How a small incentive showed it can pay big to invest in renewable energy.

In the summer of 2014, I read that George Washington University, American University, and The George Washington University Hospital were going to buy 52 megawatts of power every year from a North Carolina solar farm. At the time, it was the largest non-utility solar power purchase in the U.S. and the largest solar project east of the Mississippi River. The icing on the cake was that they were getting fixed pricing for solar energy for 20 years at a lower price point than the current market.

In Boston, since we have so many colleges, hospitals, and large institutions—all major energy users—I thought, “Could we do something similar here?” The Boston Green Ribbon Commission (GRC) also considered this question and last year organized an informal network of Boston institutions to talk about how they could do large-scale renewables procurement. There was a lot of interest in joint purchasing to reduce costs and make it easier, but uncertainty about how it might work. To continue the momentum and to inspire action, the GRC issued a prize and Barr partnered with the GRC to fund it.

The $100,000 Renewable Energy Leadership Prize launched last summer. Its goal was to spur local leaders who were contemplating big renewable energy purchases to move ahead with their projects.

On February 25, the GRC announced the winner: PowerOptions, in partnership with Tufts University and Endicott College. The largest energy-buying consortium in Massachusetts, PowerOptions procures electricity and natural gas supply for 500 nonprofit and public members. The nonprofit organization teamed up with two of its members, Tufts University and Endicott College, to purchase up to 12 megawatts of power from a wind project in New England.

Other applications came from Boston University and by A Better City (ABC), a consortium of Boston institutions and civic leaders. All three applicants went through twists and turns to pursue a deal and, as of this writing, their pursuits are still ongoing. Some customers participating in the deals withdrew because developers changed their terms. Some deals fell apart or were delayed as market and policy conditions changed. Most notably, Endicott College is no longer part of the PowerOptions deal because the developer wanted them to purchase a larger amount of power. They were replaced by Partners HealthCare, the parent organization of Massachusetts General Hospital and other major healthcare facilities.

At this point, it appears that the Prize is yielding two sets of results. First, it spurred the three applicants to devote considerable time and effort to solving the puzzle of buying offsite renewable electricity. Our initial hope and hypothesis was that a prize would catalyze action, and that turned out to be right. There was a risk that there would be no takers and we were pleasantly surprised to see such significant interest. The applicants were in different stages of readiness and had different factors motivating their actions. The Prize helped push them to their finish lines by creating deadlines for accomplishing what some had been planning to do for some time. If all three deals go ahead as currently planned, it could result in as much as 63 megawatts of new renewable energy capacity.

The second result is learning: by the applicants and their developers, consultants, and brokers; by the GRC and their stakeholders; and by the Barr Foundation. To share the lessons learned from the Prize, the GRC recently released a case study, called Solving the Puzzle.

Read Solving The Puzzle

Here are four of the key takeaways:

1. Collaboration takes time, but multiplies returns.

The Prize placed a high premium on collaborative proposals, with the theory that joint procurement would be better. While this created a barrier to wider participation, it also tested the theory that institutions could collaborate to negotiate stronger green power purchases. While results suggest that more time is needed to structure such deals, it also showed that collaboration did in fact create better deals. I hope the participants’ experiences of crafting and negotiating these deals provides them with jumping-off points to continue their efforts and to inspire others.

2. Unexpected terms may make the deal work for you.

All three applicants considered or deployed some complicated features in their deals, including forms of arbitrage for both electricity and renewable energy credits, as well as inter-regional power deals. The complexity was worthwhile because of the significant financial benefits it captured. There were huge price variations between technologies and regions that enabled significant cost savings.

3. Policies can move or delay an energy deal.

State, regional, and federal policies had major implications for the nature of the deals. Strong energy policies drive progress in clean energy, but they are difficult to navigate and can be slowed down by legislative inaction. State solar regulations and federal tax credits were both up in the air at the time of the contest, causing a number of delays and potential dead-ends. The applications, and the response from potential suppliers, were affected by this uncertainty.

4. A commitment to sustainability really matters.

While all applicants were looking for the most cost competitive deals, their degrees of commitment to sustainability and clean energy played decisive roles in motivating their actions. Those with long-term carbon-reduction goals embedded across their organizational decision-making processes looked at their options in a different light than institutions without such goals.

I would strongly encourage other funders to consider launching a similar initiative. The Prize was particularly useful here in Boston, where higher education, healthcare, and private companies have the potential to directly purchase renewable energy. The Prize motivated them to commit to such purchases. I expect many other places are in similar situations.

There is still work to be done to expand interest in renewable energy purchases and to make it easier for institutions to participate. But, the Prize offered a major learning opportunity for the Barr Foundation and for the GRC in what it takes for institutions and companies to engage in renewable energy purchases.

Depicted in the photo above are applicants of the $100,000 GRC Renewable Energy Leadership Prize along with Barr and GRC staff.