Author: Amanda Mortlock

Amanda Mortlock is the vice president of utility partnerships at 3Degrees, where she helps electric and gas utilities design and implement leading voluntary renewable energy programs.

Best Practices for Voluntary RNG Programs

cows-biodigester-rng

What Gas Utilities Can Learn From Electric Utility Green Power Programs

As pressure to decarbonize our energy supply mounts, many gas utilities are considering how to integrate and scale renewable natural gas, and are considering a voluntary renewable natural gas (RNG) program for their residential and commercial customers.

While voluntary RNG programs are a relatively new development for gas utilities, these programs have many similarities to the voluntary green power programs that have been offered by electric utilities for decades. As such, there is much that gas utilities can learn from their electric utility counterparts in terms of best practices and risk mitigation as they consider whether and how to design and launch successful RNG programs.

Top ten key factors in creating a successful voluntary program

Thanks to the annual NREL Top Ten List, it’s easy to get a sense for which electric utility programs have been the most successful. But looking at those lists doesn’t tell you why those programs have achieved such success.

Here are ten specific lessons that will help gas utilities build a successful voluntary program:

1. Understand your customers

What customers value in a renewable product may surprise you, and in many cases it will vary by segment. Conduct market research to both validate demand and help you understand how different customers make price and value decisions. The most successful electric utilities often have different programs for commercial and residential customers.

2. Work with stakeholders

Environmental and rate-payer advocates can be staunch supporters or opponents of a program. Work with them early in your program design process to understand what they value, and help them understand trade-offs. The nationally renowned electric utility programs in Oregon were launched with the most robust stakeholder process in the country.

3. Certify

Voluntary certifications such as Green-e® Energy will soon be available for gas programs. Embrace the certification when it comes. Whether customers know about the certification or not, new markets need it to build trust.

4. Gain internal alignment

These programs will eventually require support from, or integration with, every department across the utility; anticipate this and make sure you have the cross-functional support you need.

5. Create value

Voluntary renewable energy programs create value for utilities in different ways, from customer satisfaction to, in some cases, direct profit. Internal stakeholders need to understand what value the program delivers initially, how to measure it, and whether it has the potential to deliver even more value over time. Electric utilities that extract value from their green power programs are more likely to invest in them; the same will be true for gas utilities.

6. Go local

Customers and stakeholders value local supply. While it may not be possible to start with 100% local supply, electric utilities have pioneered approaches that include program funding for small scale projects or a blend of local with lower-cost regional supply.

7. Include budget for start-up costs

Renewable programs tend to be funded by participants, which means start-up costs for items such as new billing system programming or the first year’s marketing and administration need an explicit funding strategy. Successful programs have found ways to ensure a good start through strategies like limited ratepayer funding, a shareholder investment, or accepting a long payback period.

8. Know your billing system

Updating your billing system to allow for an additional product can be very expensive. Be sure you understand what the billing system can accommodate at varying levels of investment early on in the process.

9. Engage customers

The utilities with the most successful programs give their customers many opportunities to learn about the programs and participate, and often lead with the green power program in their customer interactions. All of the top programs invest in direct sales and marketing channels, as well as awareness-focused marketing efforts.

10. Consider all procurement options

When designing RNG products, consider all options for procuring renewable natural gas. Similar to renewable electricity, it is most important that you obtain and retire the environmental attributes associated with RNG (“RNG attributes”). RNG attributes represent all of the environmental and other generation benefits that differentiate a unit of RNG from a unit of conventional natural gas. Procuring unbundled RNG attributes can offer the flexibility needed to get started and validate demand, while you work through the hurdles of physical supply.

 

Though there are some key differences between green power and RNG programs, such as the higher cost and lower availability of supply, as well as less customer awareness, adhering to these best practice principles will better equip gas utilities to successfully navigate these differences, lower their risk, and increase the likelihood of program success.

Many gas and electric utilities are already demonstrating real leadership in decarbonizing our energy supply. Offering voluntary RNG programs is one potentially powerful path forward that I’m confident will lead to benefits for customers, utilities, and the climate.

