Benefits of Using Renewable Energy for Colleges and Universities

Government Policies Related to Renewable Energy

Costs of Different Types of Renewable Energy

Financing Renewable Energy Projects on Campus

Purchasing Green Power

Putting Together an On-Site Generation Project

New Areas for Colleges and Universities to Explore

Benefits of Using Renewable Energy for Colleges and Universities

Tangible benefits of college and university renewable energy programs:

·         Hedges against volatile fuel prices - oil, natural gas are sure to rise in the future because dwindling supply (peak oil); prices for high Btu coal have doubled in the last two years.

·         Reduces peak demand charges – a large portion of our energy demand is determined by peak demand on the system.  Renewable energy can reduce peak demand and thus save the college large amounts of money and speed the payback period for a renewable system

·         Increases reliability – Having on-site renewable energy generation allows the college to have a backup energy supply in case of a natural disaster or blackout.  Many college maintain backup generators that run on gas or diesel fuel that cost the institution money.  Renewable backup systems pay for themselves over time.

·         Can help the state meet Clean Air Act – If the state of Colorado is not in compliance with the Clean Air Act, it must submit a plan to reduce emissions.  In this case, it might be possible to get state funding to pay for a renewable energy system.

·         Can produce income for the college – The college can generate revenue by producing energy and selling it back to the grid

·         Helps secure LEED-credits for college projects – Renewable energy will boost the LEED rating on the college’s buildings.

Intangible benefits include:

·         Leadership and social responsibility

·         Curriculum and educational value

·         Student, faculty, and alumni support

·         Public relations

·         Collaboration and partnership opportunities

·         Positive community relationships

Important Questions for Fort Lewis to consider:

·         How are rising fuel prices factored into calculating the payback period for a renewable energy system?

·         What is FLC’s peak demand and how much would we save by reducing this demand?

·         How is our electricity bill structured?

·         Does FLC have a backup energy system?  What kind, how often has it been used, and what does it cost to maintain?

·         Is there an opportunity to partner with our utility or other institutions, such as San Juan College or Mercy Hospital, on projects that can further the college’s mission?

Government Policies Related to Renewable Energy

Policies that require or encourage renewable energy investments and purchases by institutions of higher education, utilities, and local governments include:

Renewable Portfolio Standards (RPS) – require electric utilities to purchase and supply renewable energy.  In Colorado, Amendment 37 requirements have set a standard for the purchase of renewable energy that LPEA is trying to meet.  A national standard is currently under debate in the latest energy bill that is currently in conference committee.

Executive orders – requires a state’s public institutions to use renewable energy.  Currently Colorado does not have an executive order related to renewable energy in place.

Net metering laws – requires utilities to purchase renewable energy generated by their customers at the same price that the utility sells power.  Most net metering laws put a cap on the size of the system or the amount of electricity that a person or institution can sell to a utility.  Systems that go above this standard would require colleges and universities to negotiate a sale price with the utility.   Colorado currently has the highest size limit in the nation (2,000 kW), but it is limited to certain utility types.  Net metering does not mean that a utility has to purchase all the renewable energy available by producers.  It only requires that if they do purchase it, they have to pay the sale price.  

Local initiatives – requires local governments to procure renewable energy.  For example, Aspen, CO has approved a standard of 75% green power by 2010.   Currently, the City of Durango and La Plata County do not have their own RPS standard, but this is a possible step as part of meeting its commitment under the Mayor’s Climate Protection Agreement signed in 2006.  In some cases, multiple counties have pooled their resources to purchase green power, thus lowering the price.

In addition to these policy drivers, there are a number of regional and national initiatives that can impact the cost effectiveness of renewable energy:

Mayor’s Climate Protection Agreement – This requires municipalities to strive to meet or beat the greenhouse gas emissions targets set by the Kyoto Protocol (7% below 1990 emissions-levels) by 2012.  As stated earlier, both the City of Durango and La Plata County have signed the agreement.

Western Governors’ Association – In 2004, 18 states agreed to develop 30,000 MW of clean energy by 2015.  This policy resolution also urged an increase in energy efficiency of 20% by 2020.  

