Part 1 in a blog series on a popular solution for large commercial and industrial renewable energy buyers in regulated markets
In addition to common commercial and industrial renewable energy procurement challenges present irrespective of site location (e.g. lacking project scale, space, or capital), large buyers with operations within Southeastern U.S. markets are also faced with the limitations of a regulated electricity market. One corporate renewables solution rapidly gaining popularity amongst policymakers and regulators is voluntary on-bill (on your electric bill) renewable energy procurement programs or “green tariffs”. Recently, S2 Solar was fortunate to serve as an advisor for a large organization evaluating a utility green tariff program in North Carolina and plans to do the same for clients across the region. This green tariff blog series focuses on existing and upcoming opportunities, beginning with an overview of South Carolina offerings.
For initial level-setting, the membership association Renewable Energy Buyers Alliance (REBA) summarizes a green tariff as, “a price structure, or an electricity rate, offered by a local utility and approved by the state’s Public Utility Commission (PUC) that allows eligible customers to source up to 100% of their electricity from renewable resources. Through a green tariff, customers are able to purchase both the energy from a renewable energy project, at a large-scale, and the associated Renewable Energy Certificates” (emphasis added). Additionally, in November 2019, REBA teamed up with World Resources Institute (WRI) for a nice issue brief on nationwide green tariff programs and offered two general findings worth noting:
- Through green tariffs, traditional utilities may be able to offer renewable energy services as attractive as what buyers are able to access in competitive markets or through third party-financed “behind-the-meter” renewable energy services.
- Green tariffs may also prove to provide greater flexibility and lower transaction costs, given utilities’ expertise and decades of experience in integrating generation technologies, aggregating customer demand, and reliably delivering least-cost resources.
While imperfect, the existing and upcoming green tariffs throughout the Southeast specifically provide an opportunity for large energy consumers to:
- Make a low-cost or no-cost sustainability play at scale. Organizations can avoid the large CAPEX for onsite asset deployment and ownership often required to implement renewable energy in a regulated market, instead adopting renewables through incremental purchases (kWh-by-kWh) the way electricity is purchased from conventional fossil-fuel based generation in the region. If reflective of activity within competitive deregulated markets, significant bill savings can exist by participating.
- Have a more direct financial connection to, and drive, large renewable energy projects within their utility service territory. Said more simply: have real impact. The buyer is able to say, “without my participation, this solar project would not have gotten financed or come to fruition”.
- Easily meet ESG (Environmental, Social, and Governance) criteria and expectations from customers, investors, communities, and Boards of Directors.
- Avoid the concerns of maintenance and performance associated with hosting or owning a system
- Mitigate risk and uncertainty around increases in electricity prices (though there’s less volatility in the regulated power markets of the Southeast compared to competitive marketplaces, this energy risk to OPEX is still a reality that deserves attention).
South Carolina Opportunity
Stemming in part from South Carolina Energy Freedom Act of 2019 (Act 62), voluntary green tariffs for large electricity consumers are coming in investor-owned utility electric service territory within the state (Duke Energy Carolinas, Duke Energy Progress, and Dominion Energy South Carolina – formerly SCE&G – territories). Duke Energy’s program (called Green Source Advantage or “GSA”) is much further along the lifecycle than Dominion’s Voluntary Renewable Energy (“VRE”) Rider, though both remain at the Public Service Commission of South Carolina (regulatory level).
Both GSA and VRE will be three-party agreements amongst the customer, utility, and a renewable energy supplier (e.g. solar developer) for the bundled procurement of energy, capacity, and renewable energy certificates (RECs) from an offsite, third party owned asset (most likely a solar farm). To be clear, neither program is for physical delivery of electricity (these offsite projects will not be powering a participant’s facility). The customer continues to receive their standard electric bill each month with a few new line items added. Eligibility is based on a minimum 1MW (1,000kW) of Max Annual Peak Demand (aggregating demand from multiple locations is permitted) and customers may participate up to 125% of their Max Annual Peak Demand.
While North Carolina’s version of Green Source Advantage did receive a few big name participants in Bank of America, City of Charlotte, and Duke University, a significant portion of capacity in the program still exists in all classes (the UNC System, Military Installations, and Unreserved), and South Carolina’s GSA is expected to garner more excitement due to the expectation that real bill savings will be attainable (versus a large premium in North Carolina). Many leading corporates, institutions, and municipalities have already issued RFIs and RFPs, and the limited program capacity (113MW for DEC territory, 37MW for DEP territory will get “eaten up” quickly due to the benefits previously outlined. Though background conversations amongst parties are picking up and the next formal GSA update to the Commission is due from Duke Energy on September 30, 2020, our current expectation, here at S2 Solar, is that enrollment will open in the April – May 2021 time frame.
Thank you for your interest in large-scale renewable energy procurement solutions within a regulated power market! We hope you found this to be helpful and that you’ll spend a few minutes reviewing other entries and insights on our Blog page. To dig-in further on this topic and discuss specific distributed energy resource (DER) and renewable energy strategies for your organization, please Contact Ben.