Maximizing the Value of Your Green Power Programs

Enrollment form green power program

Electric utilities face significant pressures as well as many exciting opportunities — decarbonization, transportation electrification, continuing digital transformation, changing customer preferences, increasing disintermediation (just to name a few). Every day, utility teams work hard to solve these challenges, as well as capitalize on the opportunities that they present. But many utilities fail to realize there is an underutilized tool in their toolbox that could be very effective in these efforts: voluntary green power programs.

What’s the true value of voluntary green power programs?

Having worked closely with utilities for over a decade, I can say with confidence that fully optimized green power programs provide a huge opportunity for utilities. When designed and implemented well, these programs offer numerous benefits.

Decarbonization

Green power programs enable utilities to partner with their customers to achieve utility or regional carbon reduction targets.

New revenue potential

These programs also provide the opportunity to achieve incremental revenue, whether from assets supported by the voluntary market or a regulatory-approved mark-up. While challenging to make happen, this is feasible and some utilities are already realizing these revenue gains.

New load

Green tariffs have become absolutely essential in attracting most significant new corporate load.

Customer satisfaction

As documented by J.D. Power research, when customers participate in a green power program – or are even just aware of it – customer satisfaction scores jump.

New sales opportunities

When most utilities envision the utility-of-the-future, they picture selling more than just electrons to customers. Green power programs allow utilities to start to build that muscle, and can even fund entire sales channels that can eventually be leveraged to support the sales of additional products.

Digital transformation

Green power programs provide the perfect opportunity for utilities to embrace a comprehensive digital sales and marketing strategy (most are just scratching the surface right now). With a low barrier to entry, highly targeted reach, and a great storytelling platform, a full digital strategy can help utilities explore new ground when it comes to connecting with customers where they are.

While it may not be possible to realize every one of these benefits, a well-designed suite of programs should be able to deliver on most of them collectively. Even a legacy program can be optimized to deliver increasing value.

Moving from the “Why?” to the “How?”

Frequently, utilities create individual green power programs that are reactive — designed to address a particular threat or to serve a specific client — which can make it difficult to scale the programs to reach their full potential. And without scale, most of the benefits listed above simply aren’t meaningful or even possible. 

Instead, utilities need to start with a proactive program design where an entire suite of green power programs is designed as part of a clear, intentional piece of the organization’s broader strategy. Critical factors in program design include:

Customer research

Green power programs are only successful if customers enroll. It’s essential to invest time in researching how your customers across different segments feel about critical elements of the program.

Renewables strategy and pricing

Based on this research, you’ll have a better sense of how your program needs to balance cost with impact. Customers want to have an impact with their purchase, but there is still a ceiling on the premium customers are willing to pay.

Stakeholder engagement

Working with environmental and rate-payer advocates early on in the program design process will help you understand what they value and, later, make it easier to secure their support. And engaging internal stakeholders is also critical to program success — if they understand the value the program delivers, they will be more likely to champion it throughout the organization.

Financial and strategic value

Utilities need to be intentional about the value they want a suite of green power programs to deliver. For example, if program profit is critical, this needs to be built into the program rates at the beginning.

Marketing investment

Green power programs are unlike other utility programs that often have fixed, regulatory mandated marketing budgets. In this case, the budget grows as the program grows — which is appropriate for a premium, subscription-based product. One of the most common mistakes utilities make is under-funding their marketing efforts in early years. Without investment, they can’t scale the program and ultimately deliver any of the benefits listed above in a meaningful way.

 

Green power programs sit at the intersection of decarbonization and customer satisfaction and thus provide a unique opportunity to utilities. By maximizing the value of these programs, utilities, their customers, and the climate all win.

Green power programs can stagnate. Here’s how one utility kept theirs relevant.

