Expanding Green Power - A New Business Model
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Epg Gee Pe:A New Bsiness Model
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Oveve
A new milestone or the wind power indstry was
set in March, 2008, when Steelcase Inc., the
international oce rnitre company, annonced a
long-term nancial commitment to spport a wind
arm to be bilt in Panhandle, Texas. Never beore
had one company made a long-term commitment
to prchase all the renewable energy credits
(essentially the property rights to the environmental,
social, and other non-power qalities o renewable
electricity generation) and the associated naming
and branding rights rom a acility.
Even without the naming rights
thrown in, it is unusual or a company
other than a utility to buy all o the
energy credits o a project beore
it is built, reported The New York Times.1
The project was a milestone or Steelcase, too.
The wind arm, developed by John Deere
Renewables and operational in 2008, eatres eight
trbines and generates p to 35,000 megawatthors o electricity each year. Thats enogh to
power 2,925 homes and represents the eqivalent
o 20% o Steelcases electrical sage or its
North American operations. The wind arm was
named the Wege Wind Energy Farm, provided by
Steelcase, ater ormer board member Peter Wege,
an environmental pioneer who has long spported
Steelcases environmental eorts. As sole sponsor
o the wind arm, Steelcase is the largest byer o
wind power in the rnitre indstry.
The organizations involved in this project were
broght together by Renewable Choice Energy,
a leading retailer o renewable energy credits.
This partnership demonstrates an improved way
to nance wind power projects, with increased
vale to both wind power developers and corporate
renewable energy consmers. The project alsoestablishes a new way or companies to accelerate
the growth o renewable energy while demonstrating
their commitment to sstainability and conserving
the worlds non-renewable resorces.
In this paper, we review the innovative bsiness
partnership developed or this wind energy arm,
explain the basics o sch a project, and provide
a model or other organizations interested in
spporting green power generation and realizing
its benets or their bsiness.
Busess Ebes
Sustblty
Over the years, more companies have incorporated
higher standards o environmental responsibility
into their bsiness practices. For example:
+ In 1991, the Body Shop stopped sorcing any
ingredient or its beaty prodcts sbject to
animal testing.
2
+ In 1999, Ben and Jerrys introdced the ice
cream indstrys rst pint container made rom
nbleached paperboard.3
+ In 2006, Whole Foods Market Inc. annonced
it wold by 485,000 megawatt hors o wind
energy credits annally, an amont eqal to its
corporate electricity needs.4
Bsinesses have taken these initiatives or many
reasons: to respond to consmer demand, to meet
new environmental standards and legislation, or
rom an increased commitment to the environment.
Bt many organizations are taking a more holistic
view o sstainability, the triple bottom line, or
TBL. This perspective, sometimes called people,
planet, and prot, addresses more than what an
02
1 Corporate Sponsorship or a Wind Farm, by Claudia H. Deutsch, The New York Times, March 18, 2008.
2 Against Animal Testing, accessed June 10, 2009 : http ://www.thebodyshopusa.com/bodyshop/values/against_animal_testing.jsp.
3 Environmental Action/Company History, accessed June 10, 2009: http: //www.benjerry.com/company/history/
4 Whole Foods Switching To Wind Power, CBC News.com, Januar y 11, 2006
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organization can do to protect the environment. It
views sstainability as a two-way street, a means tostrengthen the organization, create vale or society
while protecting the environment at the same time.
When a company nrtres environmental, social,
and economic resorces, it in trn helps ensre the
tre o the organization and all o its stakeholders.
Ths, the organization both receives and provides
benets with a triple bottom line approach.
Steelcase embraces the TBL strategy. It is part o
its long history o orward-looking environmental
action. Over the years the company:+ pioneered a manactring process to crb
polltants in the painting process, which
garnered a national award in 1983 rom the
Presidents Concil on Environmental Qality
+ bilt the rst manactring acility in the world
to achieve LEED certication, in 2001
+ eliminated the emission o almost all volatile
organic componds (VOCs) rom its metal
nishing operations in Michigan, in 2003
+ was the rst company to receive Cradle toCradle Prodct Certication in 2005, and
contines to take the indstry lead in C2C
prodct certication
+ in 2006 committed to redcing its environmental
ootprint 25% by 2012, the 100-year anniversary
o the companys onding
We are constantly seeking
more eective ways to conserve
resources, prevent pollution and
nurture environmental consciousness
in our people every day, says Nancy
Hickey, Steelcase senior vice president and chie
administrative ocer. Investing in wind power
seemed a natral evoltion o the companys
on-going sstainability eorts.
