Buying Energy: Today’s Choices

The energy purchaser has many choices today that have not existed until recently. For example, ten states now have thirteen green energy riders that allow end users to purchase green energy from a specific new renewable asset and use the utility system either virtually or physically to receive the energy. Importantly, larger scale projects can be substantially more economically than smaller size projects and new ways to sell 10 MW blocks are emerging. Commercial and Industrials, datacenters vital for computer networks, communities, hospitality firms and critical care medical facilities in a number of experimental cases in New York, California, Connecticut, Massachusetts, New Jersey and other states have an emerging ability to participate in microgrids. Microgrids are formed by end users having access to solar, storage, back-up power, combined heat and power and other forms of generation as well as demand response. Utilities are also interested in retaining customers and are being creative in offering innovative new rate structures.

All of these choices can be confusing for the average energy purchaser. While sustainable and lower cost energy goals can be achieved, new risks are introduced. These new risks include basis differentials between project locations and use, local transmission injection constraints, interconnection costs, terms in offtake contracts, utility tariff provisions/limitations, minimum take obligations, RECs versus additionality, project sponsor performance guarantees/lack there of, and many other issues. Typically, end user organizations are not forgiving of surprises or possible increases in costs not properly disclosed at the time of the energy purchasing decision.

The typical energy purchaser has limited staff resources and seeks assistance in running a robust energy procurement process, comparing offers, understanding risks of key offers and negotiating final terms. Some advisors charge large success fees, which can impact the cost of new projects and the cost of energy that the end users seek to obtain. The best energy advisors have the necessary expertise to help the purchaser understand the risks and properly rank projects, and:

  • Can provide a realistic view of the real energy costs to expect, uncovering potentially hidden charges or future liabilities.
  • Can present the information in a simple manner.
  • Can help explain the situation to senior management and properly defend the decision recommendation.
  • Operate with high ethics, are trustworthy and share the values of the purchaser.
  • Are, in all respects, an integral part of the team with reasonable fees.

Energy purchasers have many choices in supply as well as in choosing advisors. The crux is to choose wisely, something easier said than done. Yet, with an increasing number of choices, a large marketplace of suppliers and low current costs of solar and natural gas, the rewards for making the right choice are high.