Green Energy Plans: The Reality

100% Renewable Power Plans

Form vs. Function

Texans should think twice before buying a “100% renewable” power plan. Despite their green credentials, most do little more than boost retailer profits.

First, some background: Nearly all Texas homes get their electricity from a common grid. At any given moment, that grid is fed by a vast array of both renewable and fossil-fueled generation sources. You can’t physically track or control the path of electrons from a particular source to your house, so in the 1990’s a proxy financial mechanism was created to encourage the development of renewables.

Called Renewable Energy Certificates (or RECs), generators earn one REC for each Megawatt-hour (MWh) of electricity they produce from renewable sources. Utilities and retailers then buy these RECs to comply with legislative mandates or to resell them to customers who want to support clean energy. Each REC gives you claim to the green attributes of 1 MWh of certified generation, such as to offset your consumption from the grid. REC prices vary with supply and demand, so more demand theoretically drives higher prices that support the development of more renewables capacity.

In Texas, however, REC supply far exceeds the demand, so the incentives no longer work as designed. With wholesale prices below $0.50, voluntary RECs provide neither the necessary funding boost [~$8] nor the long-term commitment needed to finance a new wind or solar project.

If you’re considering a 100% renewable plan from PowerToChoose.org or elsewhere, ask yourself why. If it’s only to claim your energy consumption is offset by existing green sources, the cheap RECs bundled with those plans technically do that. But they obscure and undermine a more impactful goal: the growth of new renewable energy. Cheap RECs don’t motivate new construction, a concept known as “additionality”. At best, their ~$0.50 value adds a little gravy to an existing plant’s balance sheet. (They are, however, a great deal for the Retailer if they charged you a $3/MWh premium for your “green” plan.)

If you want to promote renewable energy growth, skip the “100% renewable” power plan. Existing generators, REC brokers, retailers and others who profit from RECs may assert that every REC is a vote for green energy. But at inflated retail prices with no promise of additionality, your dollars are better spent elsewhere.

Alternatives

So what can you do to support renewables growth? Here are some options:

  1. Shift Your Consumption.  Aligning your electricity usage with the times that wind and solar are producing encourages their development, even if it doesn’t currently displace fossil-fueled sources. Wind blows strongest in the evening and night; solar shines during mid-day.  In the gaps are the peak load times when families wake up and return home, which forces more fossil-fueled generation to kick in to meet the demand. Until energy storage systems become common, rescheduling your dishwasher, laundry, AC, pool filter, etc. to minimize the 3:00-6:00 pm peak plays to renewables’ strengths.
  2. Build Your Own.  While not for everyone, a new rooftop or community solar installation is undeniably “additional”. Pricing continues to fall rapidly, and it’s easier than ever to weigh your options. See TXSES for general information and helpful local resources.
  3. Change The Game.  Part of the reason for Texas’s oversupply of RECs is its weak Renewable Portfolio Standard, which was exceeded many years ago. Lobbying for a higher standard could increase mandatory REC demand and take the slack out of the system, although it’s unlikely given contrary legislative trends.
  4. Purchase “Forward” RECs.  Unlike the cheap voluntary RECs bundled with most electric plans, “forward” RECs support specific new projects and truly determine their viability. But they are more expensive, of much longer duration, and difficult for individual consumers to source.
  5. Do Nothing.  Fortunately for Texas renewables, growth doesn’t depend on REC-based subsidies. Falling equipment prices, new transmission lines, and the $18.40/MWh federal Production Tax Credit (PTC) continue to drive aggressive renewables expansion in west Texas, with 20 gigawatts of installed wind capacity and counting. Solar also is beginning to ramp.

TPG’s RateGrinder tool can filter Texas power plans by their renewable energy content, but we suggest ignoring this feature. If RateGrinder indicates that the cheapest plan for your home is also 100% renewable, then all the better; that provider is clearly competing for your business.

For more on this topic, see here, here and here.

Did we miss any alternatives? Do any Retailers provide forward REC-based products that we’ve overlooked? If so, please share your thoughts in the comments.

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