Tens of millions of retail electrical energy prospects in the USA purchase voluntary inexperienced energy, which means renewable vitality past what load-serving entities equivalent to utilities in any other case present. These inexperienced energy gross sales have surged previously decade: based on information collected and printed yearly by the Nationwide Renewable Power Laboratory (NREL), doubling from 2010 to 2014 and doubling once more from 2014 to 2019.
NREL estimates voluntary inexperienced energy gross sales reached 164 million megawatt-hours (MWh) in 2019, accounting for round 32 p.c of all non-hydropower renewable electrical energy gross sales, or simply over four p.c of all retail electrical energy gross sales in the USA. Whereas a number of components clarify this wholesome development, an vital one is the widening methods for purchasers to take part, as this desk exhibits:
Many retail electrical energy prospects—particularly giant industrial and industrial prospects—have procured unbundled renewable vitality certificates (RECs) to meet clear vitality targets, with 69 million MWh of unbundled RECs bought in 2019, based on NREL information. Massive prospects have additionally developed a wide range of energy buy settlement (PPA) buildings which have turn into the quickest rising supply of voluntary inexperienced energy demand, based on NREL information, reaching about 42 million MWh of gross sales final yr.
The emergence of group selection aggregations has additionally been pivotal. Due largely to the proliferation of CCAs in California, buyer demand for voluntary inexperienced energy on this class has grown from practically zero in 2010 to 13 million MWh in 2019.
NREL’s information present that voluntary inexperienced energy gross sales are growing in all six of the ways in which prospects purchase inexperienced energy.
The previous classes have acquired appreciable consideration from the press and academia. However one other key participant has maintained a comparatively silent however vital position within the regular development of voluntary inexperienced energy markets: utilities.
Utility inexperienced energy applications, by the numbers
NREL estimates about 14 p.c of shoppers purchase voluntary inexperienced energy by way of their utility, with utility inexperienced pricing and contracts accounting for about 9 p.c of complete gross sales within the class. And utility inexperienced energy gross sales have constantly elevated during the last decade, practically tripling from 2010 to 2019.
This development displays, partially, ongoing utility improvements to increase voluntary inexperienced energy entry to extra prospects. Utilities have developed a wide range of merchandise with completely different useful resource, value, and contractual traits, permitting extra prospects to purchase renewable vitality in ways in which deal with their particular wants.
We imagine utility inexperienced energy applications are worthy of extra consideration for 2 causes. First, utilities stay the first and, in lots of instances, sole load-serving entity for many U.S. prospects. Consequently, utility applications are sometimes the best, quickest, and doubtlessly most cost-effective manner for many to entry renewable vitality. But many shoppers stay unaware of those choices.
Second, the NREL information counsel that participation in these applications might be larger. The highest 10 utility applications have enrolled greater than 5 p.c of their gross sales, in comparison with typical participation charges of round 1 p.c in most different applications. These outcomes counsel utility inexperienced energy applications may develop renewable vitality entry to extra prospects, probably by way of sharing of greatest practices and product improvements throughout utilities.
To spark this dialogue, we summarize the first ways in which utilities are offering inexperienced energy to their prospects, and we offer some market estimates from the latest publication of the NREL voluntary inexperienced energy information.
Utility Inexperienced Pricing
Utility inexperienced pricing applications are the bread and butter of utility voluntary inexperienced energy. They permit retail electrical energy prospects to pay premiums for renewable vitality above what the utility would in any other case present, and use these premiums to manage this system and retire RECs on behalf of individuals. Participation has grown steadily for 20 years, from simply over 100,000 prospects in 2000 to about 570,000 in 2010, and simply over 1 million 2019.
In contrast to the expansion of different inexperienced energy merchandise equivalent to PPAs, utility inexperienced pricing program development can’t be attributed to falling costs. NREL information suggests premiums have remained regular, and even elevated as applications supply dearer electrical energy from native photo voltaic vegetation. College of Michigan analysis suggests participation development is quite attributable to rising buyer curiosity and willingness to pay for renewable vitality.
A few giant applications constantly lead developments in utility inexperienced pricing, NREL information present. Massive applications from Portland Normal Electrical, Xcel Power, and PacifiCorp have discovered methods to maintain prospects engaged and improve gross sales. One in 4 Portland Normal Electrical prospects was enrolled in its flagship Inexperienced Supply program as of 2019, offering different utilities a possible mannequin to observe by way of program advertising and marketing greatest practices.
Neighborhood renewables—notably group photo voltaic—have proliferated over the previous 5 years, permitting prospects to “subscribe” to a portion of a photo voltaic or wind venture and obtain invoice credit for its output as a return on their funding.
Whereas a lot of this market concerned third-party venture builders, a rising variety of utilities are actually providing group renewables that retire RECs on behalf of subscribers. Bundling RECs ensures prospects are shopping for each the facility and the underlying clear vitality attributes of renewable vitality initiatives—a key differentiation from most third-party group renewables which don’t entitle subscribers to RECs.
