New York advertising firm Gardner Nelson & Partners recently asked consumer, business, and opinion leaders to draw pictures of how they imagined a world powered by green energy. The sketches revealed that even society's leaders know little about the scale and effectiveness of today's renewable energy technology.

Several of the study participants drew primitive settings with claptrap inventions. One even labeled his drawing Gilligan's Island, from the 1960s sitcom about seven castaways making do on a deserted island.

"Clean energy was seen as weak and not capable of powering our world. People believed you'd need backups for your backups," Gardner Nelson wrote in a report released in the spring of 2004 for its client, the Clean Energy States Alliance, a nonprofit organization of a dozen states that promote renewable energy.

The study reflects a common complaint heard from corporate energy managers and others in the trenches who are attempting to sell top executives on the idea of green distributed generation. They say decision-makers too quickly dismiss renewable energy as a second-rate power source.

Jennifer Layke, director of business engagement for the Sustainable Enterprise Program of the World Resources Institute (WRI), works frequently with corporate leaders, and she concurs: "I do think there are probably still misconceptions out there."

The Washington, DC–based environmental think tank has brought together 16 of the country's largest energy users to build the US market for renewable energy and rectify the misconceptions. Alcoa, Cargill Dow LLC, The Dow Chemical Company, DuPont, General Motors (GM), IBM, Johnson & Johnson, and Staples are among those who have set a goal to voluntarily add 1,000 megawatts of renewable energy to the US supply portfolio by 2010. Calling themselves the Green Power Market Development Group, the companies intend to serve as role models and encourage others to pursue renewables. By investing heavily in solar, wind, fuel cells, landfill gases, and other clean energy technologies, they hope to influence the market and drive down prices.

Environmentalism: A Big Yawn?

These corporate pioneers have their work cut out for them if the Gardner Nelson report is any indication. People see renewables as eccentric, full of kinks, the report says. When the ad agency told study participants that America already produces enough clean energy to power all of Chicago, they were surprised. "No one ever pictures clean energy being harnessed at a big enough scale to create massive power," Gardner Nelson wrote.

How can the renewable energy industry turn around this image? Here's a surprise: It needs to stop talking so much about the environment. People have turned a deaf ear. It's not that they don't care; they've just heard the environmental argument too often when it comes to renewable energy—or at least that's what the Gardner Nelson focus group members indicated. "It's old news, and no longer very motivating," the report says. "It will take a new message to break through."

Gardner Nelson suggests that the idea of energy self-sufficiency resonates more than environmentalism at this juncture. Indeed, last year's blackout in the Northeast, which left 50 million utility customers without power, woke up many businesses to the importance of energy independence. Following the blackout, companies like PowerLight Corporation, a Berkeley, CA, firm that has installed solar panels for Toyota, Rodney Strong Vineyards, Harvard University, and other large energy users, reported an immediate uptick in calls from businesses exploring distributed generation. "They like the idea of onsite sourcing whenever they can make it work, especially given the recent outages," Layke says.

But Layke adds that in the world of large energy users, where complex electricity usage patterns often demand customized solutions, there is no one-size-fits-all argument that wins corporate decision-makers over to the idea of renewable energy. Instead, it's important to match benefits with specific company needs. "You have to be savvy about what challenges the company faces and if there is a renewables solution," she says.

Bored or not with the environmental argument, businesses intent on reducing air emissions remain the most likely to pursue renewables. Jori Zimmerman, vice president of business sales for Renewable Choice Energy, a Boulder, CO, company that supplies green energy to Coldwell Banker Colorado and a range of other businesses, says she uses the three-click rule before approaching a prospect: "If they don't mention sustainability within three clicks on their Web site, there is no point in calling them. We're a business; we need to go where the fish are." Thomas Leyden, a PowerLight vice president, adds, "Good customers have an environmental plan. They have a mission statement or credo that specifically mentions trying to pursue environmentally sound strategies."

The Price Is Right…Sometimes

But altruism only goes so far in the corporate world. Even companies with a strong environmental bent seldom commit to renewable projects unless they offer a good return on investment, Leyden says. PowerLight is able to clinch deals with the offer of a five- to 10-year payback for about 80% of its solar installations. Solar is heavily dependent on state subsidies to be cost-competitive, so the company tends to achieve the best returns in states with strong incentive programs, such as California and New Jersey.

