In last week’s post, I wrote about coal – the source of half our country’s electricity and one-third of all our atmospheric CO2 emissions. This week, I promised to write about concrete steps we can all take to reduce our own coal use and speed this country’s development of alternative, renewable energy sources.
The post was going to start something like this: “In a little more time than it takes you to read this article, you can convert your home’s electricity to renewable energy.” And I intended to switch my home over as proof that it can be done.
But since then I’ve learned that depending on where you live, you may have genuine energy choice – although in Maryland (where I live) and in most other states, you probably don’t. And if that sounds like a mixed message, welcome to the wonderful world of alternative energy in a deregulated market with a loophole you could drive an SUV through.
RECs: Green Incentive or Environmental Indulgence?
Let’s start with an option that’s theoretically available to any electricity consumer. If you’ve got a credit card then you can buy renewable energy — regardless of whether there’s a renewable power source physically present on the grid that sends electricity to your home — through the miracle of Renewable Energy Certificates. When you buy a REC, you buy a certificate stating that a particular amount of renewable energy has been generated somewhere (else) in the U.S. Most RECs are bought by electric utilities in states that require a certain percentage of energy to be obtained from renewable sources. To the extent that the utility can’t supply enough renewable energy to meet the state’s requirements, it purchases RECs from other states. RECs can also be purchased by companies or individuals seeking to offset their CO2 emissions and to claim their operations are carbon-neutral.
|Wind Turbines of the Shiloh Wind Power Plant in Solano County, CA|
The term “offset” deserves consideration. RECs don’t actually reduce CO2 emissions; turn on that light and, offset or no offset, I’m burning coal. RECs do, however, create a market for renewable energy sources (wind farms, solar, geothermal, biomass, and a few others). The more RECs we buy, the more money we funnel to renewable energy providers. The hope is that this works as an incentive to the renewable energy market because it reduces the cost of providing renewable energy relative to coal, drives development of new renewable energy sources, and eventually reduces greenhouse gas emissions from electrical power generation.
There are, however, concerns about the effectiveness of RECs as incentives. The financial benefits of RECs accrue to the providers of renewable energy. On the one hand, that’s good because the money they get paid for providing additional energy within their grid, offsetting non-renewable sources elsewhere, can be used to build more wind farms, biomass power plants, solar plants, etc. On the other hand, utilities that purchase RECs have a reduced incentive to increase their renewable energy capacity, since it’s often cheaper for them to meet state requirements by purchasing RECs elsewhere than by building their own new power plants. And don’t expect the energy company selling RECs from North Dakota to build more wind farms in your region; RECs are such a valuable commodity that they might make a bigger profit selling you RECs than if they sold you the wind power directly. For this reason, RECs may have the perverse effect of slowing the development of wind farms and other renewable energies around the country.
Another concern about RECs is that they eliminate the incentive for individuals or organizations to actually reduce their carbon footprints. A business can claim it’s “gone green” by purchasing RECs to offset its use of non-renewable energy, instead of making a genuine investment in green energy or practicing conservation. This article from Business Week gives some examples of how RECs have become a substitute for real emissions reduction measures, and questions what is being offset by many REC purchases, other than guilt. As one Business Week reader put it: “Buying carbon credits is like paying someone else to lose weight because you’re too lazy to do it yourself. In the end you’re still fat, and someone made money off your guilt.”
I decided this option was not for me.
Utilities Deregulation: Your So-Called Choice
Now here’s where it gets interesting for the consumer of coal-powered electricity. In fourteen states with utilities deregulation (including Maryland) and the District of Columbia, multiple providers have entered the market, and they are permitted to sell electricity over the existing transmission network. If your state is shown in green on this Department of Energy map, then you live in the wild world of utilities deregulation. This has added an interesting twist to the green energy market, or at least a new layer of haze.
According to my utility company, Baltimore Gas and Electric, deregulation has enabled new electric companies to compete to supply power to my home using the existing grid. BG&E even provides a simple diagram to illustrate: electricity deregulation gives me a choice of the power supplier, where all suppliers feed into the same BG&E distribution network. So if I want to switch from coal to another form of energy, I should be able to. BG&E would continue to transmit electricity to me via its grid, but they would purchase it from the source I specified.
Proposed renewable energy generation on the PJM grid, which serves 13 states and the District of Columbia.
So let’s go shopping for clean energy! Thanks to deregulation, I can choose one of six energy companies licensed by the Maryland Public Service Commission and registered by BG&E. When I checked last week, three of these companies, Commerce Energy, Washington Gas Energy Services, and Pepco, offered renewable energy in the form of 50-100% wind. The price of wind power is higher than that offered by the mostly-coal sources. But I am willing to pay a little more, and I could offset the expense with savings elsewhere, such as by installing a programmable thermostat and switching to compact fluorescent bulbs.
