LBNL-46766

Purchasing Renewable Energy: A Guidebook for Federal Agencies

William Golove, Mark Bolinger and Ryan Wiser

Environmental Energy Technologies DivisionErnest Orlando Lawrence Berkeley National Laboratory

University of CaliforniaBerkeley, California 94720

August, 2000

Download from: http://eetd.lbl.gov/EA/EMP/

The work described in this study was funded by the Assistant Secretary of Energy Efficiency and RenewableEnergy, Office of Power Technologies of the U.S. Department of Energy under Contract No. DE-AC03-76SF00098.

Customer choice is emerging as a defining fea-ture of retail electricity markets. Nearly half ofall states have either restructured their electrici-ty markets or have firm plans to move towardretail competition in the next few years.1 Evenin states that have not yet adopted retail elec-tricity competition, consumers often have theopportunity to participate in utility green pric-ing programs by paying a premium to haverenewable energy supplied to the grid by theirlocal utility. Whether by purchasing renewableenergy from a competitive supplier or by par-ticipating in a regulated green pricing programwith a local utility, there is now an unprece-dented opportunity for consumers to influencehow their electricity is produced.

While no form of electric power generationis completely benign, electricity generatedfrom renewable resources such as solar, wind,geothermal or biomass is typically regarded asenvironmentally preferable to electricity fromtraditional energy sources such as coal, oil,nuclear, and natural gas. Increasing customerchoice provides opportunities for all con-sumers—households, businesses, non-profitorganizations, and governments—to reducetheir impact on the environment. For the fed-

P u rchasing Renewable Energ y :A Guidebook

for Federal Agencies

Text Box 1

Case Study: The U.S. EnvironmentalProtection Agency’s Region 9 Laboratory

In July 1999, the U.S. Environmental Protection Agency’s (EPA) Region

9 laboratory located in Richmond, California, became the first federal

facility to be powered by 100% renewable energy. This precedent-setting

event grew out of the EPA’s desire to procure electricity in a manner con-

sistent with their organizational mission of protecting the environment.

Following normal contracting procedures, the General Services

Administration (GSA) issued a request for proposals (RFP) on behalf of

the EPA in February 1999. The RFP specified requirements for 100% eli-

gible California renewable power, excluding waste tire and municipal

solid waste. The RFP required that the product be Green-e certified, and

specified that in the case of a tie between competing bids, priority would

be given to the proposal containing the most new renewable power (with

“new” defined per California law as facilities that became operational

on or after September 23, 1996). In December 1998, the EPA, GSA, tech-

nical advisors from two national laboratories (NREL and LBNL), a rep-

resentative from Green-e, and prospective contractors held a pre-bid

meeting to answer questions and iron out potential stumbling blocks in

this novel process. The final RFP incorporated comments from the pre-

bid meeting. After reviewing bids, the GSA awarded a 3-year contract in

May 1999 to the Sacramento Municipal Utility District (SMUD) to pro-

vide 100% renewable power. The EPA will purchase the green power at a

10% premium to the applicable utility tariff (with a ceiling of

$0.01/kWh), and is working with the building owner to institute a series

of energy-efficient improvements that will create savings to offset some

of the premium. The EPA laboratory uses 1.8 million kWh of electricity

annually, enough to power 181 typical households. By meeting this load

with 100% renewable power, the EPA will cut greenhouse gas (GHG)

emissions (CO2 equivalent) by more than 2.3 million pounds per year.

Introduction

1In addition, the U.S. Congress is discussing national restructuring legislation.For information on electricity restructuring around the country, see FEMP’srestructuring webpage at http://pnnl-utilityrestructuring.pnl.gov/.

eral government, the largest consumer of elec-tricity in the U.S. with an annual electricity billof approximately $3.5 billion, this new-foundability to make a difference is enormous.

Until recently, there has been widespreaduncertainty among agencies over whether ornot the purchase of renewable energy is with-in their authority in the first place. Given long-standing requirements that Federal agenciescontract for goods and services almost exclu-

sively on a least-cost basis, many contractingofficers have been reluctant to pursue renew-able energy purchase opportunities. ExecutiveOrder 13123 (see Text Box 2) attempts to clari-fy this issue, by directing agencies to “strive toexpand the use of renewable energy within itsfacilities and in its activities by…purchasingelectricity from renewable energy sources.” Inaddition, a number of agencies have successful-ly completed pro c u rements of renewable ener-

2

Text Box 2

Executive Order 13123

Sec. 204. Renewable Energy. Each agency shall strive to expand the use of renewableenergy within its facilities and in its activities by implementing renewable energy projectsand by purchasing electricity from renewable energy sources.Sec. 301. Annual Budget Submission. Each agency’s budget submission to OMB shall specifi-cally request funding necessary to achieve the goals of this order.Sec. 404. Electricity Use. To advance the greenhouse gas and renewable energy goals ofthis order, and reduce source energy use, each agency shall strive to use electricity fromclean, efficient, and renewable energy sources.

(a) Competitive Power. Agencies shall take advantage of competitive opportunities inthe electricity and natural gas markets to reduce costs and enhance services...

(b) Reduced Greenhouse Gas Intensity of Electric Power....Agencies shall consider thegreenhouse gas intensity of the source of the electricity and strive to minimize thegreenhouse gas intensity of purchased electricity.

(c) Purchasing Electricity from Renewable Energy Sources.(1) Each agency shall evaluate its current use of electricity from re n e w a b l e

e n e rgy sources and report this level in its annual report to the Pre s i d e n t .Based on this review, each agency should adopt policies and pursue pro j-ects that increase the use of such electricity. Agencies should include pro-visions for the purchase of electricity from renewable energy sources as acomponent of their requests for bids whenever procuring electricity.Agencies may use savings from energy efficiency projects to pay addition-al incremental costs of electricity from renewable energy sourc e s .

Sec. 406(c) Retention of Savings and Rebates. Agencies granted statutory authority to retaina portion of savings generated from efficient energy and water management are encour-aged to permit the retention of the savings at the facility or site where the savings occur toprovide greater incentive for that facility and its site managers to undertake more energymanagement initiatives, invest in renewable energy systems, and purchase electricity fromrenewable energy sources.Sec. 605. Amendments to Federal Regulations. The Federal Acquisition Regulation and otherFederal regulations shall be amended to reflect changes made by this ord e r, including anamendment to facilitate agency purchases of electricity from renewable energ y sources.

gy in regions around the country (See Te x tBoxes 1, 3, 4, 5 & 6). While the question ofauthority has not been definitively addressed bys t a t u t e ,2 s u fficient resolution has been achievedto enable Federal agencies to move forwardwith renewable energy purc h a s e s .

This guidebook is intended to inform Federalagencies on their opportunities to purchaserenewable energy. Definitions of renewableenergy and green power3 are discussed andpotential benefits and costs of Federal renew-able energy purchases are identified.