"The key factor is that solar provides a hedge against future price spikes. The cost of the energy for the next 30 years is known, and it is low," Leyden says. "And the equipment is long-lived, has virtually no maintenance and solid warranties."

Johnson & Johnson, based in New Brunswick, NJ, fits the profile of a company pursuing sustainability while keeping an eye on the bottom line. The international health care product manufacturer became the second-largest corporate user of onsite photovoltaic (PV) systems in the United States, as it pursued a strategy to meet Kyoto Protocol carbon dioxide reduction standards.

Before going forward with a PV installation, Johnson & Johnson tests a project's investment worthiness to ensure it meets the company's criteria for internal rate of return, according to Dennis Canavan, executive director of worldwide management at Johnson & Johnson. So far, 1.2 megawatts of solar have made the grade and been installed, a large number considering that solar projects generate small amounts of power; measurements rarely exceed the kilowatt range.

Since solar generation runs counter cyclical to utility power, it tends to attract customers like Johnson & Johnson who are interested in the benefits of peak shaving, particularly in deregulated states where utilities offer demand-based rates. Solar panels provide peak-shaving opportunities because they are most effective when it is hottest and the sun shines brightest. This is also the time when demand for power is greatest because of air-conditioning use, so utility rates are at their highest. A company with solar electricity is able to cut costs by reducing or "shaving" its grid power use during this peak period.

The International Brotherhood of Electrical Workers (IBEW) Local 269 in Trenton, NJ, also pursued renewables because "it's the right thing to do," but has discovered economic benefits as well. Charles Marciante, business manager, says the booming solar industry is creating jobs for electricians who install panels. That's part of the reason he urged his board in 2002 to hire PowerLight to mount 100 kilowatts on the union's roof and an additional 30 kilowatts on trackers.

Now, the IBEW chapter is looking into selling green tags (also called renewable energy credits) from the excess energy the PV panels produce. Green tags are typically purchased by energy suppliers who must provide a portion of their power from renewable energy under state regulations known as Renewable Portfolio Standards (RPSs). If the suppliers do not generate green energy themselves, they can buy the tags from those who do. Fourteen states now have RPS requirements, and several others are considering them, making green tags an increasingly sought-after product. Green tags will help Local 269 earn a five-year payback on its PV investment.

At GM, environmental goals led the auto manufacturer to install four landfill gas projects with a fifth under development. But corporate management also wanted the projects to be at least cost-neutral, according to Al Hildreth, renewable energy manager. The company has done better than that; each of the projects saves GM about $500,000 a year. GM pumps methane gas from landfill sites for use as thermal energy at nearby GM facilities, displacing more expensive coal and natural gas. Now GM uses 1.6 trillion British thermal units per year of landfill gas, making it the largest non-utility landfill gas consumer in the United States.

Unfortunately, not all corporate decision-makers are knowledgeable about such cost-saving strategies as fuel diversification, peak shaving, and green tag sales. "Some companies that we've approached don't get it. The number-one hurdle or misconception is that if you are going to buy green, it's going to cost you more," says Scott Martin, regional commercial business manager for Green Mountain Energy, a retail supplier which has heavily marketed its clean energy products to commercial and industrial customers in its home state of Texas and now plans to expand the campaign nationally.

True, renewable energy isn't always the cheapest buy in competitive markets like Texas or in states that lack clean energy subsidies. In these cases, it can be a tough, if not impossible, sell to large manufacturers who see each energy transaction as a commodity play and want only rock-bottom pricing. "They can't always achieve the return on investment that is required, and they do not have special funds they can use for these projects," Layke says.

The Practical Value of Diversifying

Sometimes, however, price plays a secondary role because renewables solve other, bigger problems the company faces. Such is the case for Dow Chemical, which in partnership with GM has launched the world's largest fuel cell project.

DOW is a major US energy consumer and relies heavily on gas-fired cogeneration to meet its needs. A pioneer in the field, the company began using distributed energy in the early 1900s, and now has about 3,000 megawatts of cogeneration, making it one of the top 50 US power producers, and the largest among industrial manufacturers.

"Because we have a lot of cogeneration, we are very dependent on natural gas. Natural gas prices have gone through the roof at this point. So one of the things we want to do is diversify our portfolio. That's where renewables come in," says George Kehler, DOW commercial manager.

