Conversations with Corporate Decision Makers: #1 Green Power
This is how it usually goes.
Him/her: Hi Mr. Carbontrader thanks for meeting with me today.
Me: No problem Fortune 500 Decision Maker.
Him/her: I have some questions today that pertain to our environmental stewardship goals and carbon risk in general and I hope can help.
Me: Fire away.
Him/her: So, first of all we are looking at purchasing renewable energy for our corporate headquarters and we've called our local utility. They offer "Green Power" for an additional 2 cents per kilowatt hour. That's pretty good right, its just 2 cents.
Me: No, that's awful. As a matter of fact its insulting that they would charge you that much considering that you are trying to make a socially responsible decision.
Him/her: What do you mean? How much does that come out to in dollars per year?
Me: Well, lets do some quick math. Do you know how many kWh you use per year at your facility?
Him/her: Well, I do have that information somewhere, but our facilities manager pretty much handles that.
Me: Ok, in lieu of that number we can make an estimate using information you should know. Answer these questions:
1. How many square feet does your facility occupy?
2. What type of use is it? (Educational, office space, grocery, manufacturing,
Him/her: Let's say 100,000 square feet and it happens to be office space
Me: Okay, so all we need to do is multiply your square footage times your median electical intensity. This number generally ranges between 4 and 50 kWh. A warehouse is at the low end and a grocery store with its isles of refrigeration is nearer to the high end. The average office space is usually around 8.5 kWh/sq.ft/year. So, 100,000 x 8.5 = 850,000 kWh per year.
Him/her: Okay, that sounds about right.
Me: Now, take that value and multiply it times $.02/kWh to get a green power price tag of approx. $17,000. Now, don't forget that is an annual cost.
Him/her: That's not bad. We don't really have a choice though because we dont want to switch to another provider.
Me: You dont need to switch electricity power providers in order for your power to be GREEN.
Him/her: Really, how is that possible.
Me: Well, when you buy Green Power from your utility or ESCO you are really buying two separate things. 1) Power and 2) Green.
Him/her: Okay, I think I get it. The power is just the regular electricity that I have been buying and the "Green" is a Renewable Energy Certificate (REC) which represents the renewable attributes that every 1 MWh (1000 kWh) of energy produced by a renewable generator is tagged with.
Me: That's correct.
Him/her: So, what you're telling me is that my current provider is selling me electricity for about $.06/kWh and RECs to go along with that electricity for $.02/kWh in order to make it Green.
Me: That's correct. That's using the average electricty rate for the city of Chicago. In areas of higher electricty consumption rates, such as LA, NY, and Texas you could be looking at closer to $.12/kWh.
Him/her: Well, for Chicago that means that we're paying a 33% premium to go green.
Me: You got it.
Him/her: So, what is your solution?
Me: I can recommend a handful of Green Power/Carbon Trading companies that can deliver the RECs to make your current electricity GREEN, for 10-20% of the cost that your utility is offering.
Him/her: So, we continue buying the power from our current provider and we buy the RECs from these Green Power/Carbon Trading companies?
Me: That's correct.
Him/her: Okay, what is the cost.
Me: Well, I wouldn't pay more than $.004/kWh. So, instead of 2 cents you can get the same greeness from a company that specializes in RECs and carbon for less than half of one cent.
Him/her: Interesting. So, looking back at my consumption of 850,000 kWh per year, I could cut my green power cost from $17,000 to $3,400.
Me: That's right and if you have multiple facilities I happen to know that you can get Green Power RECs for even less than that when you buy in bulk. Try $.002/kWh.
Him/her: So, if I have 10 facilities that all need Green Power I could buy in bulk and for the same $17,000 that I thought was a good deal buying from my local provider - I could buy RECs for 10 of my facilities and make them 100% Green Powered????
Him/her: Well, Carbontrader you've been very helpful. I'm going to google REC marketers and see who pops up!
Me: Glad I could help. Next time, we can talk about how to read a REC contract to make sure you're getting the best bang for your buck and also what government programs can help you capitalize on your environmental stewardship purchase.