In addition, procurement issues andapproaches are identified that are appropriatefor both regulated and restructured markets.Drawing upon lessons learned from agenciesthat have recently completed or are currentlypursuing renewable energy purchases (seeText Boxes 1, 3, 4, 5 & 6), key elements of asuccessful renewable energy procurement areoutlined. Agencies that are interested only inparticipating in procurements run by theGeneral Services Administration (GSA) or theDefense Energy Support Center (DESC) shouldturn directly to Section 5.3 of this document.

This guidebook is intended primarily forFederal agency energy managers and contract-ing officers with facilities located in states thathave opened their electricity markets to retailcompetition or with facilities in areas servedby investor-owned or municipal utilities offer-ing green-pricing programs. Other federalagency representatives with an interest inrenewable energy may find this document use-ful as well.

Renewable energy is originally a scientific termreferring to energy resources that are replen-ished naturally over relatively short timescales. For example, the energy from sunlightused in a photovoltaic system will be replen-ished by more sunlight to follow. The processby which petroleum supplies, on the otherhand, are restored takes millions of years. Ina scientific sense, renewable energy does notrefer to the degree of environmental impact ofthe resource, although it is widely agreed thatmost renewable resources are significantlymore environmentally-benign than convention-al energy resources. For policy purposes inrecent years, both the federal government anda number of state governments have devel-oped definitions of renewable energy.

3

Overview

Audience

What Is RenewableEnergy?

2Efforts are underway to incorporate language from Executive Order 13123into the Federal Acquisition Regulations (FAR), carrying the force of law. FARCase 1999-011 contains the proposed rules and can be found by searchingwww.arnet.gov/far/for “1999-011.”

3This document focuses on electricity generated from renewable energyresources. While potentially of interest to some, the issues relating to greenpower are beyond the scope of this document. Please see Appendix A for a briefdiscussion of green power issues. Also, we use the term “renewable energy” torefer to electricity generated from renewable energy resources. In addition,this document focuses only on electricity provided through the grid, and doesnot consider on-site renewable electricity generation, which has its own set ofissues too broad to address here.

In a recent Executive Order and in energy leg-islation from the late 1970s, the Federal gov-ernment has adopted the following definitionsof renewable energy:

• Executive Order 13123 defines renew-able energy as “energy produced bysolar, wind, geothermal, and biomasspower”.4

• In addition to solar, wind, geothermal,and biomass, the Public UtilitiesRegulatory Policy Act (PURPA) of 1978included hydropower facilities of lessthan 30 MW capacity and otherresources such as municipal solid wastein defining renewable energy.

Many states that have opened their electricitymarket to retail competition have definedrenewable power within their restructuringlegislation. In most cases, states have listed thetypes of resources that are considered eligibleto participate in a state’s renewable program.As examples:5

• California and Pennsylvania have basi-cally adopted the PURPA definition ofrenewable energy, althoughPennsylvania specifies “low-head”hydro instead of setting capacity limits.

• Massachusetts added fuel cells utilizingrenewable fuels and ocean or tidalenergy to the mix.

Non-profit organizations interested in assistingthe development of markets for renewableenergy have developed programs for evaluat-ing and certifying electricity products on themarket. These programs have focused on thebroader concept of green power, rather thanrenewable energy, but may be useful to con-tracting officers looking to establish character-istics of commercial renewable energy prod-ucts or to verify delivery of renewable energyproducts.

The Center for Resource Solutions (CRS), aSan Francisco-based non-profit, has developed“Green-e” certification standards for greenpower products in California, New England,and the Mid-Atlantic region and intends to roll-out in other regions as they open for competi-tion. To be Green-e certified in California, aproduct must consist of at least 50% renew-able-energy-based electricity, where “renew-able energy” is defined as energy from bio-mass (including waste-to-energy and landfillgas), geothermal, solar, wind, and smallhydro.6 Any non-renewable portion of a prod-uct must be no more polluting than systempower, and must not contain any nuclearpower beyond that contained in any systempower purchased for the product.

In the second year that a market is open forcompetition, Green-e re q u i res 5% of a certifiedp roduct to come from new renewable generation(with the cutoff date for “new” facilities seta c c o rding to state legislation or regional conven-tion). This standard rises to 10% the followingy e a r, and continues to increase at 5% per yeart o w a rd an ultimate goal of 25% new re n e w a b l e sby the fifth year of competition.

4

Non-GovernmentalOrganizations

4Executive Order 13123, Section 710.5See Appendix B for a comprehensive listing of state definitions of renewableenergy.

State Definitions

6Any hydro facility less than 30 MW capacity is currently considered renew-able. In conjunction with environmental groups, green power marketers, andrepresentatives of the hydropower industry, CRS has recently released low-impact hydro certification standards. These standards, which consider manymore variables than just capacity size, will eventually replace Green-e’s cur-rent 30 MW limit.

Federal Definitions

5

Green-e standards are reviewed regularlyand are modified on a regional basis as neces-sary to reflect market availability and/oraddress the concerns of local stakeholders ineach state.7 For example, the “green-e” stan-dards in the New England and Mid-Atlanticregions include additional requirements forbiomass generation performance.

In 2000, CRS also developed accreditationstandards for utility green pricing programs.This new effort focuses on establishing floorrequirements for resource and environmentalcontent, as well as pricing and marketingguidelines, to be modified by local stakeholdergroups. As such it is a more flexible approachthan that taken with competitive suppliers. Foradditional information about the Center forResource Solutions and the Green-e Program,go to http://www.green-e.org/.

The Pace University Energy Project hasdeveloped another approach called the “PowerScorecard.” When completed, the Scorecardwill allow users to see how energy productscompare on the basis of air, water, and landquality impacts. The Power Scorecard ranks

different power generation technologies from 0(no impact) to 10 (high impact) in eight differ-ent categories, and then applies those rankingsto a user-supplied resource mix to arrive at anoverall assessment of the product. Thisapproach allows for flexibility in defining whatis green, and for evaluating whether a productfits the definition. Environmental groups andothers will be able to use Scorecard results toendorse certain products that meet the stan-dards they feel are most important.

As suggested in the section above, there are anumber of important considerations in evaluat-ing renewable energy products. These issuesare considered explicitly in the question andanswer section that follows.

What types of renewable resources are beingoffered?Wind, solar, and geothermal power are typical-ly uncontested as environmentally preferableenergy sources. Each is renewable and non-emitting, with little impact on the land or localhabitats.8 Hydropower, biomass, and municipalsold waste are regarded as somewhat morecontroversial among certain environmentalgroups. Hydropower dams may drastically alterriver habitats and fish populations, biomassfacilities may emit significant quantities ofNOx, and burning municipal solid waste mayrelease heavy metals and other toxins into theenvironment.

What percentage of the renewable energy offered is generated by new versus existing facilities(vintage)?Environmental groups often argue that pur-chasing power from a pre-existing renewablegeneration facility does not necessarily yieldincremental environmental benefits.

