start from scratch. With dozens of utility programs in place across the country, direct access programs in a handful of states, and full retail choice in 13 states plus Washington, D.C., there is no shortage of information, examples, and lessons learned the hard way—all of which gives laggard states a jump start on catching up.

Download Guide to Renewable Energy Offerings

Topics: State Policy, Advanced Energy Buyers Group