Chicago Climate Exchange – This is a voluntary trading program for greenhouse gas emissions.  Members make commitments to emission reduction targets and timetables. An institution that goes below these targets can sell their excess credits to institutions that don’t meet their goals.  In the future, this could be a source of revenue for institutions of higher education.  Several universities are already members.

Energy Policy Act of 2005 - This federal legislation includes a tax deduction for new commercial buildings that reduce their annual energy and power consumption by 50% compared to the ASHRAE standards.  The maximum deduction is $1.80/square foot for the building.

Important Questions for Fort Lewis to consider:

·         What is the standard set by Amendment 37 and is LPEA required to meet it or is their participation voluntary because of their small size?

·         Are any executive orders currently under consideration for the State of Colorado?

·         What net metering laws apply to La Plata County and is there a cap on the system size?

·         How will the city and county’s commitment to the Mayor’s Climate Protection Agreement affect the demand for renewable energy?

·         What financial incentives currently exist at a state or federal level for renewable energy and what are being contemplated for the future?

·         What is Colorado’s share of the Western Governors’ Association goal and does this have any ramifications for FLC?

·         What targets and timetables would FLC have to commit to in order to join the Chicago Climate Exchange?

Costs of Different Types of Renewable Energy

Overview

It is often prudent for colleges and universities to invest increasing energy efficiency of their campuses before putting money into on-site generation.  The return on investment from increasing efficiency is much higher than for on-site generation.  It doesn’t make sense to build a solar system to power inefficient building.  Institutions can use the savings from efficiency upgrades to buy green power or to pay for on-site generation down the road.  

On the other hand, if an institution is considering major capital investments for efficiency, it can make financial sense to include an on-site system as part of the package.  The short paybacks of the efficiency measures can offset the long paybacks of on-site generation and provide greater long-term savings.

An alternative to costing out such a project is to hire a consultant to do a performance contract for such a project.  This reduces the analytical burden and risk for the college, but will likely cost more and because the proprietary nature of these contracts preclude interested students and faculty from getting involved in the project.

Cost of Renewable Energy Projects

Solar photovoltaics (PV) is the most common on campuses.  The advantage is that it allows for very small-scale generation that can be expanded over time.  The disadvantage is that it is expensive and for campuses with a constrained budget can be cost-prohibitive.

Almost all renewable energy projects face the possibility of standby charges imposed by a local utility to cover the cost of having electricity available in case the on-site system stops operating.  These charges can be expensive and are controversial.  Some states have exempted renewable energy projects from standby charges entirely because they were wiping out the cost savings provided by renewable energy projects and eliminating the incentive for going green.  One way to avoid standby charges is to sell excess power back to the utility, which you can then purchase back in case of an emergency.

Important Questions for Fort Lewis to consider:

·         Does LPEA levy standby charges for customers with renewable energy systems?  If so, how are these calculated and are there state laws applicable to these charges?

Wind

A general rule of thumb is that wind projects cost $1,000 per kW or $1 million per MW.  Price varies by size of turbine, with small turbines producing only a few kW costing far more per installed kilowatt than large utility-grade turbines.

Cost Estimates for a Utility-Grade 1.65 MW wind turbine is approximately $2 million dollars.  Up front costs include:

·         Various studies: wind study ($25K to $75K), Interconnection Study ($5K-$50K), Environmental Impact Assessment, Soil Test, Telecommunications Impact Assessment, Historic Preservation/Cultural/Archaeological Survey, Permitting Appraisal

·         Turbine and Tower

·         Related Equipment

·         Interconnection with the utility distribution system

·         Land acquisition or lease

·         Access road

·         Warranty

Annual costs include:

·         Operations and maintenance

·         Extended warranty

·         Insurance

·         Land lease

·         Permit renewals, road maintenance, etc.

Carleton College has a 1.65 MW wind turbine that covers 40% of the college energy bill.

Important Questions for Fort Lewis to consider:

·         Is there enough wind on campus or at the Old Fort property in Hesperus to justify installation of a wind turbine?

·         How large of a turbine is practical and how much power could it generate?

