Expanding Green Power - A New Business Model

8/14/2019 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

ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL


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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


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


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.



10/15

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.


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



12/15

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

ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL I.


13/15

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

ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL II.


14/15

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.

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ExPandinG GrEEn PowEr: A NEW BuSINESS MODEL III.


15/15

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

ExPandinG GrEEn PowEr:A NEW BuSINESS MODEL IV.

Gle hges

Pete wege

Expanding Green Power - A New Business Model

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