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The Emergence of Creative Financial Tools for Renewable Energy and Energy Efficiency Projects

Energy and Environmental Trends Watch

The ingenuity of the renewable energy industry and the energy-oriented financial players is never to be doubted. Within the past few years, several creative financial tools have emerged to support the development of new wind and solar projects as well as further advances in large-building energy efficiency. The traditional regulatory and financial incentives for renewable energy and energy efficiency projects—investment tax credits, production tax credits, mandated renewable portfolio standards, mandated energy efficiency targets—remain in place (at least for now). However, there is a new incentive at play, one which until recently the industry has not tried to monetize. The new incentive is the desire, indeed the perceived need, of certain companies to “go green,” to demonstrate a commitment to improving the climate in the face of growing public concerns about climate change. Companies that produce consumer products—beer, bread, computers, pharmaceuticals, etc.—and companies that provide services—telecommunications, online shopping, search engines—have concluded that there is ascertainable value to putting words like “100% Renewable Energy” on bags, cans, and packaging; on social media advertising; and on bricks and mortar. Building owners perceive ascertainable value in labeling their buildings as “green” buildings. What the creative minds of the energy and financial industry players have done is develop vehicles to capture and quantify those values, and put them to use.

This blog post discusses three such vehicles: the Virtual Power Purchase Agreement (“VPPA”), the Virtual Net Metering Program (“VNMP”), and Metered Energy Efficiency Credits (“MEECs”). All three are relatively new, relatively complex, and in two cases—VPPA and VNMP—substantially regulated. However, the basic concepts are easy to explain and that is the goal of this post.

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