Green Energy Plans: The Reality

Form vs. Function

Texans should think twice before paying extra for 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 renewable generation.

In Texas, however, REC supply far exceeds the demand by an ever-widening margin, 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.

And while Texas leads the nation in wind energy production — and soon solar — that green growth is thanks to the Federal PTC and ITC tax credits (which you involuntarily subsidize via your income taxes), NOT your choice of any Retailer’s REC-backed electric plan.

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 nominally do that. But they obscure and undermine a better goal: the growth of new renewable energy. Cheap RECs don’t motivate new construction, a concept known as “additionality”. At best, their ~$0.50/MWh 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. 1. Give Directly.  Rather than wasting dollars on RECs, donate that money directly to organizations that enable fiscally-challenged renewables projects with low overhead. Options include GRID Alternatives, RE-volv, and CollectiveSun.
   2. 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.
   3. Build Your Own.  While not for everyone, a new rooftop or community solar installation is undeniably “additional”. Prices continue to fall, and it’s easier than ever to weigh your options. See TXSES or Solar United Neighbors for general information and helpful local resources.
   4. 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, but it’s unlikely given recent legislative trends.
   5. 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 buy.

More concerned about carbon emissions in general? Then start with investments to reduce your home’s energy usage. LED lighting, insulation, and smart thermostats are common solutions that typically pay for themselves.

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? If so, please share your thoughts in the comments.

Find Your Best Plan »

Share this: on Twitter on Facebook