Puget Sound Energy, the largest investor-owned utility in Washington State, announced a first-of-its-kind clean energy program yesterday aimed at serving commercial and municipal customers.
The “Green Direct” program, recently approved by the Washington Utilities and Transportation Commission, represents the first subscriber-style of green tariff to be used by retailers and small governments. And it could serve as a model for other utilities to replicate across the country.
The program's first subscribers include the iconic brands REI, Starbucks and Target, as well as local governments and local institutions in the state. “Green Direct exemplifies the power of partnership,” said Kimberly Harris, president & CEO of Puget Sound Energy (PSE), in a statement.
There are currently about a dozen green tariff programs in the U.S. These programs have emerged as a popular way for utilities to help Fortune 500 companies meet their climate and clean energy goals, by allowing customers to buy energy from a wind or solar project, as well as the associated Renewable Energy Certificates. Through green tariffs, traditional utilities may be able to offer renewable energy services that are as compelling as what buyers can find in competitive markets or in behind-the-meter deals with third parties.
Green Direct is unique among green tariff programs because it allows large-scale energy customers to subscribe to a slice of a local, utility-scale renewable energy project via a long-term service agreement. Furthermore, existing green tariffs are primarily used to enable a single, new and very large customer to contract for an entire renewable energy project, according to an assessment by the World Resources Institute (WRI). In contrast, PSE's Green Direct program is designed to allow existing customers to contract for a more modest portion of a big clean energy project.
In this way, Washington's new green tariff is similar to a community solar program, but there are also several key differences, according to the Letha Tawney, director of utility innovation at WRI. In a recent blog post, Tawney explained that green tariff subscriber programs have at least three features that appeal specifically to Fortune 500 companies and other large energy buyers:
- Utility subscriber projects are much larger-scale. Community solar may be quite small — often still a “distributed” renewable energy project less than 5 megawatts, enough to power about 800 homes. PSE is signing a contract for 130 megawatts of wind to support its Green Direct program. That’s enough to power more than 32,000 homes, or a few large factories and sewage treatment plants. Many large buyers need much more power than a shared renewables program is designed to deliver, but are not large enough to contract a whole 130 megawatts facility alone.
- Customers of utility subscriber programs pay a monthly bill, rather than making a capital investment. Often, community solar programs ask customers to “buy a brick,” or invest money to build the project. Most large companies do not want to spend their capital on renewable energy projects — rather, they prefer to pay an electricity bill each month that includes the power from a renewable energy project. A utility or a private developer will then invest capital in the project in return for those long-term payments.
- Customers of utility subscriber programs do not accrue a large bill credit for the power the project generates, as net-metered customers with onsite solar or community solar shares often do. In a subscriber program, customers pay for the power they use each month — at the cost of the renewable project — like customers accessing electricity from traditional power plants. This means that these projects are not subsidized by non-participating customers, as sometimes happens in net-metering.
“A key aspect of a voluntary green energy program is that all of the costs and benefits must accrue to those customers who select the program, and are not shifted to those customers who are not involved,” said Tom MacLean, manager for customer renewable energy development at PSE.
At the same time, customers who participate in the program will benefit from paying a consistent price. So even if the utility's electricity rates increase for other customers over time, Green Direct subscribers will continue to pay the same amount.
King County is currently the largest subscriber to the Green Direct program. Several cities have also signed up to cover all or part of their operational footprint with clean energy, including Anacortes, Bellevue, Snoqualmie and Mercer Island. Government entities like Western Washington University and Sound Transit have committed to the project too. And then there's Target, Starbucks and outdoor co-op REI.
“By partnering with Puget Sound Energy on their innovative Green Direct program, we’re able to power seven of our local Target stores with 100 percent clean energy,” said John Leisen, vice president of property management at Target, in a statement. “This initiative is just one example of Target’s ongoing commitment to sustainability and promoting renewable energy solutions in the community we serve.”
Starbucks plans to have approximately 116 of its Washington State stores powered with green energy through the tariff program, and REI will power its headquarters and five local stores through the project. REI — which has kept its energy use nearly flat while doubling sales since 2008 — was a key partner in developing the Green Direct program over the past decade.
“We are constantly looking for innovative ways to increase renewable energy development,” said Vik Sahney, REI’s divisional vice president of sustainability. “PSE’s Green Direct tariff directly benefits Washington, is a pioneering model for utilities nationwide, and supports REI’s success in continuing operate 100 percent on renewable electricity.”
Over the winter, Xcel Energy won approval for similar green tariff programs in Colorado (16A-0055E) and Minnesota (15-985) called Renewable*Connect. These programs are expected to roll out in the coming months.