“Renewable Energy Certificates” and Waxman/Markey – The complex realities of funding renewable energy

Posted by Josh Ewing in Alternative Energy, CT Insight, Featured Articles on Aug 25th, 2009 | 4 responses

At my home, I’ve been participating in Rocky Mountain Power’s Blue Sky program for 5 or 6 years. The program is sold as a way for customers to support alternative energy development by voluntarily paying an “up charge” to get more clean energy into the system. I set my goal to purchase enough Blue Sky credits that all of my energy usage at home would come from renewable energy.

Wyoming wind farm that sells "renewable energy certificates" to Rocky Mountain Power

Being a relatively astute consumer, I’ve always known that my Blue Sky dollars aren’t really sending clean wind power to my home. That’s not how the system works. There’s no way for the power company to direct the small percentage of clean energy in the system to particular homes or businesses. Not everyone gets this point, as was made evident in an interesting story on NPR last week as part of it’s “How Green Is It?” series.

What I did learn from the NPR story, which rocked my boat a bit, was that my Blue Sky dollars aren’t going to purchase wind power directly or even at all. Rocky Mountain Power uses Blue Sky funds to buy “renewable energy certificates on your behalf.” Renewable energy certificates are sold by wind power (and other renewable operators) in addition to selling their power. Essentially, certificates are a way for operators to make more money to offset the additional cost of production, without having to sell their power at rates that disallow power companies from buying. (Many states mandate power companies buy from the cheapest sources, without regard to the environmental costs of production).

So, even though Rocky Mountain Power says it’s buying certificates from Wyoming wind farms, that doesn’t mean the company is buying power from those farms. Now Rocky Mountain Power appears to have an aggressive approach to actually buying and developing renewables as part of their portfolio, so they are probably buying the power too, but not necessarily. In fact, many programs around the country, like Blue Sky, don’t purchase the renewable power. It’s too far away or to logistically challenging to get the power to their grid. So, they just purchase the certificates.

Blue Sky works because some customers want to support renewable energy, and they are not too concerned with the details. It’s a voluntary program, so nobody is forced into participating. But that’s also the program’s biggest downfall. Only a relatively few people will voluntarily pay more for their electricity. These folks realize that the “retail” price of electricity doesn’t really include all the costs of the environmental impacts of our electricity production.

Rocky Mountain Power and other electric companies, tout renewable energy programs, like Blue Sky, as evidence that they really want to support alternative energy development. But the true test of their commitment to clean energy is coming with a system that attempts to include the environmental costs of production, like the Waxman/Markey legislation that recently passed the US House of Representatives. Will Rocky Mountain Power embrace the challenge of producing 20% of its power from renewables by 2020? Or will in resist the change? I personally hope the company will not take the easy route and blame the feds for raising energy prices. Why not take a positive approach and help people understand that the increases in theeir power bill are serving to help fight climate change and ensure future generations enjoy the land we enjoy.

Unfortunately, the early signs are not good for Rocky Mountain Power’s messaging strategy. Last week, the company’s CEO, Richard Walje, told a Utah legislative committee, “The legislation that has currently been passed in the (U.S.) House of Representatives is going to impose large costs on our customers that we do not have any near-term way to avoid.” Now I know he was talking to the conservative Utah legislature, but I’m hopeful in the future the language will be tinged with cooperation and laced with language supporting the advance of clean tech.