Wind Power
The wind power indstry is growing rapidly, bt still
small. In 2007, the installed wind power capacity in
the united States increased by 45%.5 Despite this
growth, the percentage o overall electricity genera-
tion by renewable sorces remained jst 2% o the
nations spply. Yet many experts say wind power
cold saely and eectively satisy more than 20%
o the u.S.s electricity needs,6
and o all renewableenergy sorces, wind power has the greatest near-
term potential to generate a sbstantial amont o
carbon-ree electricity at prices relatively competi-
tive with existing ossil el types.
Record growth in the u.S. wind indstry contined
in 2008 when wind energy developers installed
8,545 megawatts (MWh) o capacity in the u.S.,
acconting or 42% o al l new power-prodcing ca-
pacity added in the contry. Wind arms generated
approximately 52 million MWh o electricity in 2008,
enogh to power seven million average hoseholds
while helping to avoid nearly 44 million tons o car-
bon emissions, similar to taking over seven million
cars o the road.7
Wind arm development, like other capital-intensive
enterprises, has elt the eects o the global nan-
cial crisis. Despite the most signicant commitment
made to renewable energy in u.S. policy history
by the American Recovery and Reinvestment Act
(also known as the stimls bill), signed into law
by President Obama in Febrary 2009, new wind
power installations are expected to all in 2009 rom
their record levels o 2008. This is largely de to in-
creased capital expenses and a sbseqent redc-
tion in private investment. The indstry is sensitive
03
5 American Wind Energy Association
6 20% Wind Energy by 2 030: Increasing Wind Energys Contribution to U.S. Electricity Supply, U.S. Department o Energy, May, 2008
7 American Wind Energy Association Annual Report, 2009
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04
ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL
to changes in government policy and economic
conditions, and has long soght additional revene
streams that can promote its growth and develop-
ment. The new sponsorship model is one sch
revene opportnity.
Green Power Purchasing
Many companies and tility reglators over the
years have been eager to spport renewable
energy, bt oten encontered a disconnect
between their location and where the best
renewable resorces are located. Wind power is
a good example. The nations power grid is most
extensive in the most poplated, rban areas, while
the wind tends to be strongest and most consistent
in sparsely poplated areas ar rom the grid.
As a way to encorage partnerships between
renewable energy byers and renewable energy
developers, the renewable energy credit, or
REC (prononced rk), was developed. Initially
created or states to have their tilities comply
with mandated renewable energy targets, RECs
are the ormal acconting mechanism or tracking
renewable energy added to the grid.
Heres how it works. Each time a wind or solar
energy arm generates 1,000 kilowatt hors
(or 1 megawatt hor) o electricity, it also generates
a REC. A REC represents the positive benets
o that electricity (the environmental, social, and
other non-power qalities o renewable electricity
generation). The sale o RECs provides renewable
energy project developers with an additional
revene stream that allows them to compete better
with ossil el prodcers. For byers, RECs provide
fexibility in both procring green power across
a diverse geographical area, and in applying
the renewable attribtes to electricity se at a
acility o choice.
Some RECs are certied and veried nder the
Green-e Energy program rn by the nonprot
Center or Resorce Soltions, the nations leading
independent consmer protection program or
the sale o renewable energy and greenhose gas
redctions in the retail market. This certies that
the energy comes rom a project that is developing
new renewable energy acilities and meets the
Green-e National Standard, and that each REC is
sed only once.
Huge Growth Yet Still
A Small Part o the
Nations Energy Production
Record growth in the u.S. wind
power indstry contined in 2008,
yet all renewable energy sorces
accont or jst 2% o the nations
electricity. A togh economy and
the lack o a long-term national
renewable energy strategy have
made renewable energy projects
riskier, and cased the indstry to
seek new revene streams.
25000
Net Capacity Additions
Wind capacity additions in 2009 were 9558. 12.5 MW of wind power were decommissioned.
Cumulative Capacity
20000
15000
10000
5000
081-83 84-86 87-89 90-92 93-95 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Thanks to RECs, the adoption
o renewable portolio standards
(mandates or alternative energy
generation by many states), and
production tax credits, the green
power market has grown dramatically
over the last decade.
