Corporate Buyers Power Green Electricity Market(A)

“Americans can always be counted on to do the right thing… after they have exhausted all other possibilities.” – Sir Winston Churchill
These days I don’t know whether characterize that quote as overly harsh or overly optimistic. But it seems an apt description of the growing number of companies demanding renewable energy for their electricity needs. Whether spurred to action by rolling blackouts, price spikes, or concerns about climate change, leading companies are now buying green power from utilities, purchasing renewable energy credits that fund development of new alternative energy supplies elsewhere in the grid, and/or installing solar cells, wind turbines, hydrogen fuel cells and other alternative energy sources to generate green electricity at their own facilities.
As one recent example, Wells Fargo just made the largest corporate purchase of renewable energy to date, with a commitment to purchase 550 million kilowatt-hours of wind energy for the next three years, starting last month on October 1. That accounts for 40 percent of the company’s total electricity use in a year. The switch reduces carbon dioxide emissions from Wells Fargo’s electricity use by 380,000 tons annually, the equivalent of taking 75,000 cars off the road. (Last year we joined the Service Employees International Union in filing a shareholder resolution asking Wells Fargo to take more steps to address the risks of climate change. In addition to its green power purchase, the company has begun to introduce some greener product offerings, like mortgages that encourage energy efficiency, although the company also continues to provide significant financing for coal companies as well. We’re currently seeking opportunities to talk to the companies about these contradictions and encourage the company to take a holistic and strategic approach to addressing climate change.)
Wells Fargo joins a list of other companies taking leadership in demanding renewable energy. Green power accounts for 100 percent of total electricity use at Whole Foods, 30 percent at Johnson & Johnson, 20 percent at Starbucks and FedEx Kinko’s, and 14 percent at Staples. All those companies are among a dozen corporations that joined a partnership with the World Resources Institute called the Green Power Market Development Group to boost their purchases of new renewable energy. (We’re proud to note that all these companies are core holdings of Trillium Asset Management, in part due to their leadership on renewable energy and other environmental issues. But back to the Green Power Market Development Group…) That partnership formed in 2000 with the goal of the goal of using corporate demand to catalyze the generation of 1,000 new megawatts of green power by 2010. As of last year, the group had purchased 360 megawatts of new renewable electricity, eliminating 240 million tons of carbon dioxide emissions a year. Although 98 percent of electricity generation in the U.S. still comes from fossil fuels or nuclear generation, the demand for renewable power is beginning to add up to large numbers. A study by the U.S. Department of Energy found that at the end of 2004, demand for green energy from corporations and individual consumers had led to the development of 2,220 megawatts of new wind farms, solar plants, and other renewable energy generation, with another 455 megawatts under construction. Those numbers are likely even higher today, given the large renewable purchases Wells Fargo, Whole Foods, and others have announced since DOE completed its last analysis.
Most of these large corporate purchases of green energy are made possible by the development of a market for renewable energy credits, sometimes also called green tags or tradable renewable certificates. By buying renewable energy credits, companies fund renewable power generation which offsets some or all of their electricity use. In short, renewable energy credits let companies buy green power whether or not the renewable energy they buy goes directly to their facilities or (more often) is put into the overall grid for others to use.
To verify that green power purchases come from legitimate renewable sources, many companies ensure their purchases meet an independent certification standard called Green-e, which is administered by the non-profit group the Center for Resource Solutions. The Green-e standard sets certain environmental and quality standards for green power generation, and applies to solar, wind, geothermal, generally small-scale hydropower meeting certain environmental conditions, biomass, biodiesel, and hydrogen fuel cells. The Center for Resource Solutions conducts annual verification reviews of Green-e certified electricity providers.
While green power sources still often cost more than conventional electricity, that gap is shrinking. Many of the companies profiled in this article have linked green power purchases to energy conservation programs and employee energy awareness programs that have kept their overall electricity costs flat or even decreased their total energy costs.
Beyond buying green energy or renewable energy credits from others, a growing number of companies are also starting to generate their own renewable energy at their facilities. This October, Google announced it will install 9,000 solar panels at its one-million square foot headquarters campus in Mountain View, California. This system will be able to generate 1.6 megawatts, providing about 30 percent of the electricity Google uses at the facility, and it represents the largest solar power installation at any corporate facility in the U.S. Nor are only high tech leaders installing PV solar cells. Johnson & Johnson has already installed nearly as much solar capacity as Google’s headquarters project, although the cells are spread across multiple JNJ facilities.
Other companies are experimenting with ways to encourage development of solar power for their facilities without buying the solar panels themselves. For instance, in 2004 Staples joined an innovative agreement to host solar cells on several of its warehouses and buy the power from those cells for 10 years, while letting other investors actually purchase, install, and maintain the equipment. This partnership encourages the installation of more solar capacity without requiring Staples to put up capital expenditures, which are instead financed by an affiliate of Goldman Sachs attracted to a low-risk investment in alternative energy. (More in-depth details of the arrangement and an explanation of the benefits to the companies and the solar power movement are available at http://www.thegreenpowergroup.org/pdf/case_studies_Staples_2.pdf.)
Nor are solar cells the only option for onsite alternative energy generation. A subsidiary of Johnson & Johnson located near a closed landfill in California began piping landfill gas to onsite generators that provide both electricity and hot water to the building. That landfill gas was previously burned without being used. Interface Flooring Systems is displacing about 20 percent of the natural gas it uses at its Lagrange carpet factory by using landfill gas to fuel two heaters and a boiler.
On-site hydrogen fuel cells, which convert natural gas to energy without burning it, are also gaining popularity with companies that seek not only cleaner power, but more reliable power as well. For instance, Verizon Communications uses hydrogen fuel cells to power its facility in Garden City, New Jersey that provides telephone and data services to 35,000 Long Island customers. The seven on-site hydrogen fuel cells not only provide electricity to power the building, the heat and water they generate as byproducts are used to reduce the facility’s’ heating and cooling needs by a third. In these and many other ways, leading companies are helping promote a much needed transition to cleaner energy sources. Five companies currently buy more green power than the U.S. Department of Energy does. Companies make up more than half of the top 25 green power purchasers in the U.S. tracked by the U.S. Environmental Protection Agency. (Federal government agencies, local municipalities, and universities fill out the rest of the list.) At Trillium Asset Management, we’re working to encourage more companies to join this market shift that’s bringing new sources of green power into the U.S. electricity grid…maybe even before they exhaust all other possibilities.