Construction working building new wind turbine at Huntington Wind Project

Subscribers to utility green power programs pay a premium on their electricity bill for renewable energy certificates (RECs) in order to support renewable energy projects and reduce their personal carbon footprint. Since the late nineties, utilities have launched REC based green power programs in response to customer demand or regulatory mandate. There are now over 850 of these programs, offered to over 25 million customers across the nation and they continue to be a popular way to make a positive environmental impact.

However, while the renewable energy market has changed dramatically in recent decades, many green power programs haven’t. With lower REC prices, the rapid growth of rooftop solar, and dramatic expansion of community solar programs, utilities are now considering how to evolve their existing programs in order to keep them relevant to customers and to the wider renewable energy market.

Pacific Power recently confronted this challenge with their Blue Sky program. Pacific Power’s Blue Sky Program Manager, Berit Kling, reports that “Blue Sky was first launched in 1999 and is still consistently ranked as one of the top REC-based programs in the country with over 110,000 residential and business customers currently participating in Blue Sky across the 6 states.” This level of customer support creates opportunities for impactful supply strategies. Oregon was a particular target for new procurement approaches as more than half of the Blue Sky customers live there.

“We know that our customers care about the environment and want to see more renewable energy in Oregon,” says Scott Bolton, VP of External Affairs and Customer Solutions at Pacific Power. “We worked closely with 3Degrees to develop a REC procurement strategy that has, in a single year, driven the development of 51 megawatts (MWs) of additional renewable capacity in the state of Oregon.”

The strategy was straight-forward. Scott Eidson, VP of Environmental Markets at 3Degrees reports, “We knew Pacific Power valued making a difference in Oregon so we looked for new projects that needed long-term REC purchase commitments in order to make the project viable.” In this scenario, a contract for RECs is similar in structure to a Power Purchase Agreement (PPA) in that it offers a guaranteed payment per megawatt-hour produced over a certain period of time. Today, most green power programs do not purchase RECs at a price or term that can really drive the development of new projects. This example suggests that perhaps they should be.

At a high-level, the approach was to:

  • Identify projects that had not yet been financed.
  • Work with developers to determine the REC price needed to secure financing or get the project built.
  • Sign long-term REC contracts to guarantee this income stream for multiple year periods.

Bolton reports that, “The specific renewable energy projects that have been developed due to this innovative approach are the Huntington Wind project, a 50 MW project in Eastern Oregon, and Blue Basin Power, a 1 MW solar project near Klamath Falls in southern Oregon.” Blue Basin is being developed in two phases; the 1 MW installation currently in operation, and a second 2.5 MW phase planned for 2017. Bill Eddie, CEO of OneEnergy Renewables, the project developer, describes how finding reliable funding for the projects was key in getting both phases of the project off the ground. “The first phase of the project was critical to break the ice as this is one of the first projects that has been built in the area…by partnering with Blue Sky, we were able to get enough revenue into the project to support financing.”

Not only does this approach directly impact the regional renewable energy landscape, but it creates a more tangible connection between program participants and the facilities they support—something that is often lacking in the traditional green pricing model. “Huntington will be the largest wind project to come on-line in Oregon since 2012. It’s great to be able to point to a large, high profile project like this and say, ‘Blue Sky customers made this happen.’ They can and should feel good about making a real difference in renewable energy development in Oregon,” says Bolton. Pacific Power recently released a video highlighting the difference customers are making.

Pacific Power has been publicly recognized for this procurement strategy through awards from the Northwest Environmental Business Council and the Center for Resource Solutions (CRS). Jennifer Martin, Executive Director of CRS, commented that “[Pacific Power’s] innovative Blue Sky program…helps drive new development of clean energy generation and can serve as a model for new projects throughout the country.”

While the Blue Sky program is the second largest renewable energy program in the country, this model is replicable for green power programs of any size. Pacific Power isn’t alone in wanting to offer innovative solutions for customers though they are the first to pursue this strategy at such scale and success. Utilities with existing green power programs would be wise to consider how to leverage these programs to deliver new value to participants, the renewable energy market, and ultimately to the utility in the form of increased customer satisfaction and engagement.

This article was originally posted on LinkedIn.