In recent years, sustainability has become a core consideration for businesses, not just a buzzword. Companies are setting goals for carbon reduction, renewable energy usage, or even targeting 100% renewable power. If you’re an energy buyer in a deregulated market, you actually have more tools at your disposal to green your energy supply compared to those in regulated areas. The trick is figuring out how to do it in a way that aligns with your budget and reliability needs. This page will cover the main options for integrating renewable energy and sustainability into your procurement strategy, and what each entails.
Why pursue renewable energy or sustainability goals? Aside from corporate responsibility and environmental benefits, there can be business advantages: positive brand reputation, meeting customer or investor expectations (many large companies now prefer suppliers who are green), potential long-term cost savings or price stability (solar and wind have zero fuel cost, so can offer fixed prices for decades), and hedging against future carbon regulations (if you’re already low-carbon, a carbon tax won’t hit you as hard). The good news: deregulated markets allow creative approaches to achieve these goals.
Here are some common mechanisms to consider:
- Renewable Energy Certificates (RECs): A REC represents 1 MWh of electricity generated from a renewable source (wind, solar, etc.). RECs are a way to claim renewable energy usage without having a direct physical connection to a renewable generator. For example, you can continue buying electricity from your regular supplier (which might be a mix of grid power) but separately purchase enough RECs to match your consumption, thereby legally and credibly stating that you used renewable energy (because you financed that amount of green power on the grid). RECs are readily available for purchase in most markets, and they’re relatively inexpensive for standard wind/solar (there are more costly ones like local or specific project RECs if you prefer). The advantage is simplicity and flexibility – you can turn your electricity usage “100% renewable” on paper overnight by buying RECs for every MWh. However, RECs alone don’t change your actual electricity source in real-time, and some argue basic RECs may not drive new renewable development if they’re from existing projects (so-called “additionality” concerns). Still, as a first step or a component of a strategy, RECs are very useful. Many suppliers offer a “green power” option that is essentially your normal contract + RECs. If sustainability is a priority, ask suppliers about renewable content options.
- Physical Power Purchase Agreements (PPAs): This is a direct contract with a renewable energy project (like a wind farm or solar park) to buy their output over a long term (often 10-20 years). In a Physical PPA, you agree to take power from the project into your electricity account. Usually, this requires the project to be in your region (same ISO) and you have the ability to handle scheduling. For example, a corporation might do a physical PPA with a solar farm in Texas and have that energy delivered via their retail supplier to their facilities in Texas. Benefits: you typically lock in a fixed price for renewable power long-term, which can be a hedge against future price rises. You also get the RECs from that project, so you can claim those specific renewables. Challenges: physical PPAs can be complex to arrange and in some states, non-utilities can’t directly buy from generators (deregulated states make it easier though). You also have to manage what happens if the project is producing more or less than your usage at a time (often your supplier helps balance that).
- Virtual Power Purchase Agreements (VPPAs): These are financial contracts rather than delivery ones. You agree to a price for the power from a renewable project, but you don’t take the electricity. Instead, the project sells its power into the grid at market prices, and you settle the difference between the market price and your agreed price. Essentially, if market price is lower, you pay the project the difference (subsidizing it); if market is higher, the project pays you (you benefit). Meanwhile, you receive the RECs from the project. The result is you have financially supported that project (enabling it to be built) and you can claim its green energy, even though physically your electricity comes from the grid as usual. VPPAs are popular because you can do them anywhere – even in a regulated state, a company could do a VPPA in a deregulated region like Texas where projects are plentiful. They also act as a price hedge: if conventional power prices go up, you get payments from the VPPA that offset your higher grid costs. If they go down, you pay the project but hey, your grid power is cheaper – so it balances. VPPAs do introduce some accounting complexity and you’ll want expert help to structure them, but many Fortune 500s have done these deals to reach renewable targets.
- Green Tariffs or Utility Green Programs: In some areas (especially where retail choice is limited), utilities offer special “green tariff” programs where you can opt to buy your power (or a portion) from renewable sources through the utility at some premium or arrangement【37†L221-230】【37†L231-238】. In fully competitive markets, this is less common, but some suppliers have similar offerings – e.g., a supplier might say, “We’ll supply you with 50% wind power at a fixed rate, sourced from X wind farm.” It’s worth asking. These programs can be straightforward – basically you pay a bit extra for renewable, and the provider does the rest – but watch the pricing and terms. Ensure you get the RECs or at least that they are retired on your behalf so you can claim the renewable usage.
