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What Are You Getting If You Buy Clean Electricity?

Many Community Choice Aggregators are marketing clean energy by simply rearranging where existing low-carbon electricity goes. 

Change is potentially afoot for me this November, and I’m not talking about the midterm elections. In November, if I do nothing, I will become an electricity customer of East Bay Community Energy. What does that mean? As their handy schematic points out, my local utility, PG&E, will still own and operate the wires and deliver power to me, but East Bay Community Energy will be in charge of buying electricity from the wholesale market for its customers to consume.

Source: ebce.org

East Bay Community Energy is my local Community Choice Aggregator (CCA). CCAs are taking cities and counties around California by storm. According to one projection, they could serve almost 2/3 of load in the California investor owned utilities’ service territories by 2020. They are essentially competitive retail providers with a twist: they aren’t for-profit companies but entities set up by the local governments. (See Severin’s overview of the pros and cons of CCAs.)

The newfound appeal of CCAs in California appears to hinge at least partly on the environmental characteristics of the electricity they’re buying for us. Many of the CCAs have “clean” in their name: Sonoma Clean Power, Valley Clean Energy, CleanPowerSF, Silicon Valley Clean Energy. East Bay Community Energy’s graphic highlights that they, “buy and build cleaner energy,” reinforced by the wind turbine and solar panels.

But, what does it really mean to buy clean electricity from an entity like East Bay Community Energy?

I can imagine a CCA enthusiast, I’ll call her Ms. Virtuous, driving past wind turbines, like the ones in northern California’s Altamont Pass, basking in her green glow, thinking, “Yes! Those wind turbines were built to provide me power. If everyone bought electricity this way, the dirty coal plants would rot in power plant hell, we’d have tons of wind turbines, fields full of solar panels and we’d solve climate change.” (I know what you’re thinking: nobody besides me and my friends thinks about where their electricity comes from no matter where they’re driving, but indulge me for a minute.)

The CCA embracers are probably not like Ms. Doubter, who drives by large hydroelectric dams in the Pacific Northwest thinking, “Hmm, these dams have been around for decades supplying electricity to Oregonians. But, since I decided I wanted clean energy, the dam’s electricity is being re-designated as mine and the electricity that I used to buy from the coal plant in Utah is now on paper being sold to Oregon. So, on net, nothing is really changing.”

At a recent California Public Utility Commission hearing, the CCAs reported details on their current and planned power purchases. The situation appears a lot closer to the musings of Ms. Doubter driving by the dam than Ms. Virtuous driving by the wind turbines.

For example, the figure below reports East Bay Community Energy’s existing and planned energy purchases. About half of its current energy procurement (2018-19) comes from large hydro. Keep in mind that the last large hydro plant built in the Western US went into service in 1966.

Source: ebce.org

The chart below suggests that East Bay Community Energy is not alone. The figure breaks down the planned capacity purchases from GHG-free sources for a large group of CCAs. Over half of the greenhouse gas-free electricity is currently coming from large hydro (the grey bars). Also, this figure reflects capacity, not energy. Since hydro resources have a higher load factor than wind or solar, the share of GHG-free energy accounted for by large-scale hydro is likely even higher. (The figure on this page reflects energy, but it’s a little hard to parse given all the “unspecified” power.)

Source: California Community Choice Association. CPUC

I’m more comfortable labeling something clean if it’s truly additional, meaning that it didn’t previously exist and isn’t being used to satisfy another zero-carbon mandate.

Calling large hydro clean is an example of a phenomenon called reshuffling. Jim Bushnell, Carla Peterman (then an ace graduate student at the Energy Institute) and I wrote a paper about this in 2008, before CCAs were a big thing. We analyzed several of the early ideas for achieving California’s greenhouse gas emissions goals to see whether they could be met by simply buying more from existing out-of-state zero and low GHG resources, like large hydro.

The basic idea hinges on the economics of consumer boycotts. The crucial thing about a boycott is that it’s ineffective if it’s small relative to the entire market, or, more specifically, if the boycotting customers account for a smaller share of the market than the items that are not subject to the boycott.

For example, in the figure below, with only 4 of the 10 customers boycotting, and 7 of the 10 items not subject to the boycott, the potential for reshuffling exists. There are enough items outside of the boycott to supply the needs of the boycotting customers and the boycotted goods can still find buyers among those who don’t care.

Imagine, for example, the same market with half of the items subject to the boycott and 6 out of the 10 customers boycotting. Then, the boycott would start to bite.

What that means in the electricity case is that as long as consumers in other parts of the West do not care about the provenance of their electricity, the clean energy that CCAs are buying from large hydro and other existing resources is doing absolutely nothing to address climate change.

I know, there’s more to it. CCAs don’t just buy clean energy. Some offer free smart chargers, they’re promoting heat pumps, they advertise better net energy metering deals than the utilities for customers with rooftop solar. And, some of them offer the option to upgrade to 100% “local” renewables that don’t include large hydro, for a premium. Beyond the environmental angle, CCAs have been able to offer slightly lower rates than the utilities in part given the structure of the exit fees. In addition, CCAs tout the benefits of local control and the ability to direct investment to the communities that they serve.

Also, the last part of Ms. Virtuous’s musings is true – if more people were buying 100% clean energy the boycott would start to bite and we would need to build additional GHG-free resources.

Finally, some CCAs strive to be a bit greener than the utilities. For example, East Bay Community Energy targets being 7% cleaner than what is required of them by the state Renewable Portfolio Standard. But, 7% cleaner doesn’t sound as catchy as just clean.

So, will I switch to East Bay Community Energy? We’ll see. In a true legislative victory for CCAs, they are the default provider, so I have to take an active step to stick with PG&E. Even if I intend to do it, the power of the default is strong (as I’ve dug into in other research), particularly for procrastinators. I’ve got the opt-out page bookmarked. I’ll work on it tomorrow….

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas

Catherine Wolfram View All

Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. ​During Academic year 2018-19, she will serve as the Acting Associate Dean for Academic Affairs at Berkeley Haas. She is the Program Director of the National Bureau of Economic Research's Environment and Energy Economics Program, Faculty Director of The E2e Project, a research organization focused on energy efficiency and a research affiliate at the Energy Institute at Haas. She is also an affiliated faculty member of in the Agriculture and Resource Economics department and the Energy and Resources Group at Berkeley.

Wolfram has published extensively on the economics of energy markets. Her work has analyzed rural electrification programs in the developing world, energy efficiency programs in the US, the effects of environmental regulation on energy markets and the impact of privatization and restructuring in the US and UK. She is currently implementing several randomized controlled trials to evaluate energy programs in the U.S., Ghana, and Kenya.

She received a PhD in Economics from MIT in 1996 and an AB from Harvard in 1989. Before joining the faculty at UC Berkeley, she was an Assistant Professor of Economics at Harvard.

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