To choose my energy source, I would go to one of the suppliers’ web sites, select an energy option from those on offer (100% wind? 50% wind?), and fill out a contract to purchase my electricity from that source at the price quoted for a specified length of time. Click SUBMIT and I’ve bought myself carbon-neutral, zero-emissions, guilt-free electricity…or have I?
What a Difference a Week Makes
Three alternative energy providers? That was so…last week. This week, Pepco is not in the residential renewable energy market. I clicked on Pepco’s links to residential green or wind energy and received the following statement: “There are no states where those products and services are provided.” Which left Commerce Energy and WGES.
Both offer 100% wind energy, but at widely different rates. Commerce charges 15.6 cents/kWh, while WGES charges only 12.6 cents/kWh. So, compared to BG&E’s base rate of 12 cents/kWh, I can either pay a 5% markup or a 30% markup for what looks like the same thing: 100% wind energy. I’m leaning towards WGES based on price alone and, bless them, they even provide an Emissions Disclosure Statement. Let’s open it, shall we?
According to the Emissions Disclosure Statement, when I buy 100% wind power from WGES, my "Air Emissions" of CO2 are reduced to 0%. Sounds like I’ve gone off coal…until I read the fine print in the last sentence at the bottom of the page. “WGES-specific emissions…varies from the [regional] average due to the benefit of additional purchases of Renewable Energy Credits…”
Say it ain’t so! Choose WGES and I’m still burning coal in reality while claiming “0% CO2 emissions” in name only. The 5% markup on my electricity bill would go towards purchasing RECs, exactly what I had planned to avoid in the first place.
So I’m down to one remaining source for real wind energy on the grid: Commerce Energy. I’ve got a copy of their 2008 contract that guarantees 100% “certified…wind-generated electricity…sent to the grid to replace electricity that normally would have been generated from normal non-environmentally friendly sources.” No RECs here. So let’s give them a call.
Commerce Energy is based in California, but the first human to answer the phone (after four tries) turns out to be in Toronto. He informs me that Commerce Energy has been sold to Universal Energy of Ontario, they have not applied for certification of their wind energy product this year, and in fact, it is about to be discontinued. Furthermore, I am the first caller from Maryland to have asked for green energy in over a month.
So there you have it – the market has spoken, and green energy certificates seem to have beaten out not coal, but green energy itself. Given the choice to pay 30% more for wind or 5% more for “wind,” a customer – particularly a business – seeking only the imprimatur of “carbon-neutral” would naturally favor the less expensive alternative. Sure, purchasing RECs doesn’t really reduce CO2 emissions, but who’s to know? As for reducing my household’s dependence on coal, I’m back at square one with the solar panels and whale oil.
But You Can’t Fool Mother Nature
RECs have their place. If you have to take a transatlantic flight, you can purchase a REC to support a wind farm or tree planting, and thus offset some of your excess carbon emissions. But the general consensus is that if we want to avoid the worst effects of climate change then we need to achieve a dramatic reduction in greenhouse gas emissions. And we’re not going to get there with offsets.
In the real world, C doesn’t stand for certificates. It stands for conservation. Or as one representative of a climate advocacy group succinctly put it to Business Week, “We cannot solve the climate crisis by buying offsets and claiming to be climate-neutral…nature does not fall for accounting schemes.”
For those of us who find ourselves stuck on the coal-burning grid, that means we still need to do the heavy lifting ourselves for now. There’s no choice but to examine our homes, our cars, and our lifestyles. Change the light bulbs, program the thermostat, insulate the attic, and flick off the red and green flashing lights that drain power even when the computers, cell phone, coffee maker, and humans who use them are asleep. Beyond that, we need to work towards a regulatory framework that encourages the production and use of clean energy across the country. Future posts will examine the alternatives currently under consideration.
Elsewhere on the Web:
The U.S. Department of Energy lists retail providers of Renewable Energy Certificates on this site.
RECs have become valuable commodities, and not surprisingly, selling them is big business – so big that there’s a market for companies that certify the REC sellers. Green-E certifies companies selling renewable energy throughout the United States and Canada. American Carbon Registry registers voluntary carbon offsets.
This map from the Department of Energy shows which states have undergone deregulation of their electric utilities.
Many states have a Renewable Portfolio Standard (RPS), which is a requirement that electric power suppliers achieve a certain percentage of power from renewable sources by a given year. This site from the EPA lists state-by-state RPS requirements. For example, 20% of electricity sold in Maryland by the year 2022 must come from renewable sources, and 2% of the total must come from solar energy. See this site for a detailed listing of RPS requirements for states on the PJM network, which serves 51 million customers in Maryland, D.C., and 12 other states. PJM recently launched this dashboard, which it will periodically update to illustrate the current and future locations of renewable energy sources on their grid.
Carol Berkower is a mathematician and molecular biologist living in Baltimore.
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