Renewable Energy: From Pipe Dream To Mainstream
By Diane Moss
From the November 2013 issue of Today’s Facility Manager
More and more businesses and institutions are aiming for 100% renewable energy, challenging conventional thinking that such targets are just pipe dreams. And it’s not only traditional “green” organizations getting involved. Also jumping in are big retail stores like Kohl’s, Ikea, and Staples; car companies like BMW; municipalities and regions across the globe; and many small businesses. What may previously have been pipe dreams, especially in the electricity sector, seem to be starting to shift to mainstream. What’s causing the shift? And how can facility managers (fms) assess whether and how to become a part of it?
Data from the U.S. Environmental Protection Agency (EPA) backs up the notion that there is indeed a rising trend. The EPA reports1 that nearly three times as many organizations now somehow cover at least 100% of their power needs from domestic renewable sources—like wind, solar, biomass, geothermal, and small hydro—than when the agency started tracking this information in 2007. Those employing on-site renewable power generation have increased eight times over the same period, suggesting energy self-sufficiency and the economics of renewable power are growing influences. The EPA list is not comprehensive, nor does it include the rising number of businesses, like tech giants Apple and Google, that are well on their way to 100% renewable electricity.
What are some of the ways that the 100% renewable power goal is being achieved? Earliest adopters have often relied on buying renewable energy certificates (RECs), which are tradeable commodities that renewable energy producers can sell as proof that they generated a megawatt hour of renewable power. RECs are not physical electricity, but organizations can buy them to claim they have purchased renewable energy. The benefit to the buyers is the ability to demonstrate that they are “offsetting” conventional electricity use with equivalent investment in renewables. If done wisely, RECs are the choice for achieving renewable energy targets where there are no more direct, cost-effective options.
A more direct method is to purchase electricity from utilities that offer a 100% renewable energy choice.2 Often, utilities in the U.S. charge more for these products, but this is changing in some cases. For example, Dusquesne Light, which is in a competitive energy market, offers Pittsburgh customers 100% renewable power for 10% less than the normal utility rate. The County of Marin in California and the city of Evanston, IL likewise both offer green electricity options that cost customers less than the conventional utility offerings, which they achieve with a vehicle called Community Choice Aggregation.3 This allows communities to aggregate their constituents’ buying power to secure competitive pricing for alternative energy contracts, for example.
Clearly the most direct option—and increasingly the most economical—for facilities to shift to 100% renewable power is to generate it on-site. Once the capital costs are paid off, the energy produced is virtually free. Capital costs have been rapidly shrinking, as volume scales up. For example, since 2008, onshore wind turbine prices have dropped 29%, and solar module prices have plummeted 80%, according to an April 2013 report from Bloomberg New Energy Finance.4
Meanwhile, traditional non-renewable energy sources are on a continual upward price trajectory, as they deplete and regulations tighten. Even natural gas, which has enjoyed lower prices with recent increased shale production, is volatile and subject to long-term price increases. More and more facility owners are installing renewables as a hedge against uncertain future energy costs.
Will It Pay Off?
To assess whether owning on-site renewable energy is financially sound for specific facilities, fms can perform two simple equations:
1. If the system will be financed, figure out if the monthly financing is less than the facility’s monthly utility bill. If it is, going renewable is a no-brainer. Industry reports indicate that financing for commercial solar produces handsome returns of 10% or more for many businesses.5
2. If there is cash available to forego financing, take the best quote for installed cost of the renewable power technology and deduct the available local and federal incentives like tax benefits and rebates. Divide the annual payment for the system over the expected number of kilowatt hours the system will produce annually over the course of its useful life (usually 20 to 30 years). If that number is less than the amount of the facility’s current annual electric bill, going renewable is a smart financial move.
Many fms are finding on-site renewable investment pays off in plenty of time to be financially viable. Fms can consider solar, which has tended to be the most expensive renewable technology. It’s typically paid back in about six to seven years. In states with especially strong incentives, like North Carolina, the payback period for commercial solar systems are reportedly averaging four years or less. Add to this the public relations benefit of having on-site renewable energy and the opportunity to depreciate any equipment related to the installation, and it’s clear why this is becoming the right business decision for many facilities.
What are the technical requirements for adopting on-site renewable power technologies? The facility in question must have sufficient space and renewable resources, like sunshine, wind, biomass, or heating and cooling from the earth. Also a plus is increased energy efficiency, which can mean quick energy cost savings of 10% to 30%6 as well the need for smaller, cheaper renewable power systems.
Fms may become completely self-sufficient from electric—and even gas—utilities, if they have access to biomass, geothermal, or hydropower resources, which make renewable energy available 24/7. Energy storage, like batteries, can help to achieve round-the-clock renewable power systems. Solar thermal, biomass, and geothermal are often cost-effective to heat water and space, and solar chilling systems can cool air. Operating with 100% renewable energy overall is within reach by also integrating transportation solutions, like electric fleets, public and shared transport options, telecommuting, and support for biking.
Eventually, 100% renewable energy is a decision all fms will need to consider because non-renewable energy, by definition, won’t always be around. Meanwhile finite energy sources will tend to get more expensive and problematic. A growing number of organizations clearly seem to think that making the shift now is wise to protect their operations—while also protecting future generations.
Moss is a founder of the Renewables 100 Policy Institute and an independent energy policy consultant. Her writing on renewable energy has appeared in numerous publications. She also recently served as environmental deputy to former United States Congressmember Jane Harman and energy advisor to several non-profits.