New Report Offers Design Principles for Voluntary Renewable Energy Tariffs to Meet Growing Corporate Demand, Capture Benefits, and Avoid Ratepayer Impacts

27 Jul 2017

A report published by Advanced Energy Economy Institute (AEE Institute) looks in detail at how to design voluntary renewable energy programs that work for participating corporate customers and other ratepayers alike. A related policy brief, from affiliated national business group Advanced Energy Economy (AEE), outlines essential elements for voluntary utility renewable energy tariffs, which have emerged as a key tool to meet growing corporate demand for renewable energy in vertically integrated utility markets. Given that 71 Fortune 100 companies have energy-related sustainability goals and their demand for renewable energy is growing, these voluntary utility programs are an important tool with significant untapped potential.

The AEE Institute report, Making Corporate Renewable Energy Purchasing Work for All Utility Customers, looks at how to design voluntary renewable energy programs to meet the needs of participating customers as well as nonparticipating customers, and examines case studies of actual programs in seven states. Noting concern expressed in some states that these programs may result in higher electricity costs for other utility customers, as well as the risk that programs may overcompensate for this concern by imposing high fees that deter participation, the AEE Institute report sets out eight design principles that policymakers, regulators, and utilities should apply to ensure that participants are able to benefit while protecting nonparticipants from impact. Specifically, such programs should:

  1. Charge participants according to the actual cost of serving them;
  2. Pass renewable energy certificates (REC) and REC costs to participants;
  3. Charge transparent, cost-based administrative and program fees;
  4. Set fair termination requirements;
  5. Consider the impact of costs and benefits outside the scope of the program;
  6. Enable participation by both new and existing customers;
  7. Allow flexibility within the program to address unique needs and circumstances; and
  8. Set a regular schedule for program review.

In a succinct two-page policy brief, Essential Elements of Next-Generation Renewable Energy Tariffs, AEE outlines six design elements of successful renewable energy tariffs. Specifically, AEE recommends that such programs: (1) avoid impacting nonparticipating customers, (2) include program pricing that reflects actual market pricing and program costs, (3) allow for competitive project selection, (4) facilitate development of new, additional renewable energy, (5) allow a range of corporate customers to participate, and (6) include varied or flexible offerings to meet the needs of different customers.

“Corporate renewable energy procurement is a growing trend that can bring enormous benefits to states, including new jobs and investment. In regulated markets, where corporate customers cannot purchase renewable energy directly from developers, renewable energy tariffs provide a way for states to capitalize on this trend,” said Malcolm Woolf, senior vice president of policy and government affairs at AEE. “To be successful, these programs need to be attractive to corporate purchasers but also protect other ratepayers from higher costs. There are already some good models for utilities, corporate buyers, and state regulators to draw on for guidance, as they seek to make the most of this opportunity.”

Since the introduction of the first renewable energy tariffs in 2013, there have been significant improvements in design and implementation that have made these programs more attractive for customers and utilities alike, resulting in increased participation. 

“Customer collaboration has been key to accelerating innovation in green tariff design over the last four years. Utilities offer 13 green tariffs across 10 U.S. states, with around 900 MW of renewable energy deals now under contract.” said Priya Barua, Associate, World Resources Institute. “With utilities and customers collaborating on new best practices, we expect green tariffs to expand solar and wind energy on the grid in coming years.”

Advanced Energy Economy | http://www.aee.net