Today, more and more businesses are incorporating renewables into their energy portfolio. Companies are setting goals and taking action. A recent report indicated 72% of large US energy users are actively pursuing renewable energy procurement in some form and over 45% of Fortune 500 companies have GHG reduction targets. Over the past several years the renewable energy market has evolved rapidly. All the heightened activity and awareness around renewables has increased available renewable energy deal structures for buyers depending on a facilities’ needs and limitations, budget, and preference. This has resulted in the creation of a renewable energy spectrum.
RECs – Renewable Energy Credits (RECs) represent the clean energy attributes of renewable electricity. RECs currently provide the easiest access to renewable energy markets and the least cost. RECs do not require a long-term commitment, can be purchased separately or bundled from a Retail Supplier, and cost less than other green options. The popularity of RECs continue to grow and support the renewable energy market. Given the demand increase, REC prices have become more costly than prior years.
Off-site – Off-site renewables are typically structured as either a Physical Power Purchase Agreement (PPPA) or a Virtual Power Purchase Agreement (VPPA). A PPPA is a product where a buyer takes title to the electricity and RECs in exchange for a fixed rate. There is usually an annual indexation with this option. Within a VPPA, the buyer does not own and is not responsible for the physical electrons generated by the project. The VPPA is purely a financial transaction. Beware, VPPA’s can be viewed as a financial instrument requiring a special accounting treatment. Some of the most common VPPAs include solar, wind and hydro.
Behind-the-meter – On-site or “behind-the-meter” renewable generation, including wind and solar, provide the highest level of visibility regarding a customer’s commitment to renewable energy. When you generate solar or wind energy on your own site, you are able offset additional cost components.