Text Box 3

Case Study: GSA Mid-Atlantic Region

In March 2000, the GSA Mid-Atlantic Region awarded its first contract for

100% new renewable power, to be received at eight federal facilities in the

Philadelphia area, including the pavilion that houses the Liberty Bell.

The combined load of the eight facilities is 2.7 million kWh per year. The

one-year contract was awarded to the Energy Cooperative Association of

Pennsylvania (ECAP), a member-owned, not-for-profit cooperative provid-

ing electricity, home heating oil, energy efficiency services, and solar sys-

tems to its residential, commercial, and government members in the

Philadelphia area. ECAP will supply electricity generated from 100%

newly-tapped landfill gas, and will charge a slight premium over default

rates. The mid-Atlantic region could see additional federal green power

purchases in the near future, as GSA’s solicitation included facilities in

New Jersey, which are outside of ECAP’s Pennsylvania-based service terri-

tory and so were not included in the final contract.

7 For example, even though it is defined as a renewable energy source withinPennsylvania’s restructuring legislation, municipal solid waste is not Green-ecertifiable in Pennsylvania due to regional stakeholder concerns.

Factors to Consider in Evaluating RenewableEnergy Options

8There have been concerns about increased bird mortality near wind farms,although recent design improvements are likely to reduce these concerns.

Presumably an existing facility sold power intothe grid prior to a specific renewable energypurchase and would have continued to pro-vide power into the grid in the absence of thatpurchase, regardless of whether or not it wascapturing a price premium. Purchasing fromexisting facilities, therefore, does not necessari-ly change the composition (or the “greenness”)of a region’s generation mix.9 To enhance thelikelihood that a purchase will have a positiveenvironmental impact, agencies can specifythat some percentage of their power mustcome from new renewable generation facilities.

What percentage of the total electricity purchase isgenerated from renewable resources?Since conventional power generation is cur-rently less expensive than renewable powergeneration, one way to reduce the cost of arenewable energy purchase is to contract for aproduct that is comprised of some combina-tion of renewable and non-renewable genera-tion. Furthermore, in some parts of the coun-try, regional shortages of renewable generatingfacilities could limit the renewable content ofan agency’s purchase to something less than100% of the agency’s total electricity needs. Itis generally agreed that as the ratio of an elec-tricity purchases’ renewable to non-renewablegeneration increases, so does the environmen-tal benefit, all else held constant.

What types of resources make up the non-renewable portion of the purchase?Customers may also consider the environmen-tal characteristics of any non-renewable gener-ation resources when evaluating the environ-mental characteristics of the overall electricitypurchase. It is conceivable that an offer from aretail supplier that includes 50% of the electric-ity from renewable resources and 50% fromcoal-fired power plants may actually be morepolluting than the power they have beenreceiving from their local utility (i.e., “systempower”). Furthermore, nuclear power—while

emitting few criteria pollutants or greenhousegases—is generally considered environmentallyundesirable due to the problems of nuclearwaste disposal and the potential for cata-strophic radiation leaks.

SummaryWhile it is true that purchasing a high propor-tion of an agency’s electricity needs fromnewly constructed renewable energy facilitiesis highly desirable from an environmental per-spective, this is not to suggest that purchasingsmall percentages of renewable energy isundesirable. Electricity purchases including, forexample, just ten percent renewable energyrequirements, can represent important stepstoward meeting the renewable energy goals ofEO13123 and reducing the environmentalimpacts of electricity consumption by federalagencies.

Benefits of Federal purchases of renewableenergy can be divided into those that accrueto society as a whole and those that benefitthe purchasing agency directly.

Social benefits of Federal purchases includethe following:

• Reduced environmental impacts. In 1998,electricity generation released roughly13 million tons of SO2 and 6 milliontons of NOx into the atmosphere, con-tributing to acid rain and urban smog.Fossil fuel generation also releasedover 2 billion tons of CO2—the green-house gas most implicated in causingglobal climate change. Particulate emis-

6

The Benefits and Costsof Federal RenewableEnergy Purchases

Benefits

9It can, however, provide support for existing renewable generation facilitiesthat otherwise would have been under-utilized or would not have capturedany green premium on their power sales. And in the case where demand forgreen power exceeds supply, purchasing from existing facilities can lead to theinstallation of new renewable generation capacity.

sions from fossil fuel combustiondegrade air quality and can lead to anincreased incidence of respiratory com-plications. In contrast, generating elec-tricity from renewable resources typi-cally causes only marginal (or zero) netemissions of any of these pollutants.

• Increased fuel diversity. Renewableresources are typically located in ornear the region they are used to serve,which reduces the risk of price shockscaused by disruptions in fuel suppliesresulting from transportation difficulties,cartel actions or international conflict.

• Local job creation. Because renewableresources are typically local, jobs arecreated to install and operate renew-able generation facilities, which, inaddition, tend to be more labor inten-sive per Kwh generated than conven-tional generation facilities.10

• Stimulate long-term production cost reduc-tions. Because most renewable tech-nologies have yet to be produced athigh production volumes, there remainsignificant production cost reductionopportunities for some renewable tech-nologies as their market penetrationincreases.

• Market transformation. Given the size ofthe Federal government’s utility bill,significant purchases of renewableenergy by Federal agencies could stim-ulate the overall renewable energy mar-ket. Strong Federal demand willdemonstrate that switching to renew-able energy is a national priority, willcall attention to societal and customerbenefits, and may contribute to reduc-tions in product costs. These factorsmay influence others, such as state andlocal governments, to follow suit withtheir own purchases of renewable ener-gy. In this way, Federal purchases canbe leveraged, leading to the creation ofadditional public goods and further

market transformation.

Benefits accruing directly to a Federalagency from a renewable energy purchaseinclude:

• Compliance with Executive Order 13123.EO13123 direct Federal agencies tofavor the purchase of renewable ener-gy. Complying early will put an agencyahead of the curve in meeting thePresident’s energy efficiency and green-house gas reduction goals, and willprevent the need to re-contract forpower once the language from thesetwo orders is incorporated into theFederal Acquisition Regulations (FAR).11

• Compliance with or anticipation of stateand federal renewable portfolio standards(RPS). Eight states have already estab-lished renewable portfolio standardsand a national RPS is currently beingconsidered by Congress.12

• Increased visibility. Presidential awardsshall be conferred upon those agencyenergy management teams that strive tocomply with EO13123. Energy score-cards will be tallied for each agency togauge the degree of compliance.

• Accomplishment of an agency’s organiza-tional mission. Many in the Federal gov-ernment understand the overall missionof the government to include a com-mitment to environmental protection.Beyond that general obligation, individ-ual agencies often have specific mis-sions that can benefit from the pur-chase of renewable energy. The EPA,for example, is charged with protectingthe environment, while the DOE hasbecome the first agency to make adepartment-wide commitment torenewables, pledging to purchase 3%of its electricity needs from non-hydrorenewable energy sources by 2005,

7

10National Wind Coordinating Committee, The Effect of Wind EnergyDevelopment on State and Local Economies, Wind Energy Issue Brief No. 5,January 1997. Visit the NWCC at http://www.nationalwind.org.