- On-site Generation (Solar, etc.): Installing your own renewable generation at your facilities is another route. Rooftop solar is the most common. This directly reduces the amount of power you need to buy (saving you money on energy, and often on transmission/demand charges if solar peaks align with your demand peaks). It also is a visible sustainability commitment. With battery storage, you can extend the usefulness of on-site generation. The limitation is you need capital (though there are leasing and third-party ownership models) and sufficient space/resources (solar needs roof or land, wind needs a windy open area, etc.). But prices for these technologies have come down a lot. An advantage is it can provide backup power in outages (at least solar with storage can). If you produce excess, in some markets you can even sell back or net meter, but large commercial projects often are just aimed at offsetting part of usage.
- Energy Efficiency and Load Reduction: The cleanest (and often cheapest) kilowatt-hour is the one you don’t use. Investing in efficiency (LED lighting, better HVAC, process improvements) reduces consumption and thus emissions. Many companies pair their procurement strategy with an efficiency strategy – the less you need to buy, the easier (and cheaper) it is to match 100% of it with renewables. Some states or utilities have incentives for this too. While not a procurement method per se, it’s crucial to meeting sustainability goals cost-effectively.
How to integrate these without breaking the bank? It often comes down to a portfolio approach:
Maybe you decide: “We will buy 50% of our usage through a long-term VPPA from a wind farm to cover our baseline with green power. For the rest, we’ll ensure our retail supplier provides renewable-backed energy or we’ll buy RECs annually. Meanwhile, we’ll invest in on-site solar at our headquarters which will give us a few percent renewable and be a demonstration project.” That could get you to, say, 100% renewable usage on paper. The cost impact might be a slight premium, but sometimes it can be cost-neutral or better. For example, some corporate VPPAs signed in the late 2010s ended up “in the money” (the projects paid the companies as power prices rose). However, if renewable energy is more expensive than the brown power, you have to be willing to pay that green premium. The good news is, those premiums have shrunk over time. And there’s also reputational/brand value in it.
Carbon Offsets vs. RECs: If your sustainability goals extend to gas usage or overall carbon neutrality, you might also consider offsets (for things like natural gas or fleet fuel, since RECs only cover electricity). But that goes beyond electricity procurement – just a note that RECs are specific to electricity’s renewable attribute, whereas carbon offsets can cover non-electric emissions.
Reporting and Claims: Whatever path you choose, ensure you properly account for it. For example, if you buy RECs, you must “retire” them in a registry in your company’s name to claim that renewable usage for that year. If you do a PPA, make sure you keep the RECs (some contracts might sell them off if you’re not careful, undermining your claim to renewables). Follow frameworks like the Greenhouse Gas Protocol Scope 2 Guidance for market-based accounting, which essentially say you can claim renewable electricity if you have the corresponding RECs. Many companies now report their % renewable in annual sustainability reports – these efforts would contribute to that.
Battery Storage and Future Grid: As grids get greener overall (with more wind and solar being built), even normal grid power is getting cleaner. But most businesses with aggressive goals aren’t waiting – they’re taking action to directly support projects. One interesting option for those with the ability: energy storage. Batteries don’t generate green energy, but they enable more effective use of it (store solar for night, etc.). Some forward-thinking businesses are installing big batteries to reduce peak demand (as discussed in risk management) and to help with renewable integration. If your sustainability ethos is strong, being a pioneer in adopting storage or participating in utility renewable programs (like community solar or demand response that helps the grid) can enhance your creds.
In conclusion, deregulated markets give you freedom to craft a sustainable energy mix: you can shop for green energy suppliers, tack on RECs to any deal, or create complex deals like PPAs. Start with your company’s targets – e.g., “50% renewable by 2025, 100% by 2030” – and explore the combination of tools to get there. Often a mix is optimal for balancing cost and impact. And don’t be shy about using experts (many brokers specialize in renewables now, and there are consultancy firms focusing on corporate renewables deals).
Sustainability isn’t just good for the planet; it can be part of a resilient energy strategy. Renewable sources often have stable long-term costs (no fuel volatility), so they can be a hedge as well. Plus, demonstrating leadership in this area can strengthen stakeholder relationships.
We’ve covered a lot: from the basics of deregulation to advanced sustainability initiatives. The common thread is control – deregulation gives you more control over your energy destiny. By being informed (kudos for reading this far!) and proactive, you can turn what used to be a utility bill you had no say in, into a strategic asset for your company – controlling costs, managing risks, and aligning with your values.
Thank you for exploring Marcus Energy’s guide. We encourage you to dive into any page of this guide as needed and reach out if you have questions or need professional guidance. We’re here to help commercial energy buyers succeed in the complex U.S. energy landscape.