Solar Photovoltaics

Many colleges have 1 to 15 kW PV systems for educational or demonstration purposes.  A number of colleges are installing 200-kW systems or larger. The size of the system depends on:

·         Affordability, especially after government grants and rebates are factored in

·         State limits on net metering

·         Power demand of the facility or building

As a rule of thumb, PV installations cost approximately $5.50 per watt or $5,500 per kW.  A 250 kW, roof-mounted system would cost approximately $1.375 million.  In addition, there are transaction costs for environmental assessment, project management, and construction inspection.  An estimate of these costs for a 250 kW system would be $36,500.  Typically, systems are roof-mounted on buildings, cover parking garages, or are located on open land

Upfront costs include: design, solar modules, support structures, inverters, transformers, controls, and other equipment, maintenance contract and batteries (which are optional)

Annual costs include: operations and maintenance (unless paid up front), insurance, batteries (which are optional and typically require replacement every ten years).

Buildings can be made to be PV-ready by adding design elements such as a south-facing orientation, a reinforced roof, and a battery bank.  

Most colleges and universities do not install batteries or other electricity storage equipment because they add significantly to the project cost (as much as 30% to the up front costs).  Most campuses use gasoline or diesel backup systems.  A system also needs to be larger to provide electricity and power batteries to provide electricity at night or to have available for emergencies.  The advantage of batteries is that they provide greater security as a backup source of power, pay for themselves over time, and allow a building to be self-supporting.

Important Questions for Fort Lewis to consider:

·         What is the anticipated electricity load for the new buildings going up on campus?

·         What kind of government financing or incentives are currently available for solar technology?

·         What are the additional costs associated with making our new buildings “PV-ready?”

Biomass

One of the advantages of biomass is that it can be used in existing equipment and co-fired alongside conventional fuels.  This is the most complex renewable energy source because it can use a variety of fuel types.

·         Solids – This includes wood chips, agricultural waste, and urban wood waste.  This is most inexpensive and requires little processing, but is also the least efficient and dirtiest form of biomass energy.  Residues from combustion can mean higher maintenance costs.

·         Liquids – Includes ethanol from crops or agricultural waste and can take the place of gasoline and diesel fuel in generators.

·         Gas – This includes methane from sewage treatment or landfills.  This is the most efficient and produces the least greenhouse gases, but the gasification process from solids can be expensive.  Sometimes the fuel is already in gaseous form and this can significantly reduce the expense. Biomass needs to be in gaseous form to power a fuel cell.

The three basic biomass costs are capital equipment, fuel costs, and operations and maintenance.  The fuel costs typically include the cost of transporting the fuel to the power plant.  Taxes and insurance are typically factored into operations.  There can be some costs associated with pollution control.

Unlike solar and wind there is an ongoing fuel cost for biomass.  The fuels themselves are competitive or less expensive than conventional fuels, but transportation to get to the power plant can reduce their competitiveness.  A rough rule of thumb is that biomass fuels shouldn’t have to be transported more than 50 miles, less with increasing gasoline prices.

Biomass projects are often vulnerable to shifting markets for biomass fuels.  The option exists to reduce the variability with long-term contracts, but this can prevent the college from taking advantage of lower prices on the “spot” market as fuel becomes available.  The most successful biomass projects have a mixture of long-term, medium-term, and short-term fuel contracts.  

The use of biomass to heat large institutions provides a market for local agricultural and timber wastes that can boost local agriculture and forestry operations.  Other sources include waste from mills or organic waste related to food processing.  The use of biomass fuels can provide significant benefit to the surrounding community.  Depending on the type of fuel and the technology, however, it might not reduce greenhouse gas emissions

Another source of biomass fuel is methane from landfills.  This usually requires entering into an agreement with a company to capture and ship methane gas to an on-campus power plant.  The methane can be blended with natural gas to reduce heating costs.

An anaerobic methane digester converts human and animal waste to methane gas that can be burned for space heating, cooling, or electricity generation.  The capital cost of this technology varies from $1.40 to $8 per watt depending on the number and type of animals used.  900 pounds of manure from any source (including humans) yields 1kW or 24 kWh.

This means a large number of animals are needed to produce a relatively small amount of electricity.  A digester with a small-scale single-cell lagoon and a 75kW generator) costs roughly$375,000 and can reduce electricity bills by about $40,000.  Morrisville State College in New York uses manure from its dairy barn to power a 55 kW Sterling Engine for electricity.

At least one campus is planning to use biogas to power a hydrogen fuel cell. Fuel cells use about half the fuel of conventional power plants but have high up front costs.  

