Most Texans already know that the state’s fortunes were and are fueled by oil and natural gas. What many don’t realize, however, is just how much the future of the Lone Star State will be powered by renewable energy. With the Green Energy in Texas series, we will explore various aspects of the green energy industry and keep you informed on how those changes and innovations might affect your Texas electricity bill.
Why Is Green Energy So Attractive to Texas Business?
With the rise of the internet and social media, more companies have been investing in maintaining their reputations by being more socially responsible. The better the reputation, the more customers they’re likely to get —especially since more and more consumers believe environmentally responsible and sustainable practices are important to them. What’s also becoming clear is that businesses, especially larger companies, are highly aware they must do more for their society as a whole or face the withering backlash of its connected customers.
Companies now adopt sustainability goals, not only to showcase their environmental awareness to their customers and shareholders but also because sustainable practices can save a business money by reducing costs from materials, expenditures and energy use. How many companies are involved? Two-thirds of Fortune 100 companies and 43% of Fortune 500 companies have set sustainability targets.
So, yeah—it’s more than just a thing.
Walmart, for example, has stated it wants to be 100% supplied by renewable energy and once had the biggest installed solar capacity— 142 MW in 2015. Target surpassed it in September, 2016, for a total of 147.5 MW of installed solar capacity at 300 stores. Others include Apple, Costco, Ikea, and Kohl’s. Big box stores and distributions centers are specifically being designed to accommodate solar. Not only do these businesses use the energy they produce but they also sell their surplus to the wholesale market.
Not all companies rely on solar arrays to help then meet their sustainability targets. Some of the largest are investing in power purchasing agreements (PPAs) with renewable energy producers. 24 large US companies bought 3.6 gigawatts of power in 2015 and the first quarter of 2016 through PPAs. One of the big keys comes from having a deregulated energy market. Why?
Let’s say your Texas company negotiates a power purchase agreement (PPA) contract with Hugh Joss Wind Farms to supply your company with 100% green wind energy for 15 years. Because your contract will guarantee HJ a paying client for such a long time, you get a sweet deal locked in at a low price. Your local utility or TDU takes care of the transmission. Now, technically, of course, the electricity your business is using comes from all sorts of generators —BUT— since you’ve contracted with HJ, you’re paying them directly and you can expect a fairly stable price for 15 years.
Now, let’s say your company wants to set up a PPA in a regulated state. Regulated states oversee and authorize power purchase agreements and have rules covering things like the type of generation source, payments for stranded costs of the local utility, or limiting the duration to no more than 5 years.
While utilities in regulated states have begun working on alternative schemes to keep and attract companies, you’ll be more likely to move your operation to a deregulated state, like Texas, if you can’t get the kind of PPA that you want. That’s not surprising, since 91% of contracts for renewable energy are made in deregulated markets.
Does Effect This My Electric Rate?
First off, PPAs between corporations and wind and solar farms ensure a steady stream of income for the renewable energy producers. PPAs help pay down producers’ initial investment and fund expansion. Because renewables produce electricity at a fairly steady cost vs fossil fuels (which fluctuate by their commodity price), the increase in the number of renewable plants is creating price competition with fossil fuel plants. Whole towns, like the city of Georgetown, are already taking advantage of it as if they were large corporations.
Secondly, big Texas companies with sustainability practices that include things like putting solar panels onto their roofs, investing in on-site grid batteries, or other kinds of renewable energy classify as distributed generation producers. ERCOT is looking at ways to use their capacity to enhance grid reliability by adding them to the reserve capacity (called “ancillary services”). At present, this sort of coverage comes from power plants waiting on standby —costing thousands of dollars by the hour. However, in the future as regulators understand more about managing distributed generation to ensure reliability, the price for that coverage will fall and be reflected in the price of your electricity —but that’s going to take a while.