Synopsis
Large-scale corporate energy buyers are seeking renewable energy as a central element of their overall
energy strategy. In a few states, these commercial and industrial (C&I) customers have collaborated with their utilities to create new opportunities to buy renewable energy in ways that deliver more value to the customer.
Building on that experimentation, this guide provides a synthesis of the ways utilities can meet the renewable energy demand of large-scale energy buyers.
The paper first describes some of the existing green tariff designs, addresses why some of the country’s largest shareholder utilities are offering green tariff options, and concludes by outlining the considerations necessary to build an attractive and pragmatic green tariff offering based on learnings to date.
Key Findings
- Traditional, regulated utilities are well-positioned to meet commercial and industrial (C&I) customer demand for renewable energy through green tariffs.
- Successful green tariff programs have helped to bring more than 900 megawatts (MW) of new solar and wind projects to the grid since 2013.
- Keys to successful green tariffs include: engaging senior leadership from across the utility; consulting customers throughout the design; finding ways to offer fixed-price, cost-based energy from compelling renewable energy projects; and integrating renewable energy into an attractive package for customers.
- It is important to design products with sufficient flexibility to make them attractive to a broad class of customers and to ensure that these products are not putting an unfair burden on any other customers in the utility’s service territory.
- Attractive green tariff programs can serve as a strategic competitive differentiator for traditional utilities.
Executive Summary
- Traditional, regulated utilities are well-positioned to meet commercial and industrial (C&I) customer demand for renewable energy through green tariffs.
- Successful green tariff programs have helped to bring more than 900 megawatts (MW) of new solar and wind projects to the grid since 2013.
- Keys to successful green tariffs include: engaging senior leadership from across the utility; consulting customers throughout the design; finding ways to offer fixed-price, cost-based energy from compelling renewable energy projects; and integrating renewable energy into an attractive package for customers.
- It is important to design products with sufficient flexibility to make them attractive to a broad class of customers and to ensure that these products are not putting an unfair burden on any other customers in the utility’s service territory.
- Attractive green tariff programs can serve as a strategic competitive differentiator for traditional utilities.
Vertically integrated investor-owned utilities1 face a unique set of challenges in today’s U.S. electricity market. There is increasing pressure from many customers for more choice and control over energy supply, and the expectation of high-quality and reliable service at affordable prices. Simultaneously, there is competition from renewable energy options that are cheaper than current retail rates. Yet utilities are operating within a regulatory model that is based on owned assets and that was developed in the 1950s.
Traditional, regulated utilities are well positioned to offer many of the features that customers are seeking in renewable energy. Both residential and industrial customers are looking to purchase renewable energy to reduce their electricity bills and carbon footprint and mitigate their exposure to fuel price volatility. When large-scale energy buyers are expanding their operations, they look to make investments in service territories that offer a higher mix of renewable energy. Traditional, regulated utilities can offer many of the features that customers are seeking, along with greater flexibility and lower transaction costs than third-party approaches because of their extensive experience with aggregating load and balancing resources in the electricity system.
One effective approach to meeting customer demand for renewables within existing regulatory frameworks is through green tariffs. Green tariffs enable participating customers to source up to 100 percent of their electricity through renewable energy. However, not all green tariff programs are successfully designed or delivered. In this paper, successful green tariffs refer to green tariff programs where renewable energy deals have been signed with large C&I customers.
Successful green tariffs effectively meet large buyers’ needs without impacting other customers. Effective green tariffs are designed to prioritize the customers’ needs and values. Successful utilities create a cross-functional team that has executive sponsorship and regularly consults with customers while creating and implementing the green tariff. The team finds the best opportunities to create an attractive, value-added package that solves a problem for customers. The team proactively explains the value of the product to customers and works closely with regulators to avoid unfair cost-shifting to other customers.