Operations and maintenance costs of biomass generation might increase with increased production.  The total cost of biomass production in the U.S. averages 6.5 cents per kWh, assuming an 80-100% capacity.   This is roughly split equally between fuel, capital, and operating costs.  In some cases, you can sell the ash from biomass production to offset costs.  Having a plant that can burn a variety of biomass waste is important in making biomass financially viable.  Having a college or university buy into a community biomass facility can help make the project more economically viable.

Important Questions for Fort Lewis to consider:

·         What are nearby sources of fuel for biomass energy?

·         What types of biomass fuel and in what form is our current equipment able to burn?

·         What would the payback be for purchasing new heating equipment that could take biomass fuels?

·         What is the average number of cows are at the San Juan Basin Research Center (Old Fort property) over the course of the year?

Geothermal

This technology uses heat from the earth to generate electricity or provide heating and cooling for buildings.  Wells in the ground bring steam or hot water to the surface where it is converted to useful energy.  

There are two-types of geothermal energy: high-temperature and low-temperature.  High temperature is only viable in places with heat relatively close the surface and is usually confined to California, Nevada, and Hawaii.  Low-temperature resources are being used in 23 states.  These resources are not hot enough to turn a turbine and generate electricity, but they can be used with heat pumps  for space heating and cooling.

The Adam Joseph Lewis Center at Oberlin College installed 24 geothermal wells at a cost of $90,000 each for a total cost of $2.16 million.  These pumps provide 100% of the heating and cooling needs.

Geothermal resources sometimes count as energy efficiency measures rather than renewable energy production under different states Renewable Portfolio Standards, opening the door to possible support from local utilities.  

Important Questions for Fort Lewis to consider:

·         Do we have the geology to make geothermal heat pumps a viable option?

·         How are these resources evaluated vis-à-vis the RPS standards in Colorado?

·         How much money could geothermal heat pumps save in buildings around campus?

·         Would wells need to be drilled for each project or could they be drilled in one location and have the heat distributed to several buildings across campus?

Financing Renewable Energy Projects on Campus

Most medium- and large-scale campus projects are funded using several sources.  For example, colleges can combine government grants with operating and/or capital budgets.  Some debt might be involved as well.  This can be structured so that it’s financing will be covered by the sale or savings of electricity generated by the project.   The potential also exists to attract investment from investors interested in the tax benefits of putting money toward renewable energy projects.

Important Questions for Fort Lewis to consider:

·         How much power does a project need to effectively finance a loan so it’s cost neutral for the college?

Federal Grants, Rebates, and Incentives

Most government grants and tax incentives are technology-specific.  Sources of government support include:

Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) – Office provides grants, cooperative agreements, continuation and renewal awards.  Most available funding is for projects connected to research.

USDA – The Woody Biomass Grant Program of the U.S. Forest Service provides grants from $50,000 to $250,000 to increase the use of woody biomass from or near National Forest lands.

Federal Appropriations – Some colleges and universities have worked with their congressional representatives to get earmarks for specific projects.  It often helps to link a project to an educational or research program and have some of the money go to this.

Wind Energy Production Tax Credit – This tax credit provides a subsidy of 1.9 cents per kWh to owners of wind projects over the first 10 years of operation.  It only applies to corporate income, but colleges and universities can work with corporations looking to shelter their income.  The wind project must sell its electricity to an electric utility and so net metering becomes an important part of the finance equation.  Usually only large wind projects (> 1.5 MW) will attract investors.  This tax credit must be renewed by Congress on a regular basis.

Solar Energy Tax Credits – The 2005 Energy Policy Act provides a 30% federal solar tax credit that applies to the investment balance left after any state or utility incentives have been applied.  As with the wind energy tax credit, colleges and universities cannot directly benefit from the credit but must attract investors, such as wealthy alumni, who want the tax benefits.  This tax credit expires at the end of 2007 and must be renewed by Congress.

State Grants, Rebates, and Incentives

State Energy Funds - These funds typically come from a surcharge on electricity sales within the state.  Colorado doesn’t have grant funds but does provide rebates and loans.

State Environmental Funds - Some states have funds to help them meet Clean Air Act requirements.  These funds known as SIP funds are typically administered by the state environmental agency.  These funds can go toward renewable energy projects and/or REC purchases.

