A path to zero through smart energy procurement
Price is what you pay. Value is what you get. (they are not always the same).......... Warren Buffet
Let’s face it if you are going to get carbon net-neutral, you will have to address your energy supply. Energy efficiency will always be the most cost-effective strategy, but it will not get us 100% of the way. It also makes complete sense that if you are going to try to get to a neutral carbon emission position, you eliminate any wasted energy. But how do we get the rest of the way there?
If you are in a market with an electrical supply choice (deregulated market), then you may be able to get to carbon neutral just by making smart purchasing decisions. While deregulated electrical markets were initially set up to provide consumers choice, and that choice was historically price-driven - the source of the energy generation is also an attribute that can and should be considered.
It should be noted that there really is a lack of deep academic literature around the climate impact of deregulated electricity versus regulated electricity. The carbon intensity of electricity has reduced in both markets. Still, it has reduced at nearly twice the rate in deregulated markets compared to regulated markets, as shown in this graph:
Despite deregulated markets holding more potential for cleaner energy, simply being in a deregulated market does not guarantee you cleaner energy. This requires understanding what clean energy is, sometimes called green power. These terms are used differently and in different applications. However, in this article, I am referring specifically to electricity that is supplied from a subset of renewable generation sources that provide the highest environmental benefit.
The energy types generally considered green power include:
solar
wind
geothermal
biogas
biomass
low-impact hydroelectrical resources
Note that you will often see large hydro classified under renewable; however, there is controversy around this based on the impact of dams on fisheries and water flows. As a result, large hydro typically is not considered green energy, and it doesn’t count towards utilities renewable energy mandates in most states. Similarly, sometimes you will hear claims that energy produced from the incineration of waste is renewable or clean energy. It is not, however, considered clean energy due to the incineration process, which produces emissions. Further, this energy source is expensive, inefficient, and introduces additional environmental risks.
Before evaluating the green power in your procurement bid, you need to make sure your energy broker is providing you the generation mix of each electrical supply they are providing you a quote for. I can tell you from experience, this is not automatic, and I have had to be quite persistent at times to get this information - but it is available. If your broker tells you it is not available, I would challenge that position. No electrical supplier is licensed to provide electricity into any state without providing the state with documentation as to the generation mix of the electricity it is supplying. Most likely, you will get back something that looks like this:
Some suppliers, such as Constellation, have their disclosures online. Regardless of where the disclosure is located, your energy broker should be able to obtain this in addition to pricing.
With the disclosure in hand, you now have a better picture of your purchasing decision. What is the cost, and what is the generation mix for that cost? Can I increase the green power content, and if so, is there a premium, and what is that premium? It may literally be tenths of a cent difference.
So what about your energy broker? What should you be looking for in researching energy brokers?
Expertise: Energy brokers should understand the commodity market as it concerns utilities and understands the role that renewable energy plays in that market. If you ask your prospective energy broker about the energy generation mix of an electrical supply offering they are proposing, and they don’t know what you are referring to - that is a red flag.
Data Quality: Like opportunity identification, data is a foundational element in looking for an energy broker. They need to not only be able to capture your data and measure KPI’s but importantly present the data in a way that you understand. When are contracts due, what are my options, what is the carbon impact of my purchasing decision? Are their RECs associated, where are those RECs, and are they retired on your organization’s behalf?
Analytical Analysis: Just having data isn’t good enough; your broker should also be able to provide rigorous analytics, so you understand the implications of your purchasing options. This should include both market trending and forecasting, as well as a thorough understanding of the environmental attributes of the electrical supply you are considering.
Speed: Timing is an essential element in energy brokerage. Your energy broker should coordinate with you to make sure your decisions are timed to maximize the energy commodity market.
Technology: There are many ways to purchase energy, including phone calls and excel spreadsheets, but these methods fail to take advantage of the speed and quality control that technology can provide.
Access: When you work with a broker, access to an extensive network of providers provides you with the most options and choices. A broker with access to only a few suppliers (or one supplier) will limit your ability to shop for the best contract.
Service: A crucial part of working with an energy broker is that you get to develop an ongoing relationship with that person. They should have a genuine interest in your business goals and should be actively looking to bring you the best deal. You should never have to chase down your broker to ask them questions or figure out what is happening. They should be actively communicating with you and should be easy to get ahold of.
Fees: The broker should be able to explain their fees and conditions easily. If they can’t explain these in a way that you understand, another red flag. Transparency is essential and your broker should provide a clear and simple explanation so that you understand the purchasing decision options, including fees.
Established: Lets’s face it, to be a broker is not difficult. You can start it up in your spare time. But to be a good broker means you have a proven track record of success and are well established in the industry. Your broker should be able to provide references. When your speaking with them, they should be able to offer you insight into both the market and their industry. Their insight into the energy markets will be critical to your success. You are hiring a broker because you don’t have time to watch the markets yourself; make sure who you select is experienced and is able to actually help you. Merely taking orders is different than consulting and educating.
Finding the right energy broker is an integral part of developing a GHG Reduction strategy. At Conservice, our Optimyze team works with clients every day, providing the very services discussed in this article. If you aren’t actively managing the electrical supply in your deregulated markets, you really need to take a hard look. It can be both a tremendous opportunity to reduce costs and eliminate spikes in price as well as a very effective way of reducing the impact of your carbon emissions.
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry reduce energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions with tangible impacts and track performance to ensure the trendline stays laser-focused on the goal. At Conservice, we have developed a true bill-to-boardroom solution to help truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
Follow us at:
Twitter: @BlogThirtynine
Instragram: ThirtyNine_Blog