Month: November 2018

Translating the NREL Voluntary Green Power Market Report

NREL-report-2018

With the release of NREL’s 2017 U.S. Voluntary Green Power Market report, and most of 2018 in the rear view mirror, we can now safely look back on a few of the prevailing trends in the market with confidence and clarity as we gear up for 2019. The year of 2017 was a bumper year for the U.S. voluntary green power market: MWh sales grew almost 28% from 2016 levels – the largest YoY growth since before 2010 1 – and total sales eclipsed the 100 million MWh mark for the first time on record. Here are a few key takeaways to help explain this marked growth and keep an eye on going forward.

Product Differentiation:

The proliferation of differentiated products within the voluntary green power market has helped fuel sales growth by creating a more robust market capable of supplying a wider range of customer segments. Indeed, 2017 saw customers buying a more diversified mix of green power (all backed by RECs) than ever before.2 PPAs and Utility Contracts (green tariffs and bilateral contracts) accounted for their highest combined share of sales on record (>20%), while Unbundled RECs, Competitive Suppliers and Utility Green Pricing programs continued to make up the majority of the market. Declining costs of renewables and enabling market conditions together helped catalyze this growth in product differentiation.

Corporate Target Setting:

The trend in corporate renewable energy and emissions reduction target setting is picking up pace and driving demand in the voluntary green power market. One out of five North American headquartered companies reporting to CDP now has a renewable energy target in place and that number is even higher for companies setting broader emissions reduction targets.3 Moreover, the number of renewable energy targets reported by North American headquartered companies reporting to CDP grew 35% in the 2017 reporting year. This trend is even more exaggerated at the global scale; since 2015, the number of science-based targets has grown at a compound annual growth rate of 62%, marking a concerted and strategic effort by the private sector to work towards a shared goal.4 We see this trend continuing to strengthen as more companies learn of the benefits of setting and meeting renewable energy targets.

Unbundled RECs:

Heading into 2018, the market for national Unbundled RECs experienced a sustained uptick in prices for the first time in almost five years. Many in the industry had wondered where the floor was for this market and early 2017 prices appeared to be the answer. Unbundled REC prices have since rebounded and we can now safely attribute this market adjustment to higher voluntary demand.

Unbundled REC sales in 2017 totaled over 51 million MWh, representing 14% growth over 2016 levels. Despite the significant growth in MWh sales via PPAs over the same period, demand for Unbundled RECs does not appear to be stunted. In fact, in addition to the 14% growth in sales, the number of buyers participating in the unbundled REC market grew 78% in 2017, by far the highest YoY growth on record.5 We believe the bulk of this growth in participation came from the residential and small commercial sectors; however, it may be that PPAs have played a part in the spike in Unbundled REC participation by generating awareness and attracting first time buyers to the green power market. Either way, we expect continued growth in the unbundled REC market, especially as many corporate renewable energy and emissions reduction targets have deadlines due up in 2020.6

A Paradox of Choice and the Risk of Customer Confusion:

As with many markets, more customer choice can bring the potential for more customer confusion. Several green power products on the market today run a higher risk of not being backed by RECs, thus not counting as green power. For instance, in 2017 less than 25% of sales through Community Solar offerings were backed by RECs.7 This is because RECs from Community Solar projects are often sold separately in state RPS’. Community Choice Aggregations and Competitive Supply contracts also run a higher risk of not being backed by RECs, or supplying RECs from non-local projects without an explicit disclaimer. Consumers can guard against this by ensuring that the purchase agreement in place between buyer and seller explicitly include and disclose the source of the RECs, or by seeking out certified products.

The diversification of the renewable energy product mix marks a decidedly positive evolution in voluntary green power markets: it allows different customer segments to satisfy specific needs by tailoring products to those needs. It also highlights the need for strategy and discernment on the part of buyers to ensure internal needs are met by the product and to avoid unintentional shifts away from green power.

The U.S. voluntary green power market continues to grow and mature. Catalyzed by falling costs, a more diverse set of available products and an increasing appetite from corporations needing to meet sustainability targets, we believe the market is primed for strong future growth and is well equipped to meet a growing set of customer needs, while making significant contributions to the decarbonization of the U.S. power grid.

(1) NREL data, going back to 2012,  (2) NREL data, going back to 2012 (3) 2017 CDP climate change questionnaire (4) Science Based Targets, Nov 2018 (5) NREL data, going back to 2012 (6) 2017 CDP climate change questionnaire (7) Figure 38 in NREL’s 2018 report

REC vs Offset? Which One and Why?

recs-vs-offsets

When making your decision to invest in renewable energy certificates, carbon offsets, or both,  there are some critical questions you’ll need to first answer. The graphic below provides a snapshot of things to consider when making your investment choices.

Want more information? Take a look at our RECs and Global Equivalents and our Carbon Offset Services Pages, or Contact us.

 

Destination Decarbonization: A Magical Place

cub conference oregon

I recently had the pleasure of attending the 8th Annual CUB Policy Conference in Portland and found myself in a room full of interesting and passionate people, immersed in discussion about deep decarbonization of our economy, with an emphasis on the utility industry.  

It was clear throughout the conference that we, as an industry, struggle to define what the utility of the future looks like and, in a world of competing (and complex) stakeholder priorities, a 100% renewable or carbon-free future seems like a magical place that’s still just slightly out of reach. As we dug deeper into the evolution of the industry and where we go from here, a few key themes emerged.

KEY THEMES

  1. Choice & Flexibility: The evolution of the grid demands flexibility – whether it’s tied to distributed energy resources (think solar, storage, EVs), large-scale renewable projects, or renewable natural gas. And customers want choice – our utility partners hear it every day and are working hard to deliver.
     