11The Federal Acquisition Regulations (FAR) can be accessed online athttp://www.arnet.gov/far/.12For more information on renewable portfolio standards, see the Union ofConcerned Scientists at http://www.ucsusa.org/energy/brf.rps.html orLawrence Berkeley Laboratory’s Electricity Markets and Policy Group(http://eande.lbl.gov/EA/EMP).

increasing to 7.5% by 2010.• Demonstrate responsiveness. The pur-

chase of renewable energy represents aclear demonstration of the agency’sresponsiveness to its customers (or citi-zens), the majority of whom, accordingto multiple surveys, favor renewableenergy.13

• Potential to receive tradable pollution cred-its. The EPA is considering NOx permitset-asides for government (and other)facilities that reduce their emissions.14

The costs of renewable energy purchasescome in two forms: price premiums above tra-ditional power and transactions costs stem-ming from contracting challenges.

• Price premiums. Renewable energy isgenerally more expensive than conven-tional power sources (e.g., coal andgas-fired generation). Estimated pricepremiums for a renewable energy pur-chase compared to the cost of conven-tional power range from 0.5-4¢/kWh,although the premium varies byresource and region.15 Price premiumsfor renewables may be reduced by tak-ing advantage of various state andFederal incentives for renewable ener-gy. For example, California consumerscurrently receive a 1¢/kWh credit forswitching to renewable energ y .1 6 I nsome cases this credit more than off s e t s

the price premium for renewable energ y .• Contracting challenges. Renewable ener-

gy power may also be more difficultfor an agency to purchase than conven-tional power, generating indirect trans-actions costs in addition to any pricepremiums. Efforts to add renewableenergy and green power products (andelectricity in general) to the FederalSupply Schedules are underway, butuntil such streamlining measures areadopted, agencies wishing to purchaserenewable energy will most likely haveto spend the extra time and moneyissuing or participating in an RFP. Onthe other hand, expertise developed asa result of recent purchases is servingto reduce the contracting challengesassociated with renewable energy pur-chases.

Contracting officers wishing to pursue innova-tive purchase opportunities have historicallyreferenced the FAR and other regulations forspecific authorization to do so. The FederalAcquisition Streamlining Act of 1994 and theFederal Acquisition Reform Act of 1996addressed this predicament by encouragingcontracting officers to take initiative and pur-sue opportunities they believe to be in thebest interests of the government.17

8

Costs

13Farhar, Barbara C. and Ashley H. Houston. 1996. Willingness to Pay forElectricity from Renewable Energy . National Renewable Energy Laboratory.Golden, CO. September.14For more information on emissions credits, see A Guide to the Clean Air Actfor the Renewable Energy Community by David R. Wooley, athttp://www.repp.org.15Although it is clearly the exception, there have been some green power prod-ucts in PA that were cheaper than the traditional system mix.16For more information on the customer credit in California, see theCalifornia Energy Commission at http://www.energy.ca.gov/greenpower/index.html.

17See FAR 1.102(d) at http://www.arnet.gov/far.

Sources of and Limits to the Authority toPurchase RenewableEnergy

On June 3, 1999, President Clinton issued“Executive Order 13123—Greening theGovernment Through Efficient EnergyManagement”. This order directs Federal agen-cies to “expand the use of renewable energywithin its facilities and in its activities byimplementing renewable energy projects andby purchasing electricity from renewable ener-gy sources.”18 Agencies are encouraged totake advantage of competitive power opportu-nities to fulfill the order’s goals, and should“include provisions for the purchase of electrici-ty from renewable energy sources as a compo-nent of their requests for bids whenever pro c u r-ing electricity.”1 9 P e rhaps most empowering,E.O. 13123 directs agencies to request fundingf rom the Office of Management and Budget forthe purpose of achieving the order’s objectives(see Text Box 2).

FAR Part 23 seeks to minimize the environ-mental impacts of federal purchases. Part 23.2addresses energy conservation and efficiency,and is the section into which FAR Case 1999-011 proposes to incorporate much ofExecutive Order 13123. Part 23.7 directs agen-cies to contract for environmentally preferableand energy-efficient products and services."Environmentally preferable" is defined by FARPart 2.101 to mean "products or services thathave a lesser or reduced effect on humanhealth and the environment when comparedwith competing products or services that servethe same purpose.2 0 This comparison mayconsider raw materials acquisition, production,

manufacturing, packaging, distribution, reuse,operation, maintenance, or disposal of thep roduct or service." Although EO 13123 andlanguage specific to renewable energy have notyet been incorporated into FAR Part 23, a stro n ga rgument can currently be made that electricitygenerated from renewable re s o u rces fits thedefinition of “environmentally pre f e r a b l e . ”

The FAR has traditionally focused on minimizing theg o v e rnment’s costs by strongly favoring the pro c u re-ment of least-cost goods and services. This policyoften left contracting officers with little leeway tomake value-added decisions. The recent wave ofp ro c u rement re f o rm, however, has more closelyaligned federal acquisition pro c e d u res with com-m e rcial sector practices through a stated pre f e r-ence for commercial products and the adoptionof commercial business practices. In addition, thetraditional focus on least cost pro c u rement hasshifted to one of obtaining the best value.21

In determining best value, contracting off i c e r scan consider an array of other factors, besidesleast cost, including environmental and energ ye fficiency considerations.2 2 As formally definedin the FAR, best value means “the expected out-come of an acquisition that, in the Govern m e n t ’ sestimation, provides the greatest overall benefitin response to the re q u i re m e n t . ”2 3

9

18Executive Order 13123, Section 20419E.O. 13123, Sections 404(a) and 404(c)(1)20E.O. 13101, Section 201

FAR Part 23

Best Value

Cost Minimization

21See FAR part 1.102(a)22In addition to environmental and energy efficiency considerations, otherfactors determining best value include special features that are not providedby a comparable supply or service, trade-in considerations, probable life rela-tive to comparable items, warranty considerations, maintenance availability,and past performance. See FAR Part 8.404(b)(2).23See FAR Part 2.101

Executive Order 13123

Part 11 of the FAR— “Describing AgencyNeeds”— states that environmental objectives,including the purchase of environmentallypreferable products and services, must be con-sidered when specifying requirements.24

Requirements for renewable energy should bespecific enough to limit the number of factorsto be evaluated among competing offers, butgeneral enough so as not to jeopardize theproduct’s status as a "commercial item".25

In restructured electricity markets, the mostdirect path to a renewable energy purchase isto make use of the “commercial items” provi-sions in FAR Part 12. Commercial items arebroadly defined as goods and services soldcompetitively in the commercial marketplacein substantial quantities.26 Since an active com-petitive market reduces procurement risks,agencies are strongly encouraged to favor thepurchase of commercial items—both throughspecific language to that effect and authoriza-tion to use less stringent acquisition proce-dures.27

With large volumes being commerciallytraded in public markets each day, electricity isundisputed as a standard commercial item. Asa specific type of electricity, renewable ener-gy’s status as a commercial item is slightly lessdefinitive. Support for such a designation isaided by the ongoing development of active

renewable energy exchanges where commer-cial entities buy and sell renewable energy inlarge quantities.28 In addition, certificationefforts by state and non-governmental organi-zations such as Green-e help to establishrenewable energy as a commercial item byestablishing a brand name (e.g., “Green-e cer-tified renewable energy”). Green-e certificationprovides additional value to the federal gov-ernment because of other functions such asverification and tracking, auditing, and estab-lishing a code of supplier ethics.” As an exam-ple, the GSA used the commercial item desig-nation in the EPA Richmond purchase, specify-ing Green-e certified power (see Text Box 1).