Organizations in many indstries have prchased
RECs, ranging rom Intel Corporation and the
university o Pennsylvania to the Philadelphia
Phillies baseball clb.8
Steelcase has prchasedrenewable energy credits since 2001 as part o
a comprehensive energy strategy. RECs were a
consideration in its commitment to the Wege Wind
Energy Farm. Bt the innovative strctre o the
bsiness partnership and the opportnity to directly
impact the growth o green power generation were
the major actors in the decision.
05
8 2008 Award Winners, Green Power Leadership Awards, US Environmental Protection Agency, Green Power Partnership,
www.epa.gov/greenpower/awards/winners.htm#inte, accessed June 9, 2009
9 Bird, Lori, National Energy Lab presentation to National Renewable Energy Marketing Conerence, Denver, October 27, 2008
ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL
Volntary prchases are critical to the REC market.
These prchases accont or over 50% o the
demand or RECs, exceeding the demand rom themandated state renewable portolio standards.9
20072006200520042003
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Voluntary Markets
Compliance Markets
(New Renewables)
ThE imPorTancE o rEcs
Selling o RECs makes the constrction o
more renewable energy generation plants
possible and also makes existing renewable
generation more commercially viable.
Tim Swanson, Director of Origination
Florida Power & Light
Tee st sgle eeble lty
tt ges le ts uty ee
rEcs et see te efg.
David Drescher
Vice-President, Wind Energy
As wind trbines are becoming more and
more expensive, yo have to have every
revene stream on the back end to cover
yor costs. Renewable energy certicates are
critical to or projects.
Chris Crowley, President
Columbia Energy Partners
T y evelpe g
tys ket, eeble eegy ets
e tl t te eveue ste
tkg pjet ve te tp.
David Osborn, Dir. Operations & Engineering
Oklahoma Municipal Power Authority
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Gee Pe Spssp
Companies typically obtain green power by pr-
chasing RECs rom an energy retailers portolio.
Retailers sch as Renewable Choice Energy pool
RECs rom wind arms across the contry and
channel them to byers. This arrangement provides
some eciency in the REC system, since byers
can spport renewable energy generation wherever
it is most viable, regardless o their own location.
It also allows byers to prchase as many or as ew
RECs as they desire, regardless o any individal
wind arms prodction capacity or REC reveneneeds.
Renewable Choice conceived o the sponsorship
model or green power prchasing sed to orm the
Wege Wind Energy Farm project, a model that has
been called green power sponsorship.
A nmber o cstomers wanted to make a closer
connection to the wind arms they spported,
recalls Qayle Hodek, Renewable Choices CEO.
We also wanted to help wind developers earn
additional revene to ensre not only the completion
o this project, bt also improve the prospects or
tre projects. By selling sponsorship rights to the
acilities we cold help provide additional vale to
both parties.
John Deere, like most developers in the nascent
wind power indstry, mst overcome signicant
hrdles to develop projects that are nancially
attractive. Sponsorship made the wind arm
nancially easible. Without a doubt,
the sponsorship rights played a vital
role in that project moving orward
and being constructed, recalls David
Drescher, Vice-President, Wind Energy.
Te Sty Ptesp
Renewable energy projects typically involve a
landowner, developer, renewable energy marketer,
and sponsor. The le owns the land on
which the wind arm will be developed. In this
case, the landowner was Glenn Hodges. His ather
prchased the land in 1952 otside Panhandle,
Texas, and sed it or growing grain crops. (See the
sidebar A Shared Legacy) It was the landowners
brother who rst sggested wind trbines or the
320-acre site.
In most cases, the landowner is contacted by
a evelpe, seeking to bild a wind arm. The
developer is responsible or identiying the site,
secring the wind trbines or installation, acqiring
necessary permits, and overseeing constrction
and connection to the local tility grid. The devel-
oper sells the projects electricity and its RECs,
and monetizes any tax benets rom government
programs promoting renewable energy. For this
project, the landowner contacted the developer,
John Deere, and worked as co-developer.
John Deere arranged to sell the electricity to the
local tility company. To sell the RECs, it trned to
Renewable Choice Energy, a eeble eegy
kete, or retailer. As a leading REC and carbon
oset marketer in the u.S., Renewable Choice ag-
gregates RECs rom wind arms arond the contry
and sells them to corporate, non-prot, govern-
mental, and consmer byers, sch as Whole
Foods Market, Vail Resorts, the State o Pennsylva-
nia, and others.
