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 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.