     
  2. Connectivity & Collaboration: One breakout session explored the relationship of broadband to the evolution of the utility’s ability to engage with customers and explore smart meter technology, making onsite solar and EVs more feasible in rural communities. The idea of collaboration, a la Puget Sound Energy’s “TOGETHER” campaign was popular as well.  This diverse mix of options – renewable generation, community engagement, regional alliances, and good policy – is clearly the way forward.
     
     
  3. Change of Pace: Whether it was from the voice of a progressive utility CEO or that of a nonprofit executive, a familiar mantra was  “we’re moving too slowly, and we need to take urgent action on climate change.” Conversely, I also heard “we need to be careful not to move too quickly, we need discussion, and we need to continue to focus on reliability and affordability.” While this isn’t an either/or argument (because successful solutions can and must be reliable, affordable and reduce emissions) it seemed to be a dividing line, and a topic of ongoing conversation.  

FINAL TAKEAWAYS

As the conference concluded, I found myself trying to answer my original question – how do we get to that magical, but slightly out of reach 100% renewable or carbon-free place? What actions do we need to take now and in the near future to get us there? How can we evolve quickly in a resource-constrained world?  What I heard at the beginning of the conference was inspiring – game-changing – and served as positive momentum toward a low-carbon economy, but as the day went on it became clear that transformation will continue to be difficult.

What I saw at the CUB Policy Conference were utilities on the precipice of an incredible opportunity to redefine the way we generate and consume energy – whether it’s through renewable choices, distributed generation and market-place concepts, or by creating programs that support low-income segments and uplift communities. As the newest member of the Utility Partnership team at 3Degrees, I came out of the conference feeling energized about what’s happening in the Northwest, about the we work that we do today, and about how our partnerships can evolve as we, collectively, take urgent action on climate change.

Reflections from Renewable Energy Markets 2018

REM 2018 renewable energy markets

Co-Authored by:  Amanda Mortlock, VP of Utility Partnerships, and Scott Eidson, VP of Environmental Markets

The annual Renewable Energy Markets conference was held recently in Houston, TX.  As usual, 3Degrees made a strong showing, with four of our team members participating on panels this year and several more in attendance.  REM always delivers an action-packed agenda filled with updates on industry trends and innovative programs from both the utility and corporate leaders in the room, as well as a fantastic opportunity to catch up with colleagues from across the country – and this year was no different.

REM covers a wide variety of interesting content in the two-day conference and it’s impossible to attend every session or provide a comprehensive recap. But our team divided and conquered throughout the event and then collected a few of our top takeaways. Here are the 3Degrees’ highlights:

The landscape in utility-offered voluntary renewable energy programs is shifting and igniting much discussion about how to grow and increase the relevance of these programs.

  • In states with high or increasing Renewable Portfolio Standards (RPS), utilities and regulators are wondering what a more renewable basic service means for voluntary renewable energy programs but customer preference is clear: customers want a voluntary means of driving demand for high-quality renewable energy.  Silicon Valley Power led an excellent roundtable talking about how they leveraged market research to make minor changes to their green power program as they moved their residential product to a 100% carbon free offering.
  • Utilities who are maximizing the value of their renewables programs are focused on both product design and successful marketing strategies.  Products are increasingly more complex in part to take into account the unique needs of each customer segment or even individual customers. Xcel Energy shared insights from their product design efforts, which led to one of the most successful and accessible green tariffs in the country, RenewableConnect.  Presenters at the Utility of the Future is Here session discussed trends in program marketing and customer acquisition ranging from digital channels and online marketplaces to new methods of leveraging call centers and strategies for small business outreach.  The bottom line: successful programs require good foundations and regular evolutions when it comes to both product design and marketing.

A few key emerging trends in corporate renewable energy procurement are helping to drive expansion across a range of sizes of customers.

  • At the top of the discussion list:  aggregation. The market is showing an increased appetite for aggregation, such as the deal that 3Degrees recently facilitated in the PJM energy market. There is a lot of enthusiasm for this model since it can help bring buyers with smaller energy loads into the mix; however, aggregation is still very new and there is a lot of room for refinement and simplification of the process.
  • In addition to aggregation, PPAs, VPPAs and RECs all very much play a continued role in corporate buyers’ renewable energy strategies. 

In the fight against climate change, Scope 1 emissions are increasingly in focus with opportunities for both electric & gas utilities, as well as corporates looking to address their fleet emissions.

  • With the success and growth of renewables leading the way, many utilities, companies, and consumers are now considering how they can have a meaningful impact on their scope 1 emissions — enter electric vehicles and renewable natural gas.   Both are compelling in terms of potential climate benefits and each offers an opportunity for electric or gas utilities to create new and impactful offerings for customers that align with the utility’s long-term interests as well.

What’s the role of policy and voluntary markets?

  • As policies for renewable energy increase and carbon policies are introduced, states need to think carefully about how to ensure these policies do not constrain private investments in renewable energy.
  • Companies continue to be driven by desires to support renewable energy faster than state policies are increasing.

While these are the discussion trends that stood out to our team the most this year, there were so many other interesting topics explored during the conference – it was hard to pick just a few!  And the hands-down winner of REM this year? Houston Mayor Sylvester Turner, talking about his Green Houston initiative, his involvement with the Climate Mayors, and the very personal way climate change has impacted his beloved city.  He was absolutely fantastic.

Thanks for a great time, Houston – and we’ll look forward to seeing all of our REM colleagues in San Diego next year!