Early movers in utility-led group renewables embody the Sacramento Municipal Utility District’s SolarShares program, Rocky Mountain Energy’s Subscriber Photo voltaic program, and Xcel Power’s Renewable*Join program. NREL information present utility group renewables gross sales reached greater than 400,000 MWh in 2019, or about three% of all utility inexperienced energy gross sales.
Utility Renewable Contracts
The earlier two program fashions primarily goal residential and small nonresidential prospects, and within the case of inexperienced pricing applications include premiums that could be prohibitive for bigger nonresidential prospects. Starting in earnest round 2015, these prospects started urgent utilities for large-scale voluntary inexperienced energy merchandise. In some states the place giant industrial buyer PPAs aren’t an choice, utilities have successfully served as intermediaries with giant prospects in transactions resembling a PPA.
These applications enable giant nonresidential prospects to contractually procure renewable vitality within the utility’s service territory, thus far in two flavors. The primary are “inexperienced tariffs” to attach prospects to particular initiatives. For example, Apple used a inexperienced tariff in Nevada to contractually procure energy from a string of photo voltaic initiatives from 2013 to 2017.
The second take the type of utility open solicitations for a number of giant prospects, permitting the utility to plan and procure capability according to the extent of buyer commitments. For instance, Michigan’s DTE Power used this mannequin to construct a number of wind initiatives for giant in-state prospects together with Ford, Normal Motors, and the College of Michigan. NREL estimates these voluntary inexperienced energy gross sales have grown from just about nothing in 2012 to four.four million MWh in 2019, with vital venture capability in inexperienced tariff program pipelines.
Utility Voluntary Procurement
Conventional regulated utility enterprise fashions have traditionally disincentivized utilities from procuring renewable vitality past renewable portfolio requirements necessities. However attributable to quickly falling renewable vitality costs and different components, utilities are more and more shopping for their very own inexperienced energy voluntarily. No less than six utilities have publicly dedicated to offering 100% clear vitality inside the subsequent a number of many years.
This can be a latest phenomenon, and NREL has but to gather information to trace its influence. However the potential market implications are vital. Voluntary procurement may drastically improve inexperienced energy era, notably if giant utilities with carbon-free targets equivalent to Duke Power and Xcel follow these commitments. This raises new questions in regards to the roles of utilities and retail electrical energy prospects in broader voluntary inexperienced energy markets. For example, what’s going to occur to customer-based voluntary applications (e.g., utility inexperienced pricing) as utilities attain excessive ranges of utility-level voluntary procurement? And can utility voluntary procurement have an effect on the motivations of enormous prospects to voluntarily purchase renewable vitality on their very own?
The Future Function of Utilities in Voluntary Inexperienced Energy Markets
All these improvements have expanded renewable energy entry in ways in which swimsuit the wants of each small and huge prospects, however two alternatives for enlargement stay.
First, utilities can improve participation and gross sales in current applications. For example, as NREL’s annual high 10 lists point out, 5 utilities have enrolled greater than 10 p.c of their gross sales into voluntary inexperienced energy applications, displaying that prime charges of voluntary participation are doable.
Second, utilities can develop and supply new voluntary inexperienced energy applications. Regardless of the proliferation of group renewables applications, bilateral contracts, and utility inexperienced tariffs, only some dozen of the hundreds of U.S. utilities supply them. Extra applications, and extra participation in them, may considerably improve voluntary inexperienced energy demand.
Voluntary inexperienced energy markets additionally face evolutionary pressures as grids turn into greener attributable to state mandates or voluntary utility procurement. Utilities may proceed to play an vital position on this altering panorama by growing new merchandise that join prospects to renewable vitality with particular traits, as is already taking place at this time. Portland Normal Electrical presents each a comparatively low-cost choice primarily based totally on wind energy and a premium choice sourced from native solar energy, for instance.
Choices may turn into extra widespread, and numerous, as grids get greener. Some prospects might demand vitality from renewable vitality turbines assembly more-stringent environmental tips. Utilities may assist prospects supply vitality from particular or close by initiatives. Improvements to faucet growing demand may open voluntary inexperienced energy applications to thousands and thousands extra Individuals within the years to return.
Jenny Heeter is a senior vitality analyst on the Nationwide Renewable Power Laboratory (NREL) in Golden, Colorado. She has spent greater than 10 years at NREL researching state and native renewable vitality insurance policies, company purchases of renewable vitality, and group photo voltaic deployment and price.
Eric O’Shaughnessy is an impartial advisor specializing in distributed vitality sources and voluntary inexperienced energy market analysis. He might be contacted at [email protected]
Sara (Shiyuan) Dong is a graduate intern with the NREL Market and Coverage Group. Her work focuses on photo voltaic vitality coverage.