Renewable Choice conslted with John Deere and
identied the Texas Panhandle project as ideal or a
corporate sponsor partnership.
06
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They developed a specic prole or the right
sps:
+ an organization with a long-term commitment to
environmental sstainability
+ past experience in prchasing renewable energy
throgh RECs
+ the vision to innovate throgh a new model
Steelcase t this prole, had been actively seeking
ways to promote and spport renewable energy,
and became the project sponsor.
Te ne mel Tkes Spe
This Steelcase green power sponsorship eatres
a nmber o noteworthy innovations to the standard
renewable energy project:
+A commitment to an individual wind arm.
In the traditional model, byers prchase RECs
rom a portolio o credits, and spport a portion
o a nmber o arms. In this case, Steelcase
established a connection with a single arm and
agreed to prchase all o its expected prodction.That assred the developer and reseller o a
long-term commitment, and allowed the sponsor
a closer relationship with the project.
+A long-term commitment in the fnancing stage.
Typically, byers prchase RECs generated by
existing wind arms. In this model, Steelcase
made a commitment to prchase ve years
o RECs rom a wind arm beore it became
operational. Renewable Choice committed to
by an additional three years, with Steelcasehaving rst option to by RECs in those years.
Steelcase also provided credit assrance to back
its commitment. These commitments allowed
John Deere to redce its risks and the costs,
and made the project more nancially attractive.
+Sponsorship rights. Becase o its long-term
commitment to an individal acility, the greenpower sponsorship allowed Steelcase to assme
all naming, branding, and marketing rights
associated with the wind arm. Throgh naming,
the company was able to honor the work o
Peter Wege, a longtime environmentalist and
ormer Steelcase board member.
Innovation oten presents challenges.
A major one in this project was the potential
or prodction shortalls or overages. For
example, conventional REC contracts involvea xed nmber o RECs; the acility is already
in operation and prodction is a more known
qantity. In the new sponsorship
model, however, the proposal was
or the purchase o all o the RECs
produced by a acility not yet in
operation and with no production
track record.
I the acility nder-prodced, it might not cover the
eqivalent o 20% o Steelcases North American
operations power reqirements, its stated goal.
I the acility over-prodced, Steelcase wold be
committed to prchasing additional RECs that it
might not have bdgeted or.
Renewable Choice presented the soltion.
They contracted to cover short-alls at an agreed-
pon price in the event o nder prodction.
In the event o over-prodction, they agreed to
retain the additional RECs i Steelcase chose
not to prchase them.
Renewable Choice transacts with many wind
energy prodcers and byers, so we have access
to a ready market or RECs. We cold oer RECs
to Steelcase commensrate with their environmental
commitments, regardless o the otpt o the
07
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Wege Wind Energy Farm, explains Jstin Segall,
director o resorce development or RenewableChoice.
The new model contract details:
+ John Deere agreed to sell to Renewable Choice
all o the RECs generated in the rst eight years.
+ Renewable Choice agreed to sell Steelcase the
rst 35,000 megawatt hors o RECs each year
or ve years, with an option to prchase any
additional RECs the project prodced in any
given year, inclding years 6-8 o the project.
+ To acilitate the transaction, Steelcase provided
John Deere a credit garantee or the amont it
committed to prchase rom Renewable Choice.
+ Steelcase and John Deere signed a marketing
agreement granting Steelcase sponsorship rights
or the project; Steelcase named the arm the
Wege Wind Energy Farm, provided by Steelcase.
+ John Deere completed the development o the
Wege Wind Energy Farm.
Evlutg te opptuty
Steelcases role as the sponsor in this ventre is o
particlar importance. The internal decision-making
process that led to their participation is illstrative
or others considering a renewable energy project.
The wind arm represented an additional expense
or Steelcase, and decision makers evalated it
against other energy projects. The key actors in
their decision were:
A Corporate Culture CommittedTo Environmental Action
As noted earlier, Steelcase has made environmental
action an integral part o its bsiness practices or
many years. Its interest in energy stems rom this
history. For example, the company has redced
its electrical sage by over 30% in North America
over the past ve years throgh an energy demandmanagement team ocsed on eectively manag-
ing and redcing consmption, and working with
spplier partners to initiate energy strategies.
We take into accont the environmental impact
o or decisions, explains Steelcase exective
Nancy Hickey. We look holistically at or
operations and their impacts, and have ond
that investments in the environment
have also positively beneted our
bottom line.
