Green Power Payback

This week’s RE Insider is Kevin Hagen, Director of Sales and Marketing for the Distributed Power Market Unit of Xantrex Technology Inc. Previously, he served as Director of Business Development and Strategy for Trace Engineering from 1995 until its merger with Xantrex in 2000. Xantrex has been recognized by the Northwest Energy Coalition for commitment to green power and the company is a founding member of the EPA’s Green Power Partnership program. Hagen writes about businesses making a commitment to green power.

What do Johnson & Johnson, Kinko’s, Advanced Micro Devices, Toyota, and Fetzer Vineyards have in common? These companies and over 80 other businesses, government agencies and non-profit organizations have made huge reductions in their greenhouse gas emissions by using green electricity and have been recognized for their leadership by being part of the EPA’s Green Power Partnership Program. More and more businesses around the country are making the choice to use green electricity. From “green tags” and other virtual green power products all the way to on-site solar systems, green power options have never been so abundant, accessible and attractive. But are organizations really willing to pay more for green electricity? Although green power options can appear to come at a premium over standard utility power, many organizations are seeing great payback for their investment and making a visible commitment to sustainability at the same time. That payback can vary dramatically because there are so many ways to “go green.” There are cases where on-site generation can show an almost immediate breakeven. On the other hand, purchasing a virtual green power option such as green tags, is usually an incremental cost above the utility price of electricity. So if it’s not always an obvious cost savings on a dollars per kilowatt basis, why are so many companies choosing green power? It’s because they realize that measuring the whole payback is more than just the price of the electrons. Most companies making a green power investment today realize that there are many elements in planning and measuring the return on their investment (ROI). Green power choices can have a positive impact on a variety of stakeholders who have an influence on a company’s success. Often the key to great ROI is to tie the choice of green power to measurable benefits in addition to the value of the electricity. Sometimes this takes some creativity from a variety of disciplines, therefore, it can be helpful to engage a cross functional group within the organization to look at options and paybacks. The internal coordination between professionals in fields as varied as facilities, environmental health and safety, finance, human resources, community/government relations, sales, marketing and others is sometimes challenging, but the rewards are significant. The direct, financial cost of power is the usual place to start. However, additional factors such as tax advantages, buy-downs, and other incentive programs can greatly increase the payback. Additional financial evolutions are necessary when considering issues such as the capital costs of on-site systems or the benefit of hedging against volatile electricity pricing. Many times other programs can be tied together with a green power initiative to gain even better economies, for example energy efficiency and conservation efforts or new construction projects. Beyond these financial considerations for the direct electricity value, more paybacks and sometimes the larger benefits can be achieved in other areas. Making a green power choice is a reflection of the corporate culture and commitment. It makes a strong statement to a wide variety of audiences and can directly impact the company image and corporate brand identity. Connecting a green power program with the overall marketing plan can unlock many possible payback areas. Consider the possibilities with just a few of the many audiences. Customers In the past decade, one of the most noticeable trends of consumer behavior has been the willingness to adjust spending habits and product selections to reflect their ethics. In effect, these conscientious purchasers are ready to vote for good corporate citizenship in the way a company most understands–sales. Companies should be cautions of insincere efforts but savvy customers have demonstrated a strong track record of rewarding socially responsible commitments. Employees Employee recruitment and retention experts report that people’s decisions about their place of employment are frequently influenced by the company culture. People want to make a difference and belong to organizations that share their values. Choosing to use green power can be important to present and future employees. Some companies have even found ways to invite employees to participate in their green power efforts, which can have other benefits such as improved energy conservation. Neighbors Industrial companies are no strangers to the many issues associated with being a good neighbor. Showing a tangible commitment to sustainability, such as installing a solar PV array to offset electrical consumption, can be a great way to mitigate or remediate other local impacts and demonstrate a commitment to the community. Creative companies have even located solar systems in the community as an outreach effort, for example in local schools, parks, or recreation areas. Investors Just like consumers, investors are using their portfolios to support like-minded businesses. According to the Social Investment Forum, in 2001 socially responsible investment funds had over US$2 trillion dollars under management, over 10 percent of all professionally managed funds in the US. Making a green power choice is not likely to instantly qualify a firm for new investments, however, it can certainly be a significant part of an overall company policy that would be noticed by SRI funds and investors. Many other stakeholders could be positively impacted by a green power choice. From suppliers to resellers, to government agencies and regulators, socially responsible decisions can bear fruit in many ways, some of them not obvious at the outset. How a firm behaves is likely to have an influence on those around it, sometimes a bit of creativity is all it takes to capture that value and add it to the full return of a green power program. The choice to use green electricity can significantly reduce an orgaizations environmental footprint because electricity production is one of America’s biggest contributors to air pollution and green house gases. It has never been so easy to make a choice for green power. Some green power options have great payback from the immediate value of the electricity; however, good planning and creative approaches to finding value can translate into real return on investment for almost any green power choice. About the Author Kevin Hagen is the Director of Sales and Marketing for the Distributed Power Market Unit of Xantrex Technology Inc. Previously, he served as Director of Business Development and Strategy for Trace Engineering from 1995 until its merger with Xantrex in 2000. With over $100M in sales, Xantrex is a leading supplier of key power electronics and controls for the renewable energy and other industries. They have implemented a green power program including purchasing 100% green electricity for all their U.S. facilities. They have been recognized by the Northwest Energy Coalition for commitment to green power and the company is a founding member of the EPA’s Green Power Partnership program. Hagen is a member of the board of the Solar Energy Industry Association and a frequent speaker on Green Power issues. He is a graduate of Clarkson College of Technology with a background in both Engineering and Business. He can be reached at: Kevin.hagen@Xantrex.com
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