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Is a Green Power Program Worth Your Money?

Photo credit: Neep at the English Language Wikipedia.

Photo credit: Neep at the English Language Wikipedia, via Wikimedia Commons.

Most people who install renewable energy systems on their property do so at least partly to save money on their electricity bill. Yet more than 30,000 Virginians have shown they will pay more on their electricity bills for a product labeled as green energy, with no hope of ever recovering their investment. These are the participants in Dominion Virginia Power’s voluntary Green Power Program. The size and growth rate of this program don’t mean it’s a good option (it’s not), but it does demonstrate the huge consumer appetite for wind and solar in a state that offers little of it.

In the last couple of years, other companies have created their own renewable energy products to compete with Dominion’s and other utility programs. They typically offer 100% wind power (Arcadia Power and Groundswell) or a mix of wind and other renewables (e.g., 3Degrees, which is Dominion’s broker, but which also sells RECs directly). The companies often partner with environmental groups that help recruit residential customers in return for a donation. Recently the Sierra Club announced it had entered into a partnership with Arcadia.

I’ve been skeptical of the value of voluntary REC products offered to Virginia consumers. I’d rather see people install their own solar; or if they can’t do that, to contribute directly to a solar installation on a local church, school or low-income housing unit, or use their influence as alumni donors to goad their alma maters into installing renewable energy on campus. But with the numbers of green power participants growing, and my own favorite environmental group now promoting one of them, it seems like a good time to revisit the question: is it worth spending your money on a green power program?

Arcadia and other programs share certain elements with Dominion’s Green Power Program: you continue to buy the same conventional “brown” power you always have, but in addition you are billed a premium that goes to buy renewable energy certificates (RECs), as well as pay the broker. The RECs represent renewable energy generated—and used—somewhere else, often not in the same state or even the same region.

In other states, green power programs often sell RECs “bundled” with the underlying power. But in Virginia, only your own utility will sell you power, and for reasons I can’t fathom, our utilities don’t offer renewable energy. So the best you can do is buy RECs.

Buying RECs is supposed to give you a claim to the renewable energy they represent. Obviously, that’s a stretch if you live in Virginia and the RECs you buy come from a wind farm in Indiana, or if you’re buying RECs from solar panels installed on someone else’s roof. Participating in a green power program can require a certain suspension of disbelief.

At best, buying RECs through a green power program supports a market for renewable energy. Ideally, the money would incentivize new projects, but it doesn’t always work that way. A developer can’t count income from RECs when it looks for project financing unless it has a long-term contract with a buyer for the RECs; so for new projects to go forward without such long-term contracts, they have to make financial sense without the RECs. In that case, the REC sales are simply a nice addition to the bottom line.

Arcadia says it hopes to grow to a point where it can contract with a wind developer for the RECs from a new wind farm, but meanwhile it buys RECs from existing projects.

This is not a problem in states that have good Renewable Portfolio Standards (RPS). Those laws create REC markets that support new renewable energy development within their borders (and occasionally from other states). RECs in RPS states command higher prices in long-term contracts.*

As it happens, though, the best wind is often in conservative western or Midwestern states that lack RPS laws or have weak goals. So these green power programs can be seen as a way for good-hearted liberals to send money to red states. Admittedly, that may not be quite what they intended.

Even if they know all this, some people sign up for these programs anyway—either to send a message to their utility that they want cleaner electricity and are willing to pay for it, or for the psychological value of offsetting their fossil fuel consumption. For these people, there are reasons to prefer the Arcadia or Groundswell program to Dominion’s:

  • Arcadia uses 100% wind power. Dominion uses a mix of resources, including 29% biomass. The web site is not clear about what this means; it references landfill gas and agricultural biogas, neither of which are usually considered biomass. Environmentalists have concerns about using biomass (specially grown crops or, more commonly, wood from trees) for a number of reasons that include pollution and sustainability issues.
  • Dominion’s program costs subscribers 1.3 cents/kWh. At least in past years, approximately half of the money collected was spent on overhead and promotion. Arcadia’s program costs subscribers 1.2 cents/kWh. I have been unable to determine how much of that goes for program costs.
  • When you sign up for Arcadia, the company takes over your billing from Dominion. You receive bills directly from Arcadia. That sends a signal to Dominion that its customers want renewable energy, but don’t want to participate in Dominion’s greenwashing.

Of course, these programs only exist because our utilities have been so slow to incorporate wind and solar into Virginia’s energy mix. The solution is to let consumers buy wind and solar directly from producers anywhere in the state—a choice that is forbidden to them now—and ultimately, to create a 21st century energy economy based on sustainable and renewable energy.

The climate crisis makes that an urgent priority for everyone. We won’t achieve it if we merely rely only on volunteers.

______________________________

*An interesting question is what will happen to the voluntary REC market when the Clean Power Plan kicks in. Electricity from new renewable energy projects will acquire a higher value when coal-heavy states have to start buying Emission Rate Credits (ERCs). The EPA stresses that ERCs are not the same as RECs, but most of us would say that if one buyer holds the ERC and another the REC from the same unit of energy, something has gone very wrong.

Ivy Main's picture

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Discussions

Josh Nilsen's picture
Josh Nilsen on Dec 4, 2015 2:36 pm GMT

Any region that has a large subset of coal power / coal infrastructure has a vested interest in making solar PV look bad.

Dominion hates solar and wind energy beause their two main sources of power are nuclear and coal.  Wind and solar PV eat away at those two power sources first.  Natural gas actually plays quite nicely with wind and solar.

