Next Generation Green Tariff Programs: Increasing Access to Renewable Energy in Regulated Markets
By John Izevbigie, Associate
Are you an energy buyer with electricity load in a regulated retail market and assume your options to buy renewables are limited? Good news – there may be more renewable energy supply options available to you than previously thought.
The landscape of renewable solutions available to a prospective buyer is partly dependent on the competitive nature (or lack thereof) of the electricity market where their desired RE solution is to be located. There has been a significant shift recently in renewable energy (RE) procurement in regulated markets, as market demand and innovation has created optionality for customers with sizable footprint in these regions to purchase RE (and associated Renewable Energy Certificates [RECs]) at a fixed cost. CFR is extensively engaging with utilities to both innovate and implement these solutions on behalf of clients.
Commercial and industrial customers recognize the relative lack of solutions in states with regulated retail markets and have lobbied utilities to develop in-region solutions that enable them to meet their sustainability goals in concentrated load areas. The result of their continued efforts are emerging Green Tariff programs that have widened the aperture of renewable procurement options in markets with no retail choice. These ‘next-generation’ programs have evolved from premium, in-region REC purchases to flexible, market-driven programs that enable customers to meet their supply transaction objectives.
Most of these ‘next-generation’ Green Tariff programs enable customers to purchase renewable energy (and RECs) directly from their utility at fixed rate in return for a fixed or floating bill credit (i.e., revenue stream typically tied to the utility’s avoided cost of incremental generation). The cost is intended to reflect the actual cost of generation and delivering renewable energy while minimizing cost burden on non-subscribing rate classes.
Green Tariff programs provide four key distinct benefits to customers relative to traditional power purchase agreement (PPA) solutions: 1) environmental; 2) reputational; 3) cost protection; and 4) contractual:
- Near-site Environmental Impact. Renewable assets are located in-region and reduce the use of carbon-intensive resources to generate electricity in the customer’s grid
- Reputational Value. Early adopter of renewable supply in regions with limited RE supply and/or catalyst for change in supply mix of utilities that have historically been slow to act
- Greater Cost Protection. Potentially reduces electricity bills while acting as a hedge to brown power costs, minimizing impact of fluctuating power prices
- Flexible Exit Provisions. Some programs provide exit rights with notice at no penalty, enabling customers to terminate agreement for internal strategic or program performance reasons
Green Tariff programs range in complexity and are unlikely to be amended after regulatory approval, so it is paramount to pre-emptively assess program viability – from economics to contracting implications – and to the extent possible, shape the utility’s thinking on key areas of impact for the customer. CFR is well positioned to assess regulatory filings, vet and source customer-supplied assets, develop economic views, identify project and programmatic risks, negotiate governing agreements to minimize exposure to identified risk areas, and ultimately liaise with utilities to ensure our client’s key objectives are fulfilled.
CFR sits hand-in-hand with our clients, providing support and guidance from initial utility engagement through contract negotiations and external communications. As the market evolves and these new products proliferate, a trusted advisor can help you maximize value and avoid potential pitfalls. If you are interested in learning more about how Green Tariff programs might help your organization meet its sustainability goals, please reach out: firstname.lastname@example.org
About the authors:
John Izevbigie is an Associate who supports analytics, solution development, and due diligence throughout client engagements. John has 5 years of experience in technical and management consulting services, supporting federal grid modernization efforts, managing municipal solar deployments, and developing industrial energy saving projects. He holds a BS in Civil and Environmental Engineering from University of Pittsburgh and a MEng in Clean Energy Engineering from the University of British Columbia, Canada.