Fuel cells not only offer a way for DOW to diversify its energy portfolio, but also to recycle hydrogen waste. DOW produces hydrogen as a byproduct of chemical manufacturing. The company now fuels boilers with the hydrogen or sells it to industrial gas companies. But DOW says that it's more efficient and economical to flow hydrogen through fuel cells and generate electricity.

"In this environment even expensive fuel cells have a role to play," Layke comments. "It's a unique corporate position."

The project also offers distinct benefits to GM. The demand created by DOW gives GM the opportunity to produce fuel cells in large volume, which is expected to drive down costs and improve the technology, positioning GM to manufacture fuel cell automobiles by the end of the decade. In all, the partners expect to turnout more than 400 fuel cell units, which will generate 35 megawatts for DOW's Freeport, TX, plant, the company's largest chemical manufacturing facility.

DOW and GM launched the fuel cell project last year and in February 2004 US Department of Energy (DOE) Secretary Spencer Abraham pulled the switch to turn on the first 75-kilowatt unit, which Kehler says is "running quite well." Later this year, DOW plans to enter the pilot stage for the project with four additional units, totaling 400 kilowatts. The company will add additional units over the next 18 months to reach a 2-megawatt goal. During this period, DOW hopes to nail down the fine points of onsite fuel cell installation, grid connection, capturing water for energy use, cleanup, and waste-heat recovery. By 2006, the company expects to enter the commercialization phase.

Scoring Brownie Points

While cost savings and fuel diversity sell some corporations on the idea of renewable energy, others are attracted to the public relations benefits, especially if green energy dovetails with their customers' values. For example, energy insiders often point out that those who eat organic foods are likely to also purchase renewable energy. So it's not surprising that Whole Foods, based in New York City, has become a poster child for this strategy.

In 2002, the natural-food supermarket chain became the nation's first major food retailer to install solar energy as its primary lighting power source. PowerLight, Princeton Energy Systems of Sausalito, CA, and Nextek Power Systems of Hauppauge, NY, teamed up to install the 33-kilowatt project in the company's store in Berkeley, CA. In addition, 24 Whole Foods stores in Maryland, Pennsylvania, the District of Columbia, and Virginia purchase grid-connected wind power, and invite customers to purchase wind power for their homes through the program. More recently, its Edgewater, NJ, store installed a 120-kilowatt BP Solar panel system.

While Whole Foods is an obvious candidate for green energy, a petroleum company is not. Yet Royal Petroleum Company says it has received "atta-boy" praise from its customers for installing a 36.6-kilowatt PV system at its headquarters in Santa Rosa, CA. The company supplies diesel fuel, gasoline, and lubricants to commercial fleets in California's Sonoma and Marin counties.

"Our industry has historically, as we all know, been dirty," says Jim Dalton, Royal Petroleum president. "People ask us in astonishment, ‘Why are you guys doing this?' We tell them we want to be in the forefront of our industry, not in the back pages."

Royal Petroleum hired Sun Power & Geothermal Energy of San Rafael, CA, as a one-stop shop to handle PV installation, financing, and coordination with the local utility. The fuel supplier tapped into California's generous incentive programs, receiving a rebate through local utility Pacific Gas & Electric. Royal's system also qualified for a 7.5% California tax credit, a property tax exemption, a federal 10% investment tax credit, and an accelerated five-year federal tax depreciation schedule for renewable energy.

In addition, Royal's solar system takes advantage of California's net metering laws, which require public utilities to credit renewable energy producers for excess power that they send to the grid. Royal sells to the grid on sunny days, earns a credit, and then taps into that credit on cloudy days or at night when it uses utility power.

Now, the company expects a four-and-a-half-year payback on its investment. So the solar project turned out to be a not only a good public relations move but also "a frugal business decision," Dalton says.

Royal's involvement in solar may be a surprise to some; even more astonishing is the way America's oil capital, Texas, has taken to renewable energy. In the mid-1990s, when the state required utilities to conduct a series of customer polls, "most people were sure that conservative Texans would never survey as pro-renewable and pro-energy efficiency," says Nat Treadway, managing partner with Distributed Energy Financial Group of Washington, DC, a distributed generation consulting company.