All of these utilities in coal regions built out many expensive coal facilities in the mid 2000s and it looks like their investments are going to get obliterated.  The shareholders will then try to force these losses onto the public.  Too big to fail etc.

Look more closely at the way they are tying these financial structures together.  It’s pretty shady and deceptive.  For example, you can’t even get solar power in that state without a decent chunk of your money going back into nukes and coal.  Then they setup the financial structures so it’s almost impossible to get solar PV yourself unless you have 5k-10k+ lying around to pay out of pocket, which they know the vast majority of Virginians do not have.

You HAVE to DEMAND power choices or you’ll never get them and you’ll be forced to buy what they tell you to buy.

Bob Meinetz's picture
Bob Meinetz on Dec 4, 2015 4:59 pm GMT

Josh, renewables activists’ recent affinity for fossil fuels (“Natural gas actually plays quite nicely with wind and solar”) is touching. Gas doesn’t play nicely with the climate, however. You feel it’s worth sacrificing climate to accommodate your personal choice, do you?

Bill Hannahan's picture
Bill Hannahan on Dec 4, 2015 7:39 pm GMT


Ivy wrote,

The solution is to let consumers buy wind and solar directly from producers anywhere in the state

This solution would require utilities to install throttling devices on each meter. They would limit the flow of wind and solar power in proportion to their availability. Customers would have to install batteries, Chargers & inverters to make the unreliable kilowatt-hours reliable.

The image of neighborhoods filled with tons of toxic lead and sulfuric acid, storing large quantities of energy, is not appealing or safe or affordable.

The truth is that unreliable undispatchable kilowatt-hours are worth a small fraction of what reliable dispatchable kilowatt hours are worth. On a truly level playing field the price that people would pay for unreliable kilowatt hours is less than the cost of storage to make them reliable. Wind farms and solar farms would disappear on a truly level playing field.

Bill Hannahan's picture
Bill Hannahan on Dec 4, 2015 6:53 pm GMT

Josh, is there some state where you are not allowed to go off the grid and provide your own power with your solar panels, windmills, batteries and inverters? That is always one of at least two choices you have.

Or, are you complaining that there are some states where the utility is not required to provide you with  reliable dispatchable backup power at no additional cost?

Leo Klisch's picture
Leo Klisch on Dec 5, 2015 4:58 am GMT

We need a disconnect between distribution/transmission and generation. I pay what it actually cost to install and maintain distribution/grid connection. The coal power that currently backs up my solar costs on average $.075/kwh. A carbon tax would take that to $.15 to $.23/kwh. Gas back up about half that. Wind out here on the prairie would be less. Existing nuclear would be similar to wind. New Nuclear, I don’t know.  There would be no subsidies for solar,wind or nuclear liability insurance, long term waste storage and independent 3rd party safety reviews for design,install and operation plus appropriate security. I pay a time of use rate for both my back up received power and my solar delivered power. The wholesale provider currently is mostly coal with some wind, and gas peaker capacity equal to the coal capacity.

Bruce McFarling's picture
Bruce McFarling on Dec 7, 2015 1:17 am GMT

The most interesting part of this post is the open question in the footnote: how will REC’s and ERC’s interact in the marketplace?

What is not footnoted, however, seems a bit less valuable. Two particular clunkers stand out:

“This is not a problem in states that have good Renewable Portfolio Standards (RPS). Those laws create REC markets that support new renewable energy development within their borders (and occasionally from other states).”

It is more than a little puzzling why it matters whether or not the renewable energy development occurs within the borders of a state. Since the CO2 that is emitted will not stay within the borders of a state, and since Virginia is part of of a regional interconnection, the PJM, that “coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia[,]” it is not made at all clear why someone who wishes to support the development of renewable energy ought to only be concerned with the development of renewable energy in their own state. That is even more the case in Virginia, where the most abundant supply of renewable energy is relatively high cost off-shore wind, which would enter into a cost-optimized renewable energy portfolio primarily due to its negative covarience with on-shore wind further west and with solar PV in Virginia and further south … the further development of that on-shore wind in higher quality wind resource areas and solar PV in higher quality solar resource areas seems likely to be a pre-requisite for any substantial utilization of Virginia’s off-shore wind to be economically sensible.

“At best, buying RECs through a green power program supports a market for renewable energy. Ideally, the money would incentivize new projects, but it doesn’t always work that way. A developer can’t count income from RECs when it looks for project financing unless it has a long-term contract with a buyer for the RECs; so for new projects to go forward without such long-term contracts, they have to make financial sense without the RECs. In that case, the REC sales are simply a nice addition to the bottom line.”

Setting aside the corporate-speak atrocity that is “incentivize”, having a “nice addition to the bottom line” would indeed be an incentive. If projects regularly under-perform the business model that they are funded on, there will be pressure to add contingencies for the causes of that regular under-performance. If they regularly out-perform the business model that they are funded on, that pressure will not be present. So while the incentive would be stronger with REC’s that can be included in the business model for funding, assuming that “a nice addition to the bottom line” provides no market benefit is “at best” tenuous, at worst silly.

 

Mark Heslep's picture
Mark Heslep on May 2, 2016 12:04 am GMT

The reason not to build wind power in Virginia is because the wind resource in Virginia the worst in the US, or close to it.

http://www.nrel.gov/gis/images/80m_wind/USwind300dpe4-11.jpg

Mark Heslep's picture
Mark Heslep on May 2, 2016 12:12 am GMT

The reason not to build wind power in Virginia is because the wind resource in Virginia is the worst in the US, or close to it.

http://www.nrel.gov/gis/images/80m_wind/USwind300dpe4-11.jpg

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