Alt-Energy Watch: The Real Corporate Renewable Energy Leaders (INTC, KSS, WFM, BK, STT, C, JPM)

Do voluntary markets for renewable energy work? Government-mandated energy portfolios sort of work although the energy costs more and utilities — and consumers — often wail at having to buy the more expensive energy.

Part of the problem with voluntary markets is that many claims are simply unverifiable. Bloomberg New Energy Finance and Vestas Wind Systems A/S have combined to create a Corporate Renewable Energy Index (CREX) that ranks companies on their voluntary renewable energy purchases. The first report covers 2009 and 2010, and shows only mixed results.

The single largest consumer of renewable energy is Intel Corp. (NASDAQ: INTC), with about 1.5 million megawatt-hours of renewable procurement equal to nearly 35% of the company’s total consumption of electricity. Measured as a percentage of total consumption, two companies get 100% of their electricity from renewable sources: Kohl’s Corp. (NYSE: KSS) and Whole Foods Markets (NASDAQ: WFM). Kohl’s also is the second largest purchaser, with 1.4 million megawatt-hours.

The results came from an online survey conducted by Bloomberg New Energy Finance of the world’s 1,000 largest companies as measured by market cap. Responses from 176 companies provided the data for the two years.

Renewable energy comprised 8.2% of respondents electricity consumption in 2009, and 12.1% in 2010. However, more than 40% of respondents met less than 5% of their total consumption with renewable sources.

The report notes that more than 80% of all renewable energy purchased in 2009 resulted from purchases of renewable energy credits, which companies can buy in established markets or directly from renewable energy projects. Only a tiny bit (1% in 2009 and 0.6% in 2010) of the renewable energy came from projects directly finance by the company.

The total US market for voluntary renewable energy is estimated to be 32 terawatt-hours in 2010, and voluntary renewable energy credits account for 60% of the total. Bloomberg expects the US market to reach 133 terawatt-hours by 2020 and 218 terawatt-hours by 2030, representing about 45% of the total US compliance market for renewable energy.

Among different sectors, the less-energy intensive financial services and technology sectors met the largest percentage of their total consumption with renewable energy. That should be no surprise, as the most intensive users of electricity really have no choice but to seek out the cheapest source of electricity. In the industrial sector, hydropower accounts for about 90% of renewable energy.

Another non-surprising finding is that wind power accounts for the highest percentage of renewable energy, when the source is known. This has more to do with the installed base of wind power — 160,000 megawatts — than anything else. The installed base of solar generation is about 42,000 megawatts and geothermal generation accounts for 11,000 megawatts of installed capacity. Whole Foods Markets, for example, gets 100% of its renewable energy supply from wind power, as do Bank of New York Mellon Corp. (NYSE: BK), State Street Corp. (NYSE: STT), Citigroup Inc. (NYSE: C), and JP Morgan Chase & Co. (NYSE: JPM) among others.

So, how much does this all cost these green companies? Not as much as you might think. According to companies reporting prices, a renewable energy credit on the US voluntary market cost about $1/megawatt-hour. Credits purchased directly from a wind power source cost $0.60-$3.50.

Voluntary markets do appear to work, even if only to a limited extent. But it’s reasonable to wonder how well they’ll work, and for how long, without more policy pressure. Support for voluntary markets could well be tied to the desire of some firms to get out ahead of stricter government regulation. If governments back off, will that lead some companies to abandon their voluntary efforts?

Paul Ausick