Even in the absence of an active renew-able energy market, agencies could specify arequirement for electricity (the standard com-mercial item) generated from renewableresources (a specification in addition to thestandard commercial item). In most cases, thefavorable contracting procedures affordedcommercial items would still be applicable.29

As renewable energy requirement specifi-cations become more and more specific, how-ever, the ability to claim commercial item sta-tus grows weaker. While the boundarybetween what is and is not considered a com-mercial item will no doubt be highly case-spe-cific, in general an agency should be wary ofspecifying any requirement beyond what iscurrently commercially available. The use oflegislative or Green-e definitions of renewableenergy green power also provides justificationfor a claim of commercial item status.

As of May 2000, there have been several suc-cessful purchases of renewable energy byFederal agencies such as the EPA, DOE, GSA,and the USPS (see Text Boxes 1, 3, 4, 5 & 6for examples). These examples provide addi-

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Commercial Items

Federal Attemps to PurchaseRenewable Energy

24See FAR Part 11.002(d)25How clearly an agency specifies its requirements during the solicitationprocess is a major determinant of the relative importance of cost in determin-ing best value. In general, as requirements become more clearly defined, theimportance of price relative to other considerations increases. See FAR Part15.10126See FAR section 2.101 for complete definition.27See FAR part 12

Specification ofRequirements

29Visit the Automated Power Exchange (APX) at www.apx.com.29Personal communication with Virgil Ostrander, December 14, 1999.

tional evidence that federal procurement offi-cers have the necessary authority to purchaserenewable energy.

Federal agencies may have opportunities topurchase renewable energy both in areas thathave opened their electricity markets to com-petition, as well as those that remain fully reg-ulated. In states that have not re s t r u c t u red andestablished retail competition, Federal re n e w a b l ee n e rgy purchase options will be limited to what-ever the local utility is willing to pro v i d e .

If the utility offers a green pricing program,agencies should find out the specific enroll-ment or sign-up procedures. If a GSA area-wide contract is already in place with this utili-ty, completion of documents for both the spe-cific program and for use of the area-widecontract may be necessary. In the case of utili-ty green pricing programs, no solicitation isrequired, since the utility serving the agencyremains the same (see Text Box 4).

In a competitive market, agencies must usecompetitive acquisition procedures to “shop”for renewable energy from a variety of pro v i d e r s .Since an agency will be evaluating competingo ffers, normal solicitation pro c e d u res must be fol-lowed. Federal agencies can take two solicitationa p p roaches—making use of designated contract-ing agencies, such as the GSA or the Defense

E n e rgy Support Center (DESC), or serving as thecontracting agency themselves. While serving asthe contracting agency offers increased contro land flexibility, the designated contracting agenciesa re developing significant expertise in the area ofcompetitive electricity power pro c u rement, includ-ing renewables (see Text Boxes 1, 3 & 5 forexamples of federal purchases in re s t r u c t u re dmarkets utilizing designated contracting agencies).

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Text Box 4Case Study: Federal hub in Denver area

Though Colorado has not restructured its electricity markets, the Public

Service Company of Colorado (PSCo) offers a wind power green pricing

option called WindSource, which it sells in blocks of 100 kWh/month at

a premium of $2.50 per block (or $0.025/kWh). On April 27, 2000,

Energy Secretary Bill Richardson announced that thirty federal agencies

in the Denver area had committed to buying more than 25 million kWh

of wind power per year through the WindSource program, supporting

the installation of roughly 10 MW of new wind turbine capacity. The

multi-agency commitment—deemed the largest purchase of wind

power in the nation—was orchestrated by the Denver Federal Executive

Board (DFEB), which represents over 130 federal agencies in the area,

with assistance from DOE's Golden Field Office, DOE’s Denver Regional

Office (DRO), the National Renewable Energy Laboratory (NREL), the

General Services Administration (GSA) and the Environmental

Protection Agency (EPA). Fort Carson in Colorado Springs and the Rocky

Flats Environmental Test Site together comprise about 30% of the aggre -

gated purchase, and a number of other agencies, including the EPA

Golden laboratory and the DOE’s Golden Field and Denver Regional

Offices, have demonstrated their environmental leadership by purchas-

ing 100% of their electricity needs from WindSource.

This wind purchase demonstrates the degree of creativity and

cooperation sometimes needed to successfully complete and fund a

green power purchase. For example, DRO, which sublets its space from

the DOE Golden Field Office, who in turn leases it through a GSA con-

tract with a private landlord who pays the utility bills, has had to over-

come this complicated tenant/landlord arrangement in order to com-

plete their purchase. GSA is currently working to remove such barriers by

helping those federal agencies in leased buildings to reimburse their

landlords for the wind purchase cost. Meanwhile, the Federal Energy

Management Program (FEMP) is working with agencies to improve

their energy efficiency and reduce their energy usage as a way to defray

the added cost of the wind power premium. Similarly, NREL and EPA are

funding a portion of their WindSource purchase through savings from

an alternative natural gas supply contract with GSA. By working togeth-

er, these agencies are helping to make green power a viable option in

Colorado.R e s t r u c t u re d / C o m p e t i t i v eM a r k e t s

Fully Regulated Market

ProcurementApproaches

GSA Power Procurement ServicesGSA has been active in assisting other FederalAgencies in the procurement of renewableenergy or green power (see Text Boxes 1, 3, 4& 5). In addition to the successful procure-ments already completed, GSA is developingthe expertise to meet specific price targets by“mixing and matching” various forms of con-ventional and renewable generation.30 GSAbelieves that by packaging the electricalrequirements of extremely large and similarelectric loads utilizing a cohesive and intelli-gent strategy, the government can reap thebenefits of the economies of scale involved ina mass procurement.