But they did, and, as a result, the state instituted aggressive renewable energy standards when it made the move to competitive electricity markets in the late 1990s. Within four years, the state had developed more than 1,000 megawatts of renewable energy, according to the National Renewable Energy Laboratory, a DOE lab. Texas is expected to stay ahead of the curve; the Union of Concerned Scientists, a Cambridge, MA, environmental advocacy organization, projects that together Texas and California will produce 60% of the country's renewable energy by 2017.

For companies like Green Mountain Energy, this makes Texas a particularly attractive state to pursue industrial and commercial customers, especially since its residents tend to champion in-state products. "Texans gravitate toward the technology because it's a home-based enterprise. Texans like to support things Texan," says Green Mountain's Martin.

This is especially true of smaller businesses, Martin says, which inside or outside of Texas require a different kind of sales pitch than large corporations. When small enterprises pursue renewables, it's usually because someone in the company has a personal interest in the technology. The trick is to find that "champion" and help him make the argument to management, adds Zimmerman of Renewable Choice Energy.

Obstacles to Taking the Plunge

Some large energy users want to be "first movers" in the renewable energy arena, getting out front with the technology before competitors do or before government regulation requires it of them.

"Both actual and potential green power customers agree that they can get more attention, and perhaps gain competitive advantage, from being among the first to buy green power in their market. Even if they are not among the first, both groups agree that it becomes increasingly important for them to buy green power if other companies in their industry or community are doing so," according to Understanding Non-Residential Demand for Green Power, a report commissioned by the National Wind Coordinating Committee, a Washington, DC, collaborative organization that includes a broad range of renewable energy players from industry, government, and advocacy groups.

The first-mover strategy, however, isn't without its pitfalls, says WRI's Layke. Some companies want to get a jump-start on reducing emissions before the government imposes new requirements. This can be risky because it's not clear what the new standards will be. So companies worry that they could get penalized, depending on the baseline year set for calculating emissions reductions. For example, if a company installed renewables in 2000, and then regulations set 2001 as the baseline, the company loses the benefit of its early investment. "This is one of the issues that companies always talk about," Layke says.

Sometimes companies refrain from installing onsite renewables because they fear the complexity of managing their own plant. "It's a big leap to think about doing something around energy yourself, a big leap after you've been connected to the grid," Layke says.

She adds that industry innovations are helping companies overcome this barrier. For example, SunEdison now offers a turnkey service that removes the financial and technical risk of installing solar panels.

The Arlington, VA, firm simplifies solar by finding risk-averse investors to finance the solar installations put on the rooftops of large, national businesses. The investors earn low-risk stable returns from credit-worthy companies, while the companies avoid a large upfront expenditure in favor of a long-term fixed price schedule.

At the same time, the companies are assured that a large, well-established vendor will handle project installation and maintenance. SunEdison works with BP Solar, part of the $233 billion London-based BP conglomerate. BP Solar maintains the system, inspecting it once a year and swapping out inverters when necessary.

SunEdison prices the 10- to 20-year contracts to meet investor's return requirements, which are usually under 10%. The installations typically reduce a company's electric bill 5% below what it would pay its local utility during the first year. Future savings vary depending on utility rates.

Whole Foods signed onto SunEdison's program earlier this year for a 120-kilowatt system at its store in Edgewater, NJ. More recently, Staples inked a contract for a 260-kilowatt system at its 495,000-ft2 distribution facility in Realto, CA. A Staples spokesman said that the project offers the office products distributor the opportunity to achieve significant kilowatt-hour and demand savings, as well as generate carbon dioxide offsets and green energy tags.

SunEdison currently works only in states with strong solar subsidy programs. However, it plans to offer its products in non-subsidy states by 2010, according to Jigar Shah, president and chief executive officer.

By then, far more corporations are likely to consider renewable energy seriously. "The Changing Face of Renewable Energy," a 500-page study released last year by Navigant Consulting of Burlington, MA, predicts a doubling of renewable energy use in the United States and Canada over the next decade. The landmark report forecasts a 9.2% compounded annual growth rate for renewables globally from 2003 to 2013, a rapid expansion considering that conventional generation is expected to grow by only 2.4%.

"With a track record, people don't have to worry that they are the only ones testing these technologies. Confidence increases," Layke says. Or as Gardner Nelson puts it in an ad slogan: "Clean energy. It's real. It's here. It's working. Let's make more of it."

ELISA WOOD is an energy writer based in Esmont, VA.

DE - September/October 2004