UTILITIES CAN BE RESOURCES FOR CORPORATIONS
Sustainability is a strong current trend with large corporations in the U.S. that have concerns about their impact to the world climate and are looking for immediate ways to incorporate sustainability into a portfolio. For many corporations, this means replacing power sources with renewable energy to fulfill immediate and short-term goals, increasing their renewable energy usage percentage significantly. For the first time, in 2015, major corporations and other nonutility customers purchased more than 50 percent — 52 percent, or 2,074 MW — of wind power capacity through power purchase agreements. It has been noted that the number of corporate power purchase agreements has doubled each year for the past five years. This trend is expected to continue, although at a slower pace.
More than half of states allow customers to use purchase power agreements to purchase electricity from entities other than their local utility.
One option for utilities to support the large corporations’ sustainability goals is through the use of green tariffs. As stated previously, many utilities are required to incorporate renewable energy into their portfolio by state mandates. As part of these mandates, green tariffs allow local utilities to sell renewable energy, whether purchased or generated, to large corporations at a higher rate than utilities can purchase or generate it and at a generally lower or equivalent rate than large corporations are currently paying. Both parties benefit from this opportunity: Utilities have long-term, local clients willing to purchase the renewable energy, and large corporations are provided a local source for renewable energy that might be more cost-efficient than constructing their own renewable energy or entering into power purchase agreements for renewable energy.
Google is a great example of the use of green tariffs. One of Google’s subsidiaries is the first company to purchase renewable energy from Duke Energy in North Carolina using its green tariff program. Google is purchasing 61 MW of renewable energy from a solar farm located near its data center.
In 2016, Dominion Virginia Power and an Amazon affiliate set up a green tariff system to allow the affiliate to sign power purchase agreements with local renewable energy generators and pay Dominion Virginia Power a price similar to the cost of power in the wholesale market. This appears to be an opportunity for both parties to successfully use renewable energy beneficially.
Generally, green tariffs require long-term agreements between the utility and the customer and might have a minimum consumption requirement. Green tariffs are usually set up in a manner that does not shift the energy costs from the large corporations to other ratepayers. The only limiting factor is the number of states that allow them. In 2018, 18 states allowed the use of green tariffs. This number is expected to grow as utilities recognize the opportunity to support the renewable energy need for large corporations.