Green Power Supply Options
A variety of green power supply options are available to consumers in today's market. Each supply option has its own set of unique characteristics, and consumers should weigh these different factors when determining the option that works best for them. This broad range of supply options allows consumers to select a customized green power procurement approach that best meets their energy and environmental objectives given their unique financial, operational and policy situations. In many cases, consumers use a combination of green power supply options to meet their objectives.
All of the green power supply options listed here involve the generation of renewable energy certificates (RECs), and some may involve the retirement of RECs on behalf of the customer. They are broken up into two broad options: standardized retail products and customized project-specific products. Each supply option is linked to its own webpage, which provides greater detail about the supply type, as well as its advantages and challenges.
Retail Supply Options
These "off-the-shelf" options are typically standardized products (e.g., resource mix, price, third-party certification status) for sale to consumers from retail suppliers, such as utilities, competitive electricity suppliers and REC marketers. Retail supply options generally involve short-term commitments by the consumer to purchase a pre-determined volume or a volume tied to their electricity consumption. The renewable energy project(s) used to supply the product may be periodically changed by the supplier during the contract.
- Retail Renewable Energy Certificates (RECs) – These are retail products that are sold, delivered, or purchased separately from electricity. These retail RECs provide no physical delivery of electricity to customers and, as such, the customer is purchasing power from a separate entity than the one selling them the REC.
- Competitive Green Power Products – These optional product offerings allow customers in competitive retail electricity markets to procure bundled electricity and RECs from a competitive electricity supplier that is not their default utility supplier. Participating customers usually pay a per-kilowatt-hour premium on their monthly electric bills for the renewable electricity.
- Utility Green Power Products – These optional utility products allow customers to procure bundled electricity and RECs from their utility or default service provider. Participating customers usually pay a per-kilowatt-hour premium through an additional line item on their monthly electric utility bill for their renewable electricity.
- Community Choice Aggregation (CCA) – These programs allow local governments to procure power on behalf of their residents, businesses and municipal accounts from an alternative supplier while still receiving transmission and distribution service from their existing utility provider. CCAs are currently authorized in California, Illinois, Ohio, Massachusetts, New Jersey, New York, and Rhode Island, as enabled by state legislation. CCAs can—though are not required to—source renewable electricity for their customers, either as a default supply option and/or as an opt-in product.
Project-Specific Supply Options
These options are generally customized products negotiated between the consumer and supplier. Project-specific supply options involve long-term commitments by consumers to purchase a volume tied to the output of a pre-determined generation capacity. The renewable energy project used to supply the product is constant throughout the term of the contract or commitment.
- Self-Supply – Self-supply refers to the bundled or retail green power use by a consumer whereby the consumer owns the renewable electricity generator and is responsible for its maintenance and operation. The renewable electricity generator may be directly connected at or near the point of use, be offsite with the electricity being grid-delivered to the user or be offsite with the power sold to others but the REC retained by the consumer.
- Utility Green Tariffs – These optional programs in regulated electricity markets offered by utilities and approved by state public utility commissions (PUCs) allow eligible customers to buy bundled renewable electricity from a specific project through a special utility tariff rate.
- Shared Renewables – The use of shared renewables, such as community solar, is an emerging model allowing multiple customers to buy, lease or subscribe to a portion of a shared renewable electricity system that is located away from their home or business. The model is especially appealing to customers who do not have sufficient renewable resources, who rent, or who are otherwise unable or unwilling to install renewables on their residences or commercial buildings. Shared renewables can be in the form of “community-owned” projects or third party-owned renewable electricity generators whose electricity is shared with multiple customers.
- Physical Power Purchase Agreement (PPA) – A physical PPA for renewable electricity is a contract for the purchase of power and associated RECs from a specific renewable energy generator (the seller) to a purchaser of renewable electricity (the buyer). Physical PPAs, which are usually 10- to 20-year agreements, define all the commercial terms for the sale of renewable electricity between the two parties, including when the project will begin commercial operation, the schedule for the delivery of electricity, penalties for under-delivery, payment terms, and termination. The project may be located onsite at the user's location or be offsite with the electricity being grid-delivered to the user. Physical PPAs by non-utility consumers are generally only allowed in competitive electricity markets, and the renewable energy generator and customers must be located in the same power market to allow for physical delivery of electricity.
- Financial PPA – A financial PPA, also known as a virtual power purchase agreement or a contract for differences, is a financial arrangement between a renewable energy generator (the seller) and a consumer (the buyer). Financial PPAs, which are usually 10- to 20-year agreements, enable the renewable electricity generator to receive a known price for its sales of electricity over the term of the agreement since the buyer is contractually responsible for any difference between the wholesale price and the Financial PPA price (i.e., strike price). If the wholesale price is below the strike price, the buyer pays the renewable energy generator the difference. Conversely, if the wholesale price is above the strike price, the renewable energy generator pays the buyer the difference. In this way, the Financial PPA acts as a hedge against electricity price volatility for the buyer, as the Financial PPA credit the buyer receives is correlated to electricity market prices. The renewable energy certificates generated by the renewable energy generator are usually contractually conveyed to the buyer. A Financial PPA does not include the electricity delivery to the buyer, and therefore the buyer can be located in a different power market than the renewable energy generator, including being located in a regulated electricity market.