Related Goals
Steelcase exectives did not view the wind arm
project in isolation, bt rather alongside other
corporate goals, sch as its commitment to
redce its global carbon ootprint by 25%, its
work toward environmental prodct certications
reqiring renewable energy prchasing as a
criteria or compliance, and other objectives.10
Or goals were not to nance a wind armnecessarily, bt to spport expansion o
renewable energy, to contine or environmental
stewardship, and to make sre the project made
nancial sense. We looked at the project jst as
we wold any other, within the large goals and
objectives or the company. It was a good t
within our overall mission, says Mark
Baker, Steelcase senior vice president, global
operations ocer.
An Internal Champion
The companys Global Spply Chain Management
Department was the principal contact with
Renewable Choice, and presented the wind
power project to internal stakeholders, explaining
0810 Steelcase has achieved a number o product certications and continues to pursue more. These certications include Cradle to Cradle,
BIFMA e3/ Level, and its products contributions to LEED building certication.
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the proposed sponsorship, costs and benets,
and how it cold t into Steelcases overallenvironmental eorts.
Research
The Global Spply Chain team condcted
sbstantial research on renewable energy, wind
power, and related topics. O particlar interest
were articles and opinions qestioning o-site
renewable energy projects and RECs. This helped
the company step back rom this particlar project
and consider what impact Steelcases involvementwold have on larger environmental trends.
Local Consideration
Steelcase originally soght a wind energy project
in its home state o Michigan. Its estimated the
state is one o the top 20 states in terms o wind
energy potential,11 and it has a small bt developing
wind power indstry. However, the state did not
have a renewable portolio standard (RPS) in place.
An RPS typically incldes tax credits and sets
renewable energy mandates. Conseqently, wind
projects in Michigan were limited in nmber and
very small in scale; larger projects were located
in states that have had RPS legislation in place
or some time. (Michigan since passed an RPS in
October, 2008.)
Compelling Facts
Steelcase developed a list o compelling acts that
spported the wind arm investment. The proposed
project wold:
+ spport the companys carbon redction goals
and prodct certications
+ be a high eciency, distribted generation acility
a renewable energy project the company cold
be prod to spport
+ be located in the same region as two o
Steelcases manactring acilities (in Texasand Oklahoma)
+ be broght online qickly
We werent as concerned abot the economics as
mch as the viabi lity o the project, recalls Baker.
Wed stdied this indstry or some time.
Collective Commitment
The wind arm sponsorship wold aect dierent
divisions within Steelcase, and three bsiness
nits agreed to share the costs o the projectand sponsor responsibility: Global Operations,
Steelcase North American Prodct Grop,
and Global Environmental Sstainability.
We sat down with the CEO and
said we all have to be together on
this. The project provides signicant
benets across the organization,
says James Keane, president o Steelcase
North America.
Gteg metu
The Wege Wind Energy Farm prodced its rst
energy on April 23, 2008, althogh it wasnt lly
operational ntil September, 2008. Throgh the
end o the rst qarter, 2009, the wind arm had
prodced 17,881,000 ki lowatt hors o clean,
renewable energy.
The wind arm electricity otpt ramped p more
slowly than expected de to delays in eqipmentdeliveries and meter isses. Sch challenges are
not ncommon in the early stages o a wind arm,
and were resolved by John Deere and its team. The
Wege Wind Energy Farm then began generating
at and above its expected level o approximately
0911 American Wind Energy Association estimate, http:// www.awea.org/aq/w wt_potential.html, accessed June 10, 2009.
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2,500 megawatt hors per month and contines
at this pace today. I the wind arm contines toprodce at this slightly higher than expected level,
it will prodce over 40,000 megawatt hors by
the end o 2009, well above the 35,000 megawatt
hors anticipated.
Sps Beefts
Steelcase has realized a nmber o benets rom
the Wege Wind Farm. Among them:
Renewable Energy Credits. By virte o its
commitment to the Wege Wind Energy Farm,
Steelcase will receive RECs that it can se or
a nmber o prposes, inclding redcing its
greenhose gas emission prole, their primary
application. The RECs also are sed to a small
extent to help achieve environmental certication
or prodcts.
Positive Media Coverage.The Wege Wind
Energy Farm and its innovative sponsorship modelwere the sbject o positive coverage in The New
York Times and many other pblications and online
blogs. A ew typical comments:
+ Today, green oce rnitre company Steelcase
strengthened its case as a green company
embracing real green ideals and walking the
walk. And they might have jst helped to raise the
bar or green bsiness in the process.12
+ The move is part o the companys plan o
redcing its carbon ootprint 25% by 2012.
