- Know The Law: Options Available for using 'Green Power'
- March 30, 2017 | Author: Viggo C. Fish
- Law Firm: McLane Middleton, Professional Association - Concord Office
- Q. My company is thinking about how to “green” up its operations. What are our options for investing in renewable energy?
A. Companies seeking to invest in green energy have a number of options available to them. However, before making the decision to invest, businesses should ask themselves this key question: “What is it that I want to achieve with this effort?” A company’s motivations for procuring green power, which may be both financial and altruistic, will guide its green energy investment strategy.
Importantly, there is no one-size-fits-all approach to green energy investment. Regional price differences in the cost of green power generation may impact investment decisions. And, regional differences in the way markets are regulated can affect investment decisions as well. A good first step is to develop a goal-oriented strategy prior to exploring investment options. This article will briefly introduce two common investment vehicles below.
Green Power Purchasing
In recent years, companies like Google and Apple have gained attention for signing deals to purchase large quantities of green power. The legal instrument for this type of transaction is called a Power Purchase Agreement (PPA). PPAs allow companies to purchase a set quantity of power from a set source of green power generation at a set price for a set period of time, often twenty or more years. For companies looking to secure fixed energy prices in the long-term, PPAs offer an opportunity to procure green power while also avoiding volatile energy prices. Also, for companies looking to finance and develop new renewable resources, the structured and guaranteed revenue that comes with a PPA can give banks the assurances they need to issue loans. In deregulated markets, companies can use PPAs to purchase power from renewable energy sources whether constructed on the company’s own property or sited hundreds of miles away.
Also, as an alternative to PPAs, smaller companies may have the option to finance, install and own solar energy facilities under state-sponsored renewable energy incentive policies such as net metering.
Renewable Energy Credits
Companies who do not wish to purchase green power directly can purchase what are called Renewable Energy Credits (RECs). RECs, often called “green tags”, are tradeable certificates, separate from the physical green power produced, which represent the environmental attributes associated with the generation of one MWh of green energy. For companies attracted to the marketing benefits associated with green power, procuring RECs may be sufficient to meet the company’s goals. A company can effectively offset its operational carbon output by purchasing a proportionate quantity of RECs. Importantly, companies buying power under a PPA must also retain the RECs in order to preserve the environmental attributes associated with the power they are purchasing.