Utility Green Tariffs: A New Way for Fortune 500 Companies to Buy Clean Energy
June 5, 2018
Utilities know their larger corporate customers want clean energy to fulfill their sustainability goals and help their bottom line. Rather than contracting directly with developers, many corporations are finding a new way forward through so-called “Green Tariffs” designed by the utilities themselves.
Hannah Hunt, Contributor
Good clean energy news blew in from Michigan in March: General Motors and Switch signed up as the first customers to buy wind energy through Consumers Energy’s new green tariff. The new Cross Winds Energy Park II in Tuscola County will supply enough wind energy to match demand at both General Motor’s Flint Metal Center and Flint Engine Operations, as well as at Switch’s 1.8 million-square-foot data center campus in Grand Rapids.
Dane Parker, General Motors Vice President of Sustainable Workplaces, commented that the green tariff will help General Motors “meet its commitment to source 100 percent renewable energy at all global operations by 2050, while reducing emissions in our Michigan communities.”
A small but growing number of utilities, including Consumers Energy, are beginning to offer green tariffs, utility-created programs that allow eligible customers to buy bundled energy and renewable energy credits (REC) from specific renewable energy projects. Green tariff designs can vary — from subscriber programs, sleeved power purchase agreements (PPAs), to market-based rates — but the end goal is the same: create opportunity for large customers to buy renewable energy, especially in regulated markets where it can be difficult to directly procure renewable energy.
Well-designed green tariffs are a welcome opportunity for corporate customers who are setting ambitious targets to buy renewable energy. General Motors, in particular, shared in its blueprint “Accelerating and Scaling Corporate Renewable Energy” that it views green tariffs “as a significant part” of its renewable energy procurement strategy moving forward.
Procuring from Remote Wind Farms vs Buying Local
A recent trend has been that corporate customers have signed physical or virtual PPAs with wind projects outside of their local utility. In February, Nike signed a virtual PPA with Avangrid Renewables to purchase 86-MW of the output of the Baffin Wind Farm in South Texas and AT&T made two agreements with subsidiaries of NextEra Energy Resources to buy 520 MW of wind energy from wind farms in Texas and Oklahoma. (See Table, below)
However, some corporates prefer to procure wind energy in grids where they have operations. That was that case with the U.S. arm of Nestlé, which signed a 15-year PPA with EDP Renewables to meet approximately 80 percent of the electricity load for five Nestlé facilities in southeastern Pennsylvania through energy generated at the Meadow Lake VI wind farm.
“Because the wind farm and the recipient facilities are located on the same regional grid, the power purchase agreement provides traceability from the Pennsylvania facilities back to the wind farm,” the company pointed out in its press release.
The Corporate Renewable Energy Buyers’ Principles, a set of guidelines developed by large energy buyers to spur progress on renewable energy and to add their perspective to the future of the U.S. energy and electricity system also encourages local procurement and utility partnerships. One of the six principles states that “procuring renewable energy in partnership with local utilities may be a more efficient and cost-effective option.”
Another principle states that corporations need access to new renewable power generation.
“Where possible, we would like to procure renewable energy from projects near our operations and/or on the regional energy grids that supply our facilities so our efforts benefit local economies and communities as well as enhance the resilience and security of the local grid.”
The bottom line is that renewable energy is so attractive to Fortune 500 companies because it’s now the cheapest source of new electric generating capacity in many parts of the country, and its fixed cost helps businesses plan for the long term. After all, the fuel cost of the wind and sun never changes.
Utility Green Tariff Programs on the Rise
Consumers Energy’s Large Customer Renewable Energy tariff allows large non-residential customers, or those with at least 1 MW of annual maximum demand, to buy wind power directly from Consumers Energy-owned wind projects. Consumers’ tariff is currently a pilot program, with General Motors and Switch fully subscribing the level of renewable energy authorized for the pilot.
As of last September, 17 green tariffs in 13 states have been proposed or approved. The GE, Switch, Consumers Energy announcement was the fourth where a green tariff translated to wind energy procurement. The first came in 2016, when Facebook announced wind and solar would power 100 percent of the Los Lunas data center in New Mexico, thanks to Public Service Company of New Mexico’s Green Energy Rider.
Last year, Facebook worked with Omaha Public Power District (OPPD) to design Rate261M, a green tariff that ultimately allowed Facebook to sign a 200-MW PPA with the Rattlesnake Creek wind farm, and Puget Sound Energy’s Green Direct program will be supplied by the planned Skookumchuck wind farm in Washington.
Hannah Hunt is the deputy director, electricity policy and demand with the American Wind Energy Association (AWEA).