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green@work : Magazine : Back Issues : Sept / Oct 2003 : Special Section

Special Section

Curing the Green Power Blues
Solar or Wind? Geothermal or hydro? Biogas or biomass? If the endless complexities of green power options have you feeling confused, here's some helpful advice to overcome this renewable energy malaise.

by Kevin Hagen

Special Section

- What's Green-e?
- Put the Power Where it's Needed

Many companies are surprised to discover that they have cost effective renewable energy options today. Clean energy is the fastest growing segment of the power industry, which is good news because electricity production is frequently an organization’s largest pollution source. From coal mines to power lines, electricity generation has a high environmental price tag at every step, including being our largest industrial source of air pollution, according to the U.S. Environmental Protection Agency (EPA). The good news is that leading companies have found innovative ways to use renewable energy to make sound business sense as well as significantly reduce their environmental footprint. Unfortunately the promise of green power can be overshadowed by the challenge of unfamiliar details, complex options, competing claims and difficult price comparisons leading to a head-scratching condition called “the Green Power Blues.”

To beat the blues, managers should step past the oversimplified price per kilowatt view and consider the full value equation. A good way to unwrap the sometimes confusing combination of benefits and trade-offs is to break them into three parts: the generation source, the purchasing mechanism and the package.

Generation Sources

Ecological impacts exist at each step of the electricity generation and delivery process such as mining for coal, transporting natural gas, burning the fuel or disposing of nuclear waste. Environmentally preferred generation options reduce or eliminate the negatives at one or more of these steps. “How green is green” depends on priorities.

Generation without combustion using renewable sources with no by-products and no emissions has been called “deep green.” This includes solar photovoltaic (PV) and wind power. Other renewables that skip the burning step include geothermal and hydro, but since they generally require significant physical infrastructure the impact varies based on their design, size and location. For example, “low impact hydro” refers to installations that have minimum effect on waterways or fish habitat. Other environmentally preferred sources such as biogas and biomass are derived from renewable fuel sources, such as agricultural waste or landfill gas, but score slightly lower green points because they create some combustion products. On the other hand, reducing a solid waste stream that would otherwise go into a landfill or capturing a greenhouse gas that would have been released are winning whole system solutions. Ultimately, any of these sources are better for the environment than traditional generation. By considering the source, the buyer can assign degrees of value to different solutions based on its green power goals.

Purchasing (Delivery) Mechanisms

Independent of the generation source, there are four ways commercial customers can buy green power. Each has its own benefits and each can fit a different set of circumstances. Frequently, a combination of tactics makes up the best overall strategy.

1. Utility and Third Party Power Contracts

Over 300 utilities and third party providers now offer green power contracts. The details vary greatly, but generally the supplier agrees to deliver “green” electricity, usually for a price premium. With different companies offering many different contracts, the devil is in the details. Some of these programs are not much more than blind contributions, while others offer significant value and concrete benefits.

The first question regards content. Is the power from wind, landfill gas or some mix of sources? Sometimes renewable energy is combined with non-renewable to create a blended product. How does the content match the buyer’s needs and expectations? The power “content label” and an independent certification are important. One well-known body is the Center for Resource Solutions, whose Green-e™ label has become widely recognized. Certification does not necessarily mean that the power is perfect. It simply means that it meets a minimum standard and that the supplier’s records are checked. It gives confidence that you got what you paid for, but it does not replace doing the homework.

Beyond the green, direct power contracts can offer significant additional value. For example, some contracts exempt green power customers from fuel price surcharges, added emissions costs or special fossil fuel taxes. Within months of signing contracts in 2002, some Texas customers found their fixed price “premium” wind power less expensive than standard electricity due to a spike in natural gas markets. This “hedge” effect is one example of additional value.

2. Tradable Renewable Certificates (TRC): “Green Tags”

Tradable certificates are perhaps the most innovative new product in the utility industry, creating a wide market for green power by uniquely connecting renewable energy producers and buyers. Anyone can buy green tags and claim the environmental benefits of off-setting their electricity usage without involving their utility, making green tags the most flexible, quick-to-implement renewable energy option available.

A TRC is created when suppliers generate green energy (from a wind turbine or other clean source) and sell it to the local power grid at prevailing energy rates. The supply of clean power to the pool reduces the demand for “brown” power, thereby creating an environmental benefit. However, the supplier probably sold the clean power at less than cost, because the prevailing rate was set by the lowest-priced traditional generator. In order to encourage suppliers to produce clean power, the green tag customer buys the environmental benefit as a certificate. This extra revenue makes the clean energy financially viable. The certificate provides an audit trail for the power and allows the buyer to claim the environmental benefits. A clear content label and third party certification differentiate quality suppliers.

3. On-site Generation

Producing green power on-site delivers significant environmental benefits and can result in the most compelling commercial advantages. Benefits including improved power reliability, quality and future cost control are launching a revolution in the power industry called “Distributed Generation.”

There is already a wide selection of existing and emerging products and technologies. Solar photovoltaic (PV) systems can be added to a roof or built into a structure as beautiful, functional design features. Some estimates put commercial PV growth at over 50 percent per year as a combination of price reductions, system availability, on-site benefits and incentive programs create financially compelling solutions.

An excellent on-site solution is to generate power by converting waste streams into solid or gaseous fuel such as methane rich biogas produced from animal waste. This approach has combustion emissions and by-products but can be environmentally preferred due to the renewable source and the other whole system benefits. Co-generation is a technique for capturing waste heat from electricity production for space heating or hot water and can drive system efficiencies as high as 90 percent. When such a combined heat and power installation uses environmentally preferred fuels the result can have significant financial as well as environmental benefits. A new generation of small-scale, commercially available micro-turbines and soon fuel cells using this principle may soon change the way we produce and distribute electricity.

4. Off-site Options
There are cases where owning the power generation assets is the right business decision, but the user isn’t located where the power source is. An “off-site” solution can be a creative answer. For example, a leading carpet manufacturer worked with its local municipality to construct a landfill gas generation plant at the community landfill. The company received 100 percent of its electricity needs at a lower long-term cost plus captured a double environmental benefit by off-setting its fossil fuel use plus capturing leaking landfill gases. Moreover, the landfill received additional revenue by selling excess power. Off-site solutions can be a creative way to use the company’s capital investment to achieve multiple financial, environmental and social benefits.

Other Features: The “Package”

After the generation source and the purchasing strategy, consider the package. Just as with any product, the green electricity supplier has a value proposition to offer. Buyers should evaluate the product and the supplier with the same criteria as any other vendor decision; for instance, consider the service and support. What is the brand value? Does the supplier practice what it preaches? Is local sourcing important to you? What additional features or perks is it willing to include? While your utility company may offer green power, make sure that the total value of its offering is competitive with other suppliers, green tags or owning your own generation source.

There are real financial and environmental rewards for making a choice for green power. Dividing competing options into generation source, delivery mechanism and the package can simplify the process and help make a selection that meets your value goals. The impressive results achieved by so many green power users are clear evidence that a little homework can beat the Green Power Blues.

Kevin Hagen is principal of Shuksan Energy Consulting (www.shuk, specializing in green power solutions for sustainable business. He has been an innovator in the renewable energy industry both as a buyer and as a supplier, holding senior positions at leading manufacturing firms such as Trace Engineering and Xantrex Technology and serving on the board of the Solar Energy Industry Association (SEIA).

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