State Homeland Security Funds - States can use some of the funding it gets from the Department of Homeland Security for “critical infrastructure” that would include on-site energy projects that could provide emergency power.  None of these funds have gone to renewable energy projects as yet.

EPA Supplemental Environmental Project (SEP) Funds - The EPA will allow a corporation within a community to invest in a renewable energy project in lieu of a penalty.  Colleges and universities can offer a range of investment opportunities to the offending corporation.

Savings from Energy Efficiency

College can typically save 25% of their energy costs by putting money toward improving efficiency.  This money can then be invested in renewable energy or the purchase of RECs.  For this to happen, however, the college must agree to set aside the savings instead of putting it back into the general fund or repaying the capital costs of the efficiency improvements.

Utility Bill Management

Colleges and universities can hire a company to analyze its utility bill for mistakes and overcharges.  The company will take a percentage of any mistakes that help the institution save money.

Major Gifts

A student at Cornell University established a Solar Fund to subsidize renewable energy projects and bring the payback period down to seven years.  The fund currently has $12,000 in it.  After the seven-year period the paybacks from the project will go back into the fund.

General Funds

Colleges and universities have put general fund monies toward renewable energy projects with the paybacks usually going into the general fund

Student Fees

Students around the country have voted in large numbers for student fee increases to purchase renewable energy.  These initiatives range from a few dollars to $25 per semester.  Once such a program is in place, the administration often recognizes the strong student interest and augments the fund.  On some campus’ students and administrators have worked together to organize an energy challenge.  If the campus can reduce its electricity use, the administration will pledge to invest in green power.

Debt

Renewable energy projects are usually within the debt limits for college and universities and are good candidates for debt financing because they generate income.  Many college and universities set up private entities to own and operate the renewable energy project to protect the institution from recourse by the lender.  This can also help get the institution out of mandatory short payback periods often imposed by the state.  Several institutions have had renewable energy project headline bond measures that finance energy efficiency initiatives.

Private Equity Investors

Investors looking for a tax shelter investment might put up capital for a larger energy project.  As a private investor they will receive benefits that the college cannot.  Typically as part of the contract, the actual hardware reverts in ownership to the institution after a period of time, typically 10-years.

Leases

Colleges and universities can lease renewable energy equipment from companies, especially when there is an established market for used or second-hand products.  This is especially true with biomass equipment.  Colleges can sign on for capital leases that will give them the opportunity to own the equipment once the lease is done or an operating lease that results in lower costs.  Usually the leases are structured so the payments are equal to the cost savings from the project.

Performance Contracts

Performance contracts are a financial instrument to spread the cost of an energy installation over a multi-year period.  Monthly payments to an equipment vendor/installer are linked to estimated utility bill savings.  After the contract period, the institution gets all of the savings.  The advantage of this is that it shifts the risk during startup to the vendor/installer.  

Performance contracts are common with short paybacks; they are less common for renewable energy projects.  A contract for a renewable energy project would likely be about 20 years or longer and most vendor won’t agree to these terms.  Colleges can always agree to a shorter contract with a larger payment than the monthly utility savings generated by the project.  Some colleges combine a performance contract for a renewable energy project with one on an energy efficiency upgrade.  This increases the total project cost, but splits the difference on the payback and promises greater long-term savings.  State institutions also might have restrictions of the length of the contracts they are allowed to buy into.

Third-Party Service Model

This is mainly used for PV installations.  Colleges and installations provide the roof space to a solar energy company and agrees to purchase the electricity from the array for a 10-20 year time period at equal or less cost than they pay for normal electricity.  Even if they pay more initially for this electricity, there is a likelihood that it will prove financially beneficial as costs of other forms of energy go up.  

The company assumes all the risk and owns all the equipment.  They also may take title to any RECs or emissions credits that accrue to the project.  The up-front capital for these projects comes from investors that want the tax shelter of investing in solar energy.  At the end of the contract period the college can sign another long-term contract, end the agreement and have the installation removed, or purchase the installation at fair-market value.

