What is a Green Energy Tariff?

Oct 24, 2022

A graphic showing a statue with a wreath of leaves imposed in front of a city skyline.

What is a Green Energy Tariff?

Demand is high for this unique approach to renewable energy requirements 

Compared to deregulated energy markets, customers in states with regulated electricity markets have fewer options for purchasing renewable power. However, some utilities in regulated electricity markets have developed Green Tariffs that provide an option for renewable energy supply. What is a green energy tariff? 

Green Tariffs represent a voluntary utility rate that differs from the standard rate. An organization can request that their utility put them on a Green Tariff, which provides the organization with renewable electricity from a project owned by the utility or by an independent supplier. Green Tariffs allow customers with large-scale energy requirements and no, or limited, capacity for on-site electricity generation to obtain renewable electricity through their utility bill.

SEE MORE: Energy Management KPIs Your Company Needs to Track 

What Are the Options for Participation?

Eligibility requirements for participation differ based on each utility’s program, but most have annual energy consumption minimums and require long-term commitments from the customer. Some programs allow organizations to purchase electricity directly from a supplier; some allow the utility to be an intermediary; and in some, the utility supplies the renewable energy. Through those different options, the customer has a choice for market-based rate pricing mechanisms or fixed price power purchase agreements (PPAs).

Programs are limited by the electricity generation of the renewable assets available in each utility’s program. Spots within these programs are in high demand as green tariffs offer organizations a solution for meeting their sustainability targets that would otherwise be unavailable in regulated markets. As a result, green tariff programs have already reached capacity in many regions.

New Opportunities Made Available by the IRA 

However, with increased tax and financial incentives from the Inflation Reduction Act of 2022 (IRA), more significant benefits can now be derived from implementing renewable energy projects, including those projects that underpin green tariff programs. The IRA allows up to a 70% investment tax credit on projects that meet requirements for domestic sourcing, placement within energy and low-income communities, and prevailing wage requirements. The IRA also allows for a production tax credit of 2.6 cents per kilowatt hour. With the emergence of IRA regulations, consumers can expect more green tariff programs to emerge.

Additional Benefits of Integrating Green Tariffs 

Compared to unbundled renewable energy credits (RECs), bundled renewable power from green tariffs can offer greater rewards to an organization. Green tariffs are linked to the production of new renewable energy facilities, which is referred to as “additionality” in many sustainability circles. Another beneficial aspect is that the electricity purchased with green tariff programs can be procured in the local region where the utility grid is located. For organizations that want to spur local jobs, green tariffs can be an effective way to do this.
Environ Energy can assist your organization in navigating green tariff programs to maximize the benefits that renewable energy offers, as well as meet your organization’s sustainability goals. Contact our team by calling or filling out our contact form to learn more.