Thogh ncommon now, some expect similar
actions in the tre.13
+ Sstainability is nally becoming more than a
bzzword, and morphing into a real bsiness
imperative.14
Enthusiastic Customer Response. While the
company has not made a major eort to promote
the wind arm, Steelcase cstomers have made
it an icon o the companys environmental
commitment. The reaction to the wind arm
rom trade show and conerence attendees is
consistently positive. A typical response: I love
yor wind arm. I we werent doing the other
things, people wold see right throgh it, says
Keane. The wind arm is jst one example o or
commitment to sstainabil ity.
Positive Employee Reaction. Pictres o the
Wege Wind Energy Farm can be ond in many
o Steelcases acilities arond the world, and
employees have responded with pride and
enthsiasm. Its been a hge home rn roman employee perspective, says Nancy Hickey.
Employees jst think its cool. It creates a story
to tell at a dinner table. Were all raising kids with
higher environmental expectations than s. This
gives s something they can all relate to.
10
12 Steelcase Walks the Green Walk, Buys Naming Rights to Wind Farm, Treehugger, March 18, 2008.
13 Steelcase Makes Five-Year Commitment to Texas Wind Farm, GreenBiz.com, March 19, 2008.
14 Alt-energy grows like a breeze, thanks to corporate purchasers. Tri-Cities Business Review, March 20, 2008.
ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL
Monthly Production
2,000
0
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Monthly Production Cumulative Production
Monthly and Cumulative Productionrom the Wege Wind Energy Farm
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Furthering Environmental Goals. Overall, this
is probably or biggest win rom this project,
says Steelcase CEO Jim Hackett. The wind
arm does a lot o great things rom
a triple bottom line perspective. But
most important is that it inspires
others to think dierently, to see that
there are ways to change how we
do business. Thats going to be the
key to being successul not only as a
company, but as an industry and in
the overall economy.
rpple Eets
The sponsorship model pioneered by the Wege
Wind Energy Farm has made a signicant
impression on the renewable energy commnity.
The annoncement generated considerable interest
in the trade press and has been discssed at a
nmber o national renewable energy conerences.
Since the annoncement, a second wind arm
sponsorship has ollowed the Steelcase model:
the university o Oklahoma has partnered with
Oklahoma Gas & Electric to sponsor the Sooner
Wind Farm. They ollowed closely the new green
power sponsorship model, says Jstin Segall o
Renewable Choice.
Many cstomers have expressed interest in the
new model, according to Renewable Choice.
With the Obama administrations stimls package
schedled to pmp $38.7 billion or renewable
energy into the Department o Energy15, the hope is
that green power projects, inclding wind energy,
are primed or growth.
One stimls program oers sbstanial cash grants
to help cover the cost o renewable energy invest-
ments. The program, which began Jly 31, 2009
and is slated to rn throgh the end o 2010, oers
a cash rebate or 30% o the cost o bilding arenewable energy acility. The rebate is awarded
60 days ater an application is approved (vs. tax
credits over a 10-year period in an earlier program).
Investors are also given valable accelerated
depreciation dedctions, which help oset taxes.
Morgan Stanley and Citigrop Inc., took advantage
o the program almost immediately investing
$100 million each to nance separate wind arms
in Montana and Pennsylvania, respectively.
There is no spending cap on the renewableenergy grants and the government has committed
to spending as mch as is needed to keep
renewable energy investments growing. According
to The Wall Street Journal16, most o the stimls
nding is expected to go to wind projects, as the
indstry is more matre and in a better position to
captre limited nds. Additional nancing rom the
grants have the potential to benet not only wind
arm developers bt the manactrers who make
the trbines.
Plus, Plus, Plus
The commissioning o the Wege Wind Energy Farm
marks the beginning o a new model or renewable
energy development. For the rst time, a corpora-
tion with a core sstainability mission and a triple
bottom line perspective provided crcial spport in
the nancing stage to help develop a wind energy
arm. Steelcases action prodced positive benets
or the nations electricity mix, its cstomers and
employees, and its bsiness operations.
This sggests the green power sponsorship model
will be an important piece o the renewable energy
pictre or years to come, acting as a way or
experienced byers to invest in a signatre project
that can provide wide ranging benets.