But the GSA strategy is not limited to thesimple aggregation of the electrical loads ofFederal agencies. GSA recognizes that thereare facilities within the Federal community thatuse massive amounts of electricity in a mannerthat is looked upon favorably by the energyservice providers that are competing in therestructured electricity markets. For these cus-tomers, GSA seeks specific prices for thosefacilities and works with the facility managersto develop strategies that will result in lowerlong-term electricity prices in the restructuredmarketplace. The GSA recognizes the impor-tant challenge of providing electricity to theFederal community at reasonable prices, whileat the same time protecting the environmentfor future generations. As a result of theirefforts thus far, GSA is making significantprogress towards the availability of renewableenergy at little or no price premium (for moreinformation on GSA’s efforts to purchaserenewables, see http://www.gsa.gov/pbs/centers/energy/green.htm).

Although not currently listed on the GSA’sFederal Supply Schedules, electricity serviceand green power products are promising can-

didates for future listing. Procurement reformhas prompted an overhaul of the Schedules,transforming them into a useful tool not onlyfor smaller, generic purchases, but also forlarge-dollar-volume, agency-wide services.There are several new features of supplyschedules that make them particularly wellsuited to serve the needs of those purchasingelectricity in a restructured market:

• Multiple award schedules (MAS) listcompeting contractors offering compa-rable products and services. MAS con-tracts are awarded to all companiesoffering commercial items whose pricehas been determined to be fair by theGSA. The use of MAS is considered acompetitive procedure, under FAR6.102(d)(3).

• Maximum order limitations have beenremoved, and replaced with maximumorder thresholds, beyond which anagency is required to seek a pricereduction from the contractor.33

• MAS contracts are priced on a most-favored commercial customer basis,and a price reduction clause requiresthe contractor to lower the agency’sprice in lock step with any correspon-ding price reductions to its most-favored commercial customer.

For the latest information on Federal SupplySchedules, see http://pub.fss.gsa.gov/sched/.GSA also has an environmental products webpage at http://pub.fss.gsa.gov/environ/.

DESC Power Procurement ServicesUnder the DESC Electricity Program, solicita-tions are issued as states are restructured andperiodically thereafter (based on the contractlength). When multiple states permitting com-petition are located within (completely or par-tially) the boundaries of a power pool, NERCregion or Independent System Operator,requirements within these states are solicitedsimultaneously. To date, DESC has engagedthe market in the following states: RhodeIsland, California, New York, Pennsylvania,Illinois, New Jersey, Connecticut, and Maine

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30Personal correspondence with Lindsey Lee, Public Utilities Specialist, U.S.General Services Administration, March 2, 2000.

Using GSA or DESC

and will be active in each state as restructuringcontinues. While a majority of the require-ments contained in DESC electricity solicita-tions are DoD accounts, federal civilian activi-ties may participate as well (as is the case inthe DoD natural gas program).

All procurements are done on a best valuebasis. Line items are established for each indi-vidual activity, usually for each meteredaccount. Terms and conditions within a givensolicitation can be tailored to the needs ofindividual activities, including pricing mecha-nisms and contract performance periodsthrough the use of “flexible aggregation.”Offerors are not mandated to offer on everyline item of government-created aggregates,but instead have the opportunity to offer onindividual line items within the solicitation,create and offer on “all-or-none aggregates,” ordo both. DESC believes that this approachallows the market to identify if synergies existby aggregating line items together into one ormore groups. Each offered price is comparedto the Default Service Tariff (DST) of the appli-cable utility. An award is made when costavoidance can be determined for each lineitem, unless the requiring activity has a differ-ent objective, such as stable prices in a marketwhere the utility tariff is based on a marketindex, or the purchase of renewables.

The DESC Electricity Program offers a vari-ety of pricing options, performance periodsand billing options which can be tailored tomarket conditions and individual needs. Theobjective of the program is to minimize theamount of effort required at the level of therequiring activity. DESC contract support iscradle to grave, from the identification ofrequirements through award and contractadministration.

If an agency does not deem it advantageous torequest assistance from the GSA or DESC, it may

contract separately for electric service by meetingthe re q u i rements of FAR Part 12 as described inSection 4.6 above (See Text Box 6 for an exam-ple of a federal purchase of renewable energy ina competitive market completed by an agency’sp ro c u rement officers). If the solicitation is for acontract exceeding one year in duration, theagency will need to request delegation of con-t r a c ting authority from the GSA.32

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Agency Procurement

Text Box 5Case Study: GSA New England

Before the Rhode Island and Massachusetts markets had even opened for

competition, the General Services Administration (GSA) was envisioning

the power of aggregation and the benefits of renewable energy in the

New England region. After meeting with federal agencies in the six-state

region to assess potential interest, GSA in early 1998 issued a request for

proposals (RFP) for a 5-year indefinite delivery/indefinite quantity

(IDIQ) contract that required a minimum of 4% of GSA’s load be met by

renewable energy sources. The contract, awarded to Enron Energy

Services (EES), relies on each individual state’s definition of a renewable

energy source; the definition contained in Massachusetts’ restructuring

legislation applies if a state doesn’t specify their own definition.

Interest in the renewable energy portion of the GSA contract has

been slow to develop for three main reasons. First, restructuring legisla-

tion mandated standard offer (i.e., default) service rates that were ini-

tially below the wholesale price of electricity in New England, making it

nearly impossible for marketers to compete with incumbent utilities for

the first two years of open competition. Second, the status of restructur-

ing legislation in Massachusetts was in question for much of 1998 until

a November ballot initiative aimed at repeal failed. Third,

Massachusetts and Rhode Island were the only two New England states

to open their markets to competition during 1998 and 1999, reducing

the potential for region-wide aggregation.

With standard offer rates in some Massachusetts service territories

now at 4.5¢/kWh (allowing marketers a margin above wholesale), GSA is

seeing renewed interest in its contract. In fact, GSA and EES recently com-

pleted negotiations in which GSA agreed to forego its discount in order to

purchase 4.5 million kWh/year of a 100% renewable product likely consist-

ing of a mix of landfill gas and wind power. This purchase, which will go

into effect in October 2000, will account for about 10% of the GSA’s load in

Massachusetts. The premium works out to be roughly 15%, but since GSA

will fund the purchase through foregone savings, their total cost of service

will be no higher than the going market rate. At present, no other federal

agencies have signed on to the green portion of the contract.

32Per FAR 41.103(b), “Other agencies requirirng utility service contracts forperiods over one year, but not exceeding ten years, may request a delegation ofauthority from GSA....”

Once an agency has settled on a pro c u re m e n ta p p roach, the following “key elements” can help guidethe agency through a successful solicitation pro c e s s .

Since electricity services affect many differentdepartments within an agency, bringing repre-sentatives from as many of these departmentsas possible on board from the beginning canprevent unwelcome surprises down the road.For example, a renewable energy purchasemay provoke widely differing responses fromrepresentatives of an agency’s accounting orfinance departments (who may be most con-cerned with cost) and environmental depart-ment (who may be most concerned with the“greenness” of the purchase). Involving bothgroups from the start can help assure that thefinal solicitation satisfies everyone’s needs.Experience has demonstrated that failure toform a team will often lead to contentiondown the line, whereas inclusion of represen-tatives of a variety of interested departmentshas proven to be important in completing pro-curements of renewable energy.

