COVER STORY, MAY 2007

SWITCHING TO CLEAN ENERGY IS SOUND BUSINESS
Erich Landis

Public perception, environmental concerns and pressure from investors in recent years have fueled energy companies to produce clean energy and rely less on fossil fuels. As a result, it’s now easier than ever to be green in the Lone Star State.

The reason is that environmentally conscious customers successfully pressured businesses, which in turn pressured energy suppliers, to reduce their fossil fuel use — a simple case of supply and demand. As easy and environmentally sound as it is to run a business on green energy, getting started can leave many feeling blue. However, jumping on the clean energy bandwagon is an essential part of doing business in the 21st Century.

Converting to renewable sources now will save headaches down the line when state energy initiatives are increased. Plus, commercial property owners that use clean energy could save money over the local utility rate and make a public statement about their commitment to the environment. With the green energy movement all the rage, it’s easy to make the switch.

A Wind Of Change

As much as 80 percent to 90 percent of a company’s carbon footprint — the amount of carbon dioxide emitted through fossil fuel combustion — comes directly from their natural gas and electricity use. It’s been a major concern, and has raised the emission levels in the country’s most populous cities. As a result, more businesses nationwide are taking steps to dial down their fossil fuels.

This is especially true in Texas, where companies are beginning to embrace green energy as a major business directive. The timing couldn’t be more perfect, as the Environmental Protection Agency (EPA) has cited Texas’s three largest cities — Houston, Dallas  and San Antonio — as cities with an above-average amount of pollutants in their air quality.

But, times are changing, and Texas scored a major win in the push toward a cleaner environment in February. A group led by Kohlberg Kravis Roberts (KKR) and Texas Pacific Group bought out TXU, the state’s largest utility, for $45 billion. The group, which included Goldman Sachs and three other Wall Street firms, immediately pulled the plug on TXU’s plans to build 11 coal plants. The TXU buyout is a big step for the state of Texas and its new push for environmental awareness: it raises clean energy awareness, changes the state’s perception as a major polluter and helps prepare the state for future clean-energy initiatives.

Going Green To Save Green

While going green can sometimes cost more, it’s offset by what companies can save in the long run.  And, if a business normally buys its energy from the utility, the cost of renewable energy may be less expensive.

If an organization is currently purchasing energy on the open market, it might cost anywhere from 2 percent to 5 percent to turn green. Still, the goodwill generated from the switch, and the public perception gained, can far outweigh the incremental costs.

Since Texas is a deregulated market, energy can be purchased through utility companies or through third-party suppliers. Companies that leave the state utility in favor of renewable sources can save at least 20 percent.

One of the most common approaches for purchasing green energy is choosing a mix of renewable energy and fossil fuels. Businesses can purchase a portion of their energy needs from a clean energy provider, such as Clear Sky Power, Green Mountain and Sterling Planet, among others, and the remainder from a third-party supplier. This generates savings because it’s cheaper than the utility rate, and companies can then shop for a cheaper fossil fuel rate on the open market.

Remember that Texas has one of the most competitive supplier markets in the country, and as such, there are a number of well-qualified suppliers from which to choose. While conducting research, commercial building owners should be cautious. When shopping on the market, they shouldn’t fear asking the supplier questions such as:

• How long has the company been in business?

• What are their qualifications?

• What references do they have?

• What energy sources do they provide (wind, solar, biomass, etc.)?

• What do they recommend for the company’s facilities?

Doing some homework will lead to a successful transition to the world of clean energy.

Taking The Clean Energy Lead

If there’s not already an ingrained corporate mandate for commercial property owners to incorporate some clean energy into their buildings, there certainly is a market reason for going green.

First, owners that incorporate renewable energy can advertise their properties as green, which adds value to their property. It’s one way to attract environmentally conscious tenants, and improve how the general public perceives the company.

Second, some commercial building owners have leveraged their green component to charge higher rents. The McCain Green Building in McCain, Texas, for example, charges tenants a premium. It does this because businesses — wising up to the financial and social value of using clean energy — are demanding that building owners have a renewable component. That’s why renewable energy sources are quickly becoming the fastest growing segment of the energy market.

And lastly, it’s not only public perception that’s urging American corporations to use reduce carbon emissions. Other nations will eventually pressure the U.S. to put in guidelines that require businesses to comply with Kyoto reporting agreements. Already much of corporate America has made strides to report their emission outputs.

Currently, Texas utilities are only required to offer 2.5 percent of its energy output as renewable. That percentage is expected to jump to 15 percent by 2020. The result: companies that switch to clean energy now will have the upper hand on the competition when the government mandates businesses to use renewable energy sources. Those who don’t switch now will have to play catch-up later.

Erich Landis is director of renewable initiatives for Cadence Network.


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