1115 2010 Budget Blueprint: Agency by Agency, The Washington Post, www.washingtonpost.com, accessed June 9, 2009
16 Wind Farms Set Wall Street Afutter, The Wall Street Journal, August 31, 2009
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As ossil el prices rise along with worries
abot their role in global warming, manycompanies are considering investments in
renewable energy. A wind arm sponsorship,
or the prchase o RECs rom wind energy
arms, are two ways to get involved with
green power.
Wind Farm Sponsorship
For companies that can make the reqired long-
term commitment, a green power sponsorship is an
exciting way to deepen a commitment to renewable
energy development. To see i a sponsorship is right
or yor organization, consider:
+vluea sponsorship is best sited to large-
scale prchases; while there is no specic
minimm, it generally reqires a commitment
o 15,000 to 50,000 MWh per year
+pgsponsorship costs more than
nationally sorced RECs
+sustbltygreen power sponsorship is
best sited to organizations with an overallcommitment to environmental sstainability,
not as a single initiative
+etsponsors get involved at the nancing
and development stage, which reqires
a credit-worthy prchase that can be
incorporated into the project nancing
+tgwind power projects are ond in
varios development stages, and it can take
time to match organizations with the most
appropriate projects.
Renewable Energy Credits
Bying RECs is an easy and eective way to
improve yor organizations environmental
perormance. The basics steps to prchasing
RECs are simple:
+ dene yor gztl glshow
does renewable energy t with yor overall
sstainability goals?
+ estimate yor annal eletty usese
online calclators (see below)
+ locate and puse RECs
+ute yor commitment
Many resorces can help organizations nderstand
and prchase RECs:
+ u.S. Environmental Protection Agency oers
the Green Power Partnership, a volntary
program that spports organizational procre-
ment o green power by oering expert advice,
technical spport, and other resorces.
+ u.S. Department o Energy provides additional
resorces via the Green Power Network, with
inormation on green power providers, prodct
oerings, consmer protection isses, and
policies aecting green power markets.
+ Online calclators help organizations organize
and estimate their green power needs.
Renewable Choice has an online calclator
or estimating an organizations electricity
consmption.
Note:The Wege Wind Energy Farm RECs are certied and veri-
ed by Green-e Energy, the nations leading volntary certication
program or renewable energy. This assres that the renewable
energy meets environmental and consmer protection standards,
and reqires sellers o certied renewable energy to disclose clear
and sel inormation. Prchasing certied RECs encorages
responsible development o electricity prodcts that minimize air
polltion and redce greenhose gas emissions. For these rea-
sons, always prchase RECs that are Green-e Energy certied.
Gettg ivlve t Gee Pe
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Renewable energy credits have not been withot
their critics. Given the intangible natre oenergy credits, a concern has been whether the
environmental attribtes o renewable energy can
be claimed by two dierent parties, or doble
conted. To avoid this sitation, the Center or
Resorce Soltions, an independent watchdog
organization, started the Green-e program to
certiy that renewable energy prodcts are not
doble conted, and that all appropriate reglatory
bodies are aware o sales and transers.
REC tracking systems also have been
implemented in every state to monitor
the transer, sale, and retirement o
RECs. In the case o the Wege Wind Energy Farm,
or example, the RECs are Green-e certied and
tracked by the state o Texas.
Some critics qestion whether RECs are meeting
the prpose o encoraging new renewable energy
capacity. I a wind trbine operation is bilt beore
the RECs are sold, did the RECs really help add
new renewable energy capacity? This idea is called
additionality, and it can be diclt to prove that
the prchase o specic RECs provide additionality.
Many people take a larger view, and arge that
every REC prchased, every nancial investment in
the development o renewable energy, helps rther
the indstry and the overall market or green power.
An upront green power sponsorship,
such as the Wege Wind Energy Farm
model, provides long-term nancial
support or a project beore its bilt; its easy to
arge that sch a sponsorship does in act driveadditionality.
Perhaps the major criticism o RECs is that they
can be a way or companies to by their waytoward achieving environmental goals. While a
company may be contribting to global warming in
one part o their operation, the prchase o RECs
is only intended, critics say, to make p or those
environmental sins. This criticism is the most
diclt to assess. Theres no clear ct way to
determine a companys intentions in bying RECs,
and no dobt some companies prchase RECs or
the wrong reasons.