EconomicIf economic considerations are an overridingconcern, an agency can make use of a numberof different methods for reducing budgetimpacts (see Section 6.7 below), or can start

with a low percentage of renewable energywith an aim to increase the level over time ascosts decrease.

EnvironmentalAn agency’s strategic objectives, such as com-plying with Executive Order 13123, enhancingpublic relations, or being viewed as an “envi-ronmental champion,” may significantly affectthe requirements of the agency as specified inits electricity purchase solicitation. In general,the stronger an agency’s motivation to pur-chase renewable energy and be viewed as anenvironmental champion, the more attention itshould pay to the issues described in section2.4 (i.e., renewable resource type, vintage,33

percentage of product, and composition of anynon-renewable portion).

Because renewable energy is likely to costmore than conventional power, contractingofficers should seek approval for the purchaseapproach or increased budgetary outlay fromthe appropriate senior managers within theagency. Even if an agency is using directaccess or energy efficiency savings to fund arenewable energy purchase, approval by sen-ior management to forego some or all of thesavings will help to ensure a smooth purchase.Thus far, based on experiences gained fromprocurements of renewable energy by Federalagencies, it has been necessary in all cases toobtain management approval before these pur-chases could be completed.

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Determine AgencyObjectives

Obtain ManagementBuy-In and ExpenseApproval

33Vintage refers to the issue of older generation facilities versus newly con-structed facilities. See Section 2.4 for additional discussion of this issue.

Assemble a Multi-Function Energy Team

Key Elements of a SuccessfulProcurement Process

An agency’s electricity consumption datashould be part of any RFP, and is required byGSA when they are assisting in the procure-ment. At a minimum, monthly electricity con-sumption data should be provided; peakdemand and/or interval data are valuablewhere available. An agency should study itsconsumption data over the past year prior tospecifying requirements.

Agencies will need to define and specify theirrenewable energy requirements. Agencies maywant to look either to Executive Order 13123or state restructuring legislation for guidanceon which resources should be consideredenvironmentally preferable. The three otherimportant variables—vintage, percentage of aproduct that is supplied with renewable ener-gy, and composition of any non-renewableportion—should also be considered to theextent consistent with an agency’s environ-mental objectives. Agencies with strong envi-ronmental objectives will prefer higher per-centages of renewables, more new renew-ables, and non-renewable generation withenvironmental characteristics that are no worsethan the current system mix.

To streamline the definitional process,agencies may wish to make use of the criteriaalready established by third-party certificationefforts, such as Green-e or the Pace Scorecard.Specifying that only Green-e certified productswill be accepted may also help address verifi-cation concerns as Green-e conducts annualaudits of all certified products.

The ability to confirm that the agreed uponquantity of renewable energy was actuallydelivered into the grid and was sold only tothe contracting agency is a crucial part of anyrenewable energy purchase.

One verification option is to utilize existingstate regulatory mechanisms and, in particular,the verification methods that are used to com-ply with state fuel mix and/or air emissionsdisclosure requirements. Another approach isto conduct a private audit, or require thatpower sales be tracked as part of the suppli-er’s regular financial audit. Perhaps the sim-plest approach is to rely on third-party efforts,such as Green-e’s annual audits of certifiedproducts.

Agencies can specify requirements for renew-able energy in terms of either minimum quan-tity or maximum cost limits. While minimumquantity specifications are straightforward,costs can be limited in a number of ways.First, the agency can specify a price cap, eitheron a cents per kWh basis or as an indexlinked to market rates,34 beyond which theywill not purchase green power. Alternatively,the cap could apply only to the renewable orgreen premium over conventional power. Ifdirect access or energy efficiency projectsresult in cost savings, an agency can applysome percentage of those savings to purchaserenewable energy, controlling the cost by lim-iting the percentage of foregone savings.Finally, the agency could set a limit to their

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Select VerificationApproach

Evaluate Quantity andCost Considerations

Select RenewableEnergy Requirements

34This index can be linked to the retail price of electric service from the localutility (tariff rates) or the wholesale price of power from one of the availablewholesale markets. Other indexing approaches may be possible as well.

Obtain AgencyElectricity ConsumptionData

total budget for electricity from both renew-able and non-renewable generation. Agencydecisions regarding cost and quantity trade-offsshould be made during the procurement plan-ning phase of the process. By being flexibleabout the portion of their load served byrenewable energy, agencies can control theoverall cost of the renewable energy purchase.

Renewable Energy Price Premiums and Defining“Business As Usual”Although it is commonly claimed that re n e w a b l ee n e rgy costs more than conventional power,electricity restructuring has created some sub-tleties to this argument that bear directly onagencies’ ability to purchase renewable energ y .Because utilities are continuing to offer electricservice under regulated tariffs, while competitivesuppliers offer service under market-basedprices, there are two possible baselines againstwhich the cost of renewable energy service maybe compared—(1) electric service under defaultutility tariffs, and (2) electric service under thelowest priced competitive electric service altern a-tive. Because the “proper” baseline has notbeen legally specified as of this writing, contract-ing officers are able to use their own judgmentin determining the proper baseline. Text Box 6highlights the case of the U.S. Postal Service inC a l i f o rnia in which the default utility tariff wasused in determining the price baseline.

Bundling for Cost ControlRenewable energy purchases can be bundledin at least two ways – (1) with conventionalpower in blended service and (2) with energyefficiency. Bundling renewable energy withconventional power is relatively straightfor-ward and has the advantage of providingopportunities for any price premiums to becontrolled or eliminated. Text Box 6 describesa renewable energy procurement that utilizedblending renewable and conventional poweras a means of cost control.35

Although great potential exists for using thesavings associated with energy efficiency tofund a price premium associated with re n e w-

able energy, a pro c e d u re to do so has not yetbeen formally established. Enterprising agenciesa re encouraged to develop a pro c u rement strat-egy that will take advantage of savings re t a i n e df rom reductions in electricity or other energ ybills from efficiency projects to reduce or elimi-nate renewable energy price premiums. Underthis approach, no budgetary increases would benecessary to pay for renewable energy. E.O.13123 specifically encourages the use of savingsfrom energy efficiency to pay for renewableenergy (See Text Box 2).

Contract length should be considered in con-junction with several other factors. Forinstance, how an agency chooses to handlequantity and cost considerations interactsdirectly with contract length. If an agencychooses a fixed price per kWh rate or even afixed renewable premium, a longer contractincreases price risk. Conversely, a longer con-tract (typically 3 years or more) should reducerisk to the supplier, allowing them to offer alower rate than under a shorter contract.