Electricity Sales

If a renewable energy project generates surplus electricity the sale of that power can help payback the initial investment.  Most campuses consume all their renewable electricity during the school year, but often their demand drops during the summer.  Regulations on the sale of excess energy differ by state.  Usually the more reliable the power source, the higher the price the utility is willing to pay.  Thus, intermittent sources such as solar and wind, garners a lower price than biomass, geothermal, and hydro that operate 24-hours.

Colleges can sell the excess electricity to consumers directly, but utilities will likely charge a “wheeling” fee to route the electricity to individuals.  More likely is selling RECs to the consumer and selling the power to the utility.

Sale of RECs

As mentioned above, colleges can sell RECs directly to individuals.  But they can also sell them to brokers or REC aggregators, which are private firms.  Colleges interested in building a renewable energy project should contact these brokers to find out their going rate.  Utility companies often buy their RECs from large providers and so might not be interested in purchasing from small-scale, local providers, like a college.

When selling RECs, colleges can structure the contract to be either payment-on-delivery or be pre-paid.  Pre-paid can provide upfront capital for construction.  Payment-on-delivery can be used to service debt payments. The problem is that if the utility isn’t interested in purchasing the RECs, it can be onerous to manage the ongoing sale of RECs to multiple buyers.  You can sell to a broker, but they will offer a lower price because they need to make a profit.

One idea for the future is for college and universities to band together to form their own clearinghouse that would provide a higher price for institutions selling RECs and a lower price for those purchasing.

NOx Emission Allowances

Under certain circumstances it might be possible to convert RECs to NOx emission credits and sell them to state or local governments that need credits to comply with the Clean Air Act.  No college or university has tried this yet.  An institution would need to work closely with the EPA to make this work.

Carbon Credits

Currently carbon is not regulated and so it has limited market value.  If carbon emission reductions (CERs) do increase in market value because of regulation, there is potential for existing projects to be “grandfathered” into the system.  For this reason, it’s important to calculate baseline emissions and reductions.  Both the EPA and the Chicago Climate Exchange have quantification procedures.

Aggregation

Finally, some colleges and universities are banding together to buy green power at lower rates than if they purchased individually.  The UC and CSU system in California have aggregated their purchases and are the largest system thus far to use this practice.

Purchasing Green Power

There are typically four players involved in REC markets:

·         Green power producer who sells RECs

·         Utility who buys RECs and sells them to their customers

·         REC marketer who buys RECs and sells them clients around the country

·         REC brokers who do the matchmaking between willing sellers and buyers

Considerations when buy RECs include:

·         What renewable energy sources are represented by the RECs

·         How the price is structured

·         Whether the RECs are local or national

·         The “vintage” of RECs (month or year they were generated)

·         Are the RECs certified and, if so, by whom?

Choosing Renewable Energy Sources

Colleges can buy pre-set REC packages with percentages of wind, solar, biomass, etc. or put out an RFP for a specific mix of green power and negotiate with the utility or marketer to get what they want.  Wind and solar mixes will likely be more expensive than hydro for example.

REC Pricing

REC prices are affected by more than just the type of energy.  The location, quantity, terms of the contract, and vintage, level of demand and availability in a given region.  Price breaks usually are available for long-term contracts.

Local vs. National RECs

Buying local RECs helps finance local renewable energy projects which supports the local economy.  It also can help improve local air quality by reducing emissions from local coal-fired power plants.  

In most cases, however, national RECs will be less expensive than local ones.  National RECs also offer more options in terms of types of renewable energy.  .

REC Vintage

Older RECs tend to be less expensive than current-year RECs. Older RECs might not be certified.  The advantage of buying new is that colleges and universities are pushing development of the market.  “New” sources are generally those that began operating after January 1, 1997.  

Certification

RECs can be certified by independent groups to ensure that suppliers’ claims are accurate and that they attain certain quality standards.  The two non-profit organizations that certify RECs are the Center for Resource Solutions (Green-e certification) and Environmental Resources Trust (EcoPower certification).   REC marketers pay extra for certification and this is passed on to buyers.  Certification comes with a minimum percentage requirement for new sources.

Green-e certification defines “new” sources as those from facilities operating after January 1, 1999.  Green-e certified RECs cannot be used to meet state requirements for utilities, which prevents double-counting by utilities.  Green-e RECs must also be generated in the calendar year.  