How shold a companys environmental intentionsbe jdged? Perhaps the best approach is to
consider the companys overall record. Steelcase
North America president James Keane pts
it simply: People recognize green
washing. They know whats hype
and whats or real.
Others make similar observations. To make
real progress, genuine accomplish-
ments will have to be sorted out
rom eel-good gestures, suggests
BusinessWeek in a cover story abot corpo-
rate environmental eorts. (October 29, 2007) The
article cites sch accomplishments as Wal-Marts
promotion o compact forescent light blbs over
more protable incandescents, and Oce Depots
overhal o its store lighting and energy se, among
other examples. Many companies, inclding
Steelcase, make their environmental record pblic
via corporate responsibility or triple bottom line
reports. Sch companies arent waiting or morereglation o carbon emissions or renewable energy
mandates. Theyre taking responsible actions now
to improve their environmental perormance. That
can inclde bying RECs or the right reasons.
RECkg t te Quests
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Developers o tility-scale wind power projects have a range o nancing strctres
to consider. At the most ndamental level, all projects generate income romor components: electricity sales, asset depreciation, tax credits, and renewable
energy credits.
Wholesale Electricity Sales
Typically, a Power Prchase Agreement (PPA) serves as the legal contract between
an electricity generator (wind arm) and a cstomer (tility). These agreements play
a critical role in the nancing o electricity generating assets.
Asset Depreciation
under the ederal Modied Accelerated Cost-Recovery System (MACRS), bsinesses
may recover investments in certain property throgh depreciation dedctions.A nmber o renewable energy technologies are classied as ve-year property.
Federal Production Tax Credit
The renewable energy prodction tax credit (PTC), a credit o 2.1 cents per kilowatt-
hor, is the primary ederal incentive or the prodcer o electricity rom wind energy.
The American Recovery and Reinvestment Act passed in 2009 extended the PTC
or three years, and provided an increased level o certainty or project developers.
Renewable Energy Credits
To help acilitate the sale o renewable electricity nationally, a system was established
that separates renewable electricity generation into two parts: the electricity orelectrical energy prodced by a renewable generator and the renewable attribtes
o that generation. These attribtes inclde the greenhose gas emissions that were
avoided by generating electricity rom renewable resorces instead o conventional
els, sch as coal, nclear, oil, or gas. The renewable attribtes are sold separately
as RECs.
g a w
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Two key players in the wege w Eegy
storythe original owner o the site o the Wege
Wind Energy Farm, and the man the project is
named orshare a bit o history.
This is the arm where
I grew p, says Glen
Hodges, crrent
owner o the wind arm
property. My mom
and dad owned this
property or over ty
years. Glens dad,
Floyd Mark Hodges,
joined the Army Air
Corps dring WorldWar II, became a navigator, and served in the Soth
Pacic. In 1952, he and his wie boght a hal-
section (320 acres) o property near his parents
arm otside the town o Panhandle, Texas (pop.
2,589). Floyd Mark retired as a lietenant colonel
rom the Air Force, settled into the li e o a armer,
raised wheat, grain sorghm, and six children.
I remember when we were kids we sed to sit
otside with my dad. As a navigator he knew his
way arond the stars. He wold point ot the
constellations to s.
Abot the same time Floyd Mark was navigating
planes, another air corpsman, Peter Wege,
a pilot rom Grand Rapids, MI, was errying Army
Air Corps planes arond the u.S. beore being
deployed to North Arica. One o his rotes
changed his lie.
Wege was delivering a training plane to West Point
on a clear, snny day as he approached Pittsbrgh,
PA at a low altitde. Bt he coldnt see the city: it
was obscred by smog.
I couldnt see the ground at three
oclock in the aternoon, even though
I knew I had to be fying right over it.
He got a new heading rom the airport tower, they
trned on the landing eld lights, and he nally
ond the airport. Bt his rst experience with
environmental polltion aected him deeply. It was
the start o a lietime commitment to protect and
improve the environment. In time Wege ormed
and nded a ondation to spport environmental
work, and wrote a book abot the relationship
between economics and ecology. Throghot his
career he has invested a large share o his time,
eort, and ortne in prsit o a sstainable tre
or the planet.
The link between two ormer fyers, both dedicated
to sing the environment wisely, adds a special
toch to the wind arm or landowner Glen Hodges.
My dad wold be prod, and pleased by the
aliation with a el low Air Corpsman.
a Se Legy
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Gle hges
Pete wege
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