Jon Bortles is the Sustainability Program Manager for the Department of Facilities Management at CU-Boulder. This post does not reflect the University’s opinion nor does it imply any connection thereof.
I spent the last week
attending the National Renewable Energy Laboratory (NREL) Energy Executive Leadership
Institute. It was an inspiring week of technology and look into the future of
possibility. However it was also a frustrating realization that those of us in
this business, the business of leaving tomorrow no worse off than today, have some harsh realities to
face if we ever hope to truly make an impact. This blog attempts to address
the green elephant in the room that nobody seems to be talking about when it comes to the adoption of solar PPA's. Until now (cue overly dramatic theme music).
The solar photovoltaic (PV) industry is booming. Clean
energy is being produced more abundantly than ever before. Though still just a
miniscule percentage of overall electricity production in the US (0.4% to be
exact), the solar industry has certainly seen exponential growth in recent years.
Creative financing mechanisms, for example, have streamlined
do-gooder investments in a cleaner, less carbon-intense future. Specifically,
the widespread adoption of the Power Purchase Agreement (PPA) have allowed third-party
financiers with large tax appetites to take advantage of both Federal and State
tax credits, deductions, and utility rebates all while offering the end-user a
coal-competitive rate for solar generated electricity with no upfront capital
costs. A win-win for do-gooders and wall street – just the capitalistic
mechanism we all need to advance toward a more sustainable tomorrow, right?
I’d hate to call it a “catch,” so let’s call it a different
sports-related cliché. Let’s call it a “penalty flag;” a greenwashed handkerchief
thrown by the referee on the 1-yardline.
I’m referring to the retention (or lack thereof) of environmental attributes when investing in solar PV – often referred to as Renewable Energy Credits (or “REC’s”–
an effective market-driven mechanism that monetizes carbon reduction from
renewable energy in the absence of a formal carbon tax or cap-and-trade mandate).
The problem? Simple math. 1+ 0 does not equal 2. Let me explain by way of
example(s) in my world of higher education.
Exhibit A
Let’s call it Green University (GU). The university has long
been recognized as a leader in environmental stewardship, and continues to look
at ways to make good on their “green” reputation and their ambitious commitment
to carbon neutrality. GU invests millions of dollars into energy efficiency annually
– the soundest investment towards reduced carbon and commensurate cost savings.
However there becomes a point in which growth in demand for energy outpaces the
diminishing return of energy efficiency. GU facility managers are thereby
forced to look at energy supply in addition to demand. Rather than continuing
to purchase cheap coal-dominated electricity from the grid, GU must invest in renewable
energy. Of course this will only work if the business-case can be made to the
CFO. Enter Mega-Solar Corporation in shining armor atop a white horse. They
crunch a few beans and BOOM! Massive solar array and promises of “Net Zero Electricity”
facilities… all for no cash down AND the same low price that GU has been paying
the local utility for dirty energy! Just sign the dotted line on the Power
Purchase Agreement and GU will be on their way to green-laden awards and
accolades…
“TWEET!!!! Un-sportsmanlike
conduct on GU!”
Hold this thought.
Exhibit B
Enter Teal University (TU). Teal University does not have
much of a history on the environmental front. BUT! The student-government has
levied a per capita fee to become 100% renewable energy powered by 2020 (well,
that was easy!). However, their Administration and facility managers don’t have
the bandwidth, infrastructure or know-how to install solar PV on-site. Their
circa 1970 roofs are in need of replacement and the State has all but
eliminated funding for such Deferred Maintenance. So, they do what many wanna-be-do-gooders
do, they purchase Renewable Energy Credits (REC’s) via RFP for clean-energy
generated on their behalf at some off-site renewable energy haven. And BOOM!
Overnight they are atop the EPA’s Green Power Partnership for the campus with
the most renewable energy in the country! Oh and hey, they’re now in the same
conversation with GU down the road for being progressive stewards of the
environment. Soon the local media puts out a story “Local universities now leaders
in renewable energy production….”
“TWEEET!!! Encroachment on TU!”
Ok, hold this thought too. Last one, promise.
Exhibit C
Ash University (AU) doesn’t need to invest in renewable
energy. After all, their local utility has been mandated via Renewable Portfolio Standard (RPS) legislation to increase renewable energy production by
30% by 2020. Business-as-usual would imply carbon emissions will be reduced
without any on-site installations or pesky student fees…
“TWEEEET!!! Um, too many men on the field!”
You see, in exhibits B and C, TU and AU have claimed benefit
for the very same unit of renewable energy that GU produced from the get-go. Shame
on them, right? Wrong. Remember the PPA that GU signed with Mega-Solar Corp for
the net zero electricity building? Well it had a provision in the contract
eliminating GU’s right to claim any benefit for the renewable energy that they
produced. In fact, Mega-Solar Corp legally sold the environmental attributes of
“GU’s” solar panels in the form of a REC - either directly to TU or indirectly to AU as
part of the utility company’s mandated renewable portfolio.
Ergo, 1+ 0 = 1, not 2; GU’s solar claim + either TU or AU’s
claim does not equal more than one unit of renewably produced electricity. It’s
a complete greenwash – right?
Here’s what Green-e says about each university's right to make
claims:
Less than inspiring isn’t it – GU builds a multi-million
dollar net-zero electricity building in their commitment to doing the "right thing," and forgoes the right to say they have
solar panels on the roof? Yikes.
So what are the alternatives, so-to-speak? Should Green University
pay ~50% more on their utility bill to retain the REC’s? Highly unlikely with the CFO at the helm
(understandably so). Should Teal University use their student fees to install
on-site PV at full cost rather than buying REC’s? Not if they want to make a reasonable dent
in their carbon inventory. Should Ash University follow suit with GU or TU
rather than wait on the utility to green the grid? Seems like a hard sell in
this new light. So… what’s a U to do?
I wish I had a great solution to recommend (stay tuned,
maybe I will in a future blog). But, the reality is that “the system” is the
way it is for a reason: coal is cheap (externalities excluded, of course) and
we have 130+ years of infrastructure and culture to overcome. PPA’s that sell off REC’s
are serving as an effective, albeit seemingly greenwashed, intermediate
solution until solar PV can reach price parity on its own merit. The good news
is that this can be seen happening elsewhere in the country / world where the
price of electricity allows for a solid ROI. Advances in technology, policy,
and economies of scale in manufacturing continue to drive down the price of
clean energy. But the truth of the matter is that despite getting a few points
on the board, the game is far from over. We can’t all be celebrating in the end zone about our “greenness” when the score is still 93-7 (yes, only 7% of US electricity
production is from renewables). We have a few minutes, maybe even just a few seconds
on the clock remaining before the game is over. Time to stop the chicken dance
and start drawing up the next play – it’s time to get back to work.
Sources
Excellent and helpful post… I am so glad to left comment on this.
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