EcoPower certificates define “new” as coming from facilities that began operations on or after January 1, 1998.  

The Western Renewable Energy Generations Information System (WREGIS), sponsored by the Western Governors Association, became operational in 2005 and tracks and verifies renewable energy generation.

The Purchase Process

Before purchasing a college needs to ask the following questions:

·         Who will develop, administer, and judge RFP – internal staff or an energy consultant?

·         How much funding is available for the purchase?

·         How will it be funded?

·         What percentage of the institution’s total electricity will be covered?

·         Are there possible partners for aggregate purchases?

·         Are there additional funding sources?

·         Is there a way to work with the state to obtain SIP credit?

Important questions when institutions compare marketers of green power include:

·         What are the types of green power available?

·         What is the mix of sources?

·         Are there blends of some sources?

·         What is the price differential for different options?

·         Is the power from a local or national source?

·         What are the lengths and terms of the contract?

·         Are you buying a REC or direct green power?

·         Is the power certified?

·         Is an aggregate purchasing plan available?

Buying RECs as a Price Hedge

Most utilities and REC marketers simply add a premium to the price of their regular power.  But this means that as fuel prices go up so does the cost for RECs.  To insulate against the volatile price of fuel you can negotiate a fixed price for 100% of renewable generation.  This helps insulate the institution’s green power purchases from the anticipated rise in the cost of fuel.  This might cost more initially but if the price of fuel goes up it will pay for itself and more over time, while also providing stable budget numbers over the price of the contract.

Utilities can offer this type of hedge fairly easily.  Other REC marketers cannot since they can’t control utility bills, but they can offer a reimbursement for rising electricity bills through a “contract for difference.”  These contracts don’t have to involve green energy.  The marketer and institution agrees on a “strike” price.  When the electricity rate goes above this, the supplier pays the institution.  When it dips below, the institution pays the supplier.  

Quantifying the Environmental Benefits of RECs

NREL (National Renewable Energy Laboratory) has a Renewable Energy Calculator that allows you to calculate the benefits of purchasing green power.

Putting Together an On-Site Generation Project

Issues that make an on-site renewable energy project different than other capital projects include:

·         Utility interconnection issues

·         Revenue streams that affect project sizing and cash flow calculations

·         Ownership issues – is it college-owned, owned by a utility or a third party

Steps in putting a project together include:

·         Resource assessment (wind, solar, biomass, geothermal) and site evaluation

·         Initial economic analysis – calculation of cost per installed kW for each renewable technology; there are several other costs and revenue considerations to make (see pg. 89-90)

·         Cash Flow Analysis – You want to run through the cash flow for up to 10 years.  (see pages 92-94 for examples)

Ownership Options

Connecting to the Grid

The college that wants to connect its project to the grid should be ready to negotiate terms with the utility and understand the requirements of their state’s laws for renewable energy.  Stand-by charges to have emergency power available in case the renewable project fails can be very expensive.

Power Purchase Agreement

If a college is depending on power sales to finance a project they will typically need a PPA that’s at least 10 years in length to get banks to provide a loan.  

Interconnection Agreement

As part of the interconnection agreement, the utility might request an interconnection study that can cost up to $50,000.  For projects smaller than 1.5 MW these studies are not really necessary and often are simply a strategy to discourage small-scale renewable projects.  There are federal rules for how large a project need to be in order to require a study.

Pre-Construction Arrangements

Aspects of constructing the project include design work, studies (permitting, interconnection, etc.), and warranties and guarantees.

New Areas for Colleges and Universities to Explore

Some new directions to explore in the future with colleges and universities include:

Initiate cooperative, community projects – Cooperative projects with K-12 school districts, municipalities, and non-profit organizations can allow an institution to buy into a larger project

Bundle Projects with Other Colleges and Institutions – Consortiums of colleges can come together to purchase RECs or invest in on-site generation.  This can lower the cost and provide more leverage in negotiations with utility companies and energy marketers.

Invest in Renewable Projects Off-Campus – Investments in wind farms and other technologies off-campus can given campuses access to low-cost RECs and provide dividends from electricity sales.  Colleges can work together to combine investment resources.  

Establish a REC Clearinghouse – This is again the idea of banding together with other groups or organizations in the community to purchase and sell RECs as a way to generate income.