Experience has shown that convening allthe interested parties to a renewable ener-gy purchase in a pre-bid meeting can gre a t-ly facilitate the contracting pro c e s s .3 6

P roviding potential contractors with aforum to offer feedback on the RFP canhelp agencies ensure that their re q u i re-ments are realistic and can be met in ane ffective manner. Such a meeting also pro-vides potential off e rors an opportunity to

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Determine ContractLength

Arrange a Pre-BidMeeting to FacilitateUnderstanding

35As it turned out, no blending was required because state renewable energysubsidies reduced the price of the purchase to acceptable levels.

36See EPA Richmond case study (Text Box 1).

l e a rn more about the (potentially compli-cated) federal pro c u rement pro c e s s .

After successfully completing a renewableenergy purchase, an agency may consider oneor more of the following actions in order topublicize their efforts: (1) spread the word thatthe agency has complied with Executive Order13123, (2) investigate whether the agency iseligible for any kind of tradable emissionscredits, (3) seek public endorsements fromenvironmental groups, and (4) capitalize onpositive public relations by broadcasting theagency’s efforts and accomplishments usingvarious media to interested customers, citizens,and other agencies.

The benefits of renewable energy are enor-mous, and as the nation’s largest purchaser ofelectricity, the Federal government can have asignificant impact on the way that power isproduced now and in the future. Federalagencies have an unprecedented and increas-ing range of options for purchasing renewableenergy. In those states that have restructuredtheir electricity markets, retail access allowscustomers to choose their electricity supplierand, by extension, how their electricity is pro-duced. In regulated markets, utility green pric-ing programs enable customers to support theaddition of renewable energy to the grid with-out leaving their incumbent utility. Moreover,recent Executive Orders direct Federal agen-cies to increase their use of renewable energy.

With increasing emphasis on "best value"purchasing and explicit consideration of envi-ronmental characteristics, contracting officers

now have more authority than ever before topursue purchases of renewable energy. Actingin the government’s— and society’s—bestinterests, contracting officers can take advan-tage of the strategies outlined in this guide-book to help move the United States towardsa more sustainable energy future.

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Summary andConclusions

Capture the Benefits ofthe Purchase

Text Box 6Case Study: The United States Postal

Service (California)In one of the largest renewable energy purchases to date, the UnitedStates Postal Service (USPS) announced in April 2000 that it will powerroughly 1,100 of its facilities in California with 100% renewable energy.Go-Green.com was awarded a three-year contract to supply more than30 million kWh each year of certified renewable power, most of which isgeothermal and biomass generation, at a cost equal to the CaliforniaPower Exchange (PX) clearing price, which is also the "default service"or "standard offer" rate in California. The USPS chose to purchase thehighest percentage of renewable energy possible without paying a premi-um above the PX price. Because of subsidies available in California, theUSPS was able to procure 100% renewable energy for all the facilitiesserved under the contract and there was no need to blend conventionalgeneration in order to meet the pricing requirements. Lawrence BerkeleyNational Laboratory provided technical assistance in developing thecompetitive solicitation, issued back in the summer of 1999, and evalu-ating responses.

This purchase was motivated by the desire of the USPS both tocomply with Executive Order 13123 and to take a federal leadership rolein promoting the use of renewable energy. After the military, the USPS,with roughly 40,000 postal facilities nationwide, is the largest federalconsumer of electricity.

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Green power is primarily a marketing ratherthan a scientific term. While there is currentlyno single standard definition of the phrase“green power,” there is general agreement thatthe term refers to electricity products thatinclude significant proportions of electricitygenerated from energy resources that are bothrenewable and environmentally preferable.37

Differences in defining the phrase arise pri-marily from the differing assessments of theenvironmental impacts of harnessing specificresources and of the relative significance ofeach impact. While burning municipal solidwaste (MSW) is not considered green by someorganizations concerned about the resulting(toxic) air emissions and the effect on incen-tives to reduce waste and to recycle, othersconsider MSW to be “green” because it con-verts ever-replenished waste into energy andeases the burden at landfills. Hydropower isclearly a renewable resource, but its perceived“greenness” depends on differing levels ofconcern about impacts on local habitats, riverecology, and fish populations. Because of theimportance of hydropower resources in thecurrent national generation mix, the debateover its "greenness" has been rather heated.38

Rather than any specific resource beingclearly both renewable and environmentallypreferable and, therefore, clearly “green,” thereis instead a continuum of “brown” to “green”along which all energy resources fall.

Perhaps even more difficult than assessingthe “greenness” of an energy resource is deter-mining the “greenness” of an electricity prod-

uct made up of several different energysources. A product containing 20% windpower may actually be quite polluting if theremaining 80% comes from a dirty coal plant.As is the case with specific energy resources, acontinuum from brown to green power prod-ucts exists as well.

In an effort to head off questionable mar-keting practices, Attorneys General in variousstates have also been examining the questionof what constitutes green power.39 Theirefforts have mainly focused on defining whattypes of claims marketers can make abouttheir products without being deceptive and inviolation of state consumer protection laws.

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What is Green Power?

37Although not a renewable generation technology in a scientific sense, fuelcells using natural gas as fuel are explicitly included in certain state renew-able resource programs. Other emerging technologies may also be includedin such programs in the future.38Efforts to establish standards for "low impact" hydropower that would helpresolve these issues are currently underway or recently completed in severalvenues. The Low-Impact Hydro Institute recently received their first applica-tion for certification. See www.lowimpacthydro.org.

38See the Environmental Marketing Guidelines for Electricity recentlyissued by the National Association of Attorneys General, dated December 1999.

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For Additional Resources On the Internet:1. For further assistance or specific questions relat-ing to green power, contact FEMP on the web athttp://www.eren.doe.gov/femp/.2. The Green Power Network is a good source forup-to-date news http://www.eren.doe.gov/green-power/

Assistance with Green Power Purchases is AvailableFrom the Following Federal Agencies and NationalLabs: For Assistance Issuing Solicitations:General Services Administration

Virgil Ostrander, 202-501-3994

Lindsey Lee, 202-501-2291

Defense Energy Support Center

John Nelson, 703-767-8669

For Assistance with Program Resources:

Department of Energy – Federal EnergyManagement Program

Anne Sprunt Crawley, 202-586-1505

Brad Gustafson, 202-586-2204

Tatiana Muessel, 202-586-9230

For Technical Assistance, including market intelli-gence, market rules and development ofRequirements and Statements of Work:

Charles Goldman, Lawrence Berkeley NationalLaboratory, CAGoldman@lbl.gov, 510-486-4637

William Golove, Lawrence Berkeley NationalLaboratory, WHGolove@lbl.gov, 510-486-5229

Chandra Shah, National Renewable EnergyLaboratory, chandra_shah@nrel.gov, 303-384-7557

Ryan Wiser, Lawrence Berkeley NationalLaboratory, RHWiser@lbl.gov, 510-486-5474

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Information andAssistance RegardingRenewable Energy andGreen Power