Utility Green Tariffs

Explore the sections below to learn more about utility green tariffs.

What Are Utility Green Tariffs?

Utility green tariffs are optional programs in regulated electricity markets offered by utilities and approved by state public utility commissions (PUCs). They allow larger commercial and industrial customers to buy bundled renewable electricity from a specific project through a special utility tariff rate.

This emerging green power utility offering in regulated markets provides larger-energy customers an option to meet their varying sustainability and renewable energy goals, reduce long-term energy risks, and demonstrate a commitment to the development of new renewable energy projects.

Utility green tariffs are an important innovation that increases consumers' ability to access green power. From 2012 to 2017, only 16 percent of signed corporate off-site purchase deals occurred between organizations and utilities in traditionally regulated markets, even though these areas produce approximately 40 percent of U.S. electricity.1 Utility green tariffs help bridge that gap, expanding the opportunity for organizations in traditionally regulated states to buy bundled green power beyond utility green power products and unbundled renewable energy certificates (RECs). In 2022, corporate customers announced more than 3,000 megawatts (MW) of green tariff or bilateral utility deals, representing roughly a quarter of the approximately 12,000 MW of total deal capacity with a known contract type.2

For more information about how to decide which potential green power procurement options are available for your organization, see the Green Power Supply Options Screening Tool (xlsm) (121.22 KB) .

How Do Utility Green Tariff Programs Work?

Organizations in regulated electricity markets can take advantage of available utility green tariffs if they meet the program's eligibility requirements. The organizations that are eligible vary considerably between green tariff programs, so organizations should check with their local utility to find out if they qualify.

Under a green tariff, utilities supply the organization with up to 100 percent renewable power from projects either owned by the utility or contracted with independent power producers in the local grid or utility region. However, green tariff programs vary in the exact mechanism that the utility uses to procure green power on behalf of the organization. Some programs allow customers to choose a "market-based rate"—in other words, to peg their electric rate to the wholesale electricity market price. Other programs let the organization engage directly with the renewable generation project, encouraging competitive project selection and ensuring new renewable energy capacity is brought onto the grid. In other programs, the utility facilitates the organization's green power purchase through a type of power purchase agreement (PPA) called a "sleeved PPA," where the utility essentially passes a physical PPA that it has signed with a renewable energy project along to the consumer. In all green tariff programs, utilities avoid shifting program costs and risks to non-participating utility customers and only charge participating organizations for the cost of the renewable electricity.

The below infographic depicts how a typical Utility Green Tariff works.

GPM Utility Green Tariffs
To save the infographic, right-click on the image.

Advantages and Challenges of Utility Green Tariffs

Advantages:

  • Direct transaction/arrangement between an organization and local utility.
  • Enables organizations to maintain and expand existing relations with utility.
  • A new option for larger electricity customers in regulated markets to help meet their sustainability and renewable energy goals.
  • Price predictability and potential cost savings.
  • Enables organizations to point to a specific, often local, renewable energy project as the source of its electricity.
  • Enables organizations to procure renewable electricity from a project located in the same grid region as their operations.

Challenges:

  • Only offered in a limited number of traditionally regulated states by a few utilities
  • Often only available to large electricity customers
  • May require a long-term commitment

What Is the Difference Between a Utility Green Tariff and a Utility Green Power Product?

Both options are offered by utilities to customers in traditionally-regulated markets, and in both options, the customer receives bundled green power (i.e., RECs alongside the underlying electricity). The two options are slightly different in their purchasing process, who they're available to, term of contract, and level of project specificity.

With a green tariff, eligible organizations buy bundled renewable energy from a specific project through their utility, usually through a longer-term agreement. With a green power product, customers—which can include residential customers—pay a cost premium as an extra line item on their electric bill to support an "off-the-shelf" renewable electricity product, which is often a mix of renewable energy resources. These are often shorter-term commitments, and the renewable energy resource mix used to generate the green power can be intermittently changed by the utility.

How Do I Know if My State Has Utility Green Tariffs?

As of October 2023, 62 active utility green tariff programs have been approved or are pending approval at more than 30 utilities across 30 states. The states are Alabama, Arizona, Arkansas, Colorado, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Carolina, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. If you live in one of these states, your state has a traditionally regulated retail electricity market in which consumers have no choice but to purchase electricity from their local utility at prices regulated by the state and utility commission. Utility green tariffs are a relatively new option in regulated retail markets allowing qualifying organizations to procure bundled renewable electricity from specific renewable energy projects. Despite the significant growth of green tariff programs in recent years, it is important to note that in most states, there is only one utility with a green tariff and the programs typically have limited capacity. With such high corporate customer demand, these programs are often quickly fully subscribed, which suggests there is a need for additional utilities to create green tariffs and for greater renewable capacity from existing programs.

For a map showing the status of utility green tariff programs throughout the United States, see the Clean Energy Buyer Association's U.S. Green Tariffs Map. Click on your state to see if your utility offers a green tariff program and if your organization meets the eligibility requirements.

States with Utility Green Tariff Programs
Figure 1. States with Green Tariff Programs, October 2023. CEBA

Additional Resources

1https://www.nrel.gov/docs/fy19osti/74211.pdf
2https://cebuyers.org/us-electricity-markets-utility-green-tariff-update-january-2023/

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Last updated on January 22, 2024