Giving consumers the chance to put their money where their mouth is

As the foot dragging and grandstanding continues in Washington and the general pandering to the lowest political common denominator keeps climate and energy policy without clear direction in the largest per-capita emitter in the world, a new mechanism is putting power in the hands of the consumer. Many are able and willing to pay a few extra dollars a month for electricity that is guaranteed to come from renewable sources but have been unable to choose their suppliers.

That is beginning to change in several communities across the US. Thanks to a special provision, consumers now have a channel to wield the power of their wallets in determining how their electricity is produced. And with a few success stories now operating profitably and reliably, this idea could prove a viable tool for harnessing the purchasing power of consumers to support renewable energy initiatives throughout the United States and the world.

Community Choice Aggregation (CCA) is a legal provision that allows local governments (cities, counties) to create a non-profit agency to pool local demand and to deliver renewable power to its citizens and businesses using transmission lines owned by the local investor-owned utilities (IOUs). There are several publicly owned electric utilities in the US that fall under CCA, but most continue to purchase electricity produced from conventional sources, leveraging the community buying power solely to secure lower prices than those offered by the IOUs. But CCAs are increasingly offering electricity at 50-to-100% renewable mixes. The switch to the CCA from the investor-owned utility is invisible as far as electricity service is concerned, there is no interruption of service and no new equipment installed. Electricity simply flows through the same cables into homes and businesses from the suppliers secured by the CCA in the open market. All other services are still provided by and billed through the utility.

Because the CCA does not own the generation plants or the transmission lines, the initial investment to start operations is low both politically and economically. For example, the Marin Energy Authority (MEA) was created in December 2008 in Marin County, California just North of San Francisco with a $1.4 million loan guaranteed by the county government and a few individual citizens [1]. The agency has been profitably providing clean power since 2010 and the original loan has been repaid in full. According to its website, MEA started with about 8,000 customers and 5,500 more joined in August 2011. Its website claims "an average annual reduction of 68,595 tons of greenhouse gas emissions per year - the equivalent of taking 12,000 cars off the road every year." The Marin Energy Authority (MEA) is the not-for-profit public agency formed by the County of Marin and all of Marin's cities and towns. MEA administers the Marin Clean Energy (MCE) program [2].

MEA owns no generation capacity and relies instead on Power Purchase Agreements (PPAs) with independent generators. It provides two levels of renewable content: Light-Green with 50% renewable content and Dark-Green with 100%. When MEA launched in 2010, Light-Green content was 25% renewable. It was increased to 27% in 2011 and increased again in January 2012 to 50% renewable content. In comparison, California has a Renewable Portfolio Standard (RPS) law passed by the State Congress requiring all electric utilities in the state to provide 33% of its electricity from renewable sources by 2020. “The numbers speak for themselves,” said Damon Connolly, Marin Energy Authority Board of Directors Member. "We’re achieving our goals ahead of schedule and that’s a major accomplishment for our organization.”

What is probably most impressive and surprising is that CCAs can offer renewable electricity at rates that are competitive with the conventional electricity offered by the IOUs. Accounting for the recent July 1 rate adjustment by San Francisco based utility Pacific Gas & Electric (PG&E), MEA commercial customers can expect to pay less for their electricity in the summer and slightly more in the winter than if they bought their electricity from PG&E. However, for residential customers MEA charges less for their electricity generation, according to a recent MEA press release (See Table 1). But because PG&E charges MEA customers an "exit fee", their final electricity rate will be slightly higher than PG&E's, amounting to about $2.50 extra per month for a first tier residential customer [3].

Table 1: Rate comparison between Marin Clean Energy and Pacific Gas & Electric for Marin County Customers

Several municipalities within Marin County chose not to join when MEA was created but are now opting to do so, and the agency has attracted attention from faraway places hoping to create their own local counterparts. Neighboring San Francisco has a more aggressive plan in mind to provide only 100% renewable power to some 75,000 city customers. Known as SF Clean Power, the agency planned to launch in 2010 but was forced to postpone it due to complications with its chosen supplier. Since then, the venture has signed with the same supplier as MEA and is poised to launch its services this year.

MEA currently supplies electricity generated from wind, solar and biogas. It recently signed a 20-year power purchase agreement with the San Rafael Airport for 972 kilowatts of rooftop solar power, the largest solar project in Marin County. This power is being purchased for Marin Clean Energy customers through MEA’s feed-in tariff program (FIT) and the project is expected to be installed and operational by fall 2012. Large hydro plants are not recognized by the state of California as renewable sources so MEA only uses it in the non-renewable portion of the Light-Green portfolio. Most biogas comes from the neighboring state of Oregon but a new landfill biogas plant in Yuba and Solano counties in California will be supplying 3.2 MW starting in 2012. SF Clean Power is likely to have a similar mix relying mostly on generators in the states of Oregon and Washington because most renewable supply in California is already contracted to the large utilities trying to meet the 33% RPS standard by 2020.

MEA is not the first CCA nor will it be the last. The first was Cape Cod's Cape Light Compact formed in 1997. It today supplies electricity to 140,000 customers in Cape Cod and Martha's Vineyard. Cape Light offers electricity from conventional sources but also a 50% and 100% renewable supply and is partnering on a new 18.2 MW solar installation. In Evanston, Illinois on March 20, 73% of voters approved the referendum question for CCA and authorized the City to purchase bulk electricity for residents and small businesses. In April the Evanston City Council voted unanimously to purchase electricity from Constellation Energy for 12 months at a rate of ¢4.797/KWh with a 100% renewable energy mix [4]. The city of San Diego, CA announced on June 11 that it is seeking to form a CCA to give its citizens a choice to purchase renewable electricity [5].

The largest CCA is NOPEC in Ohio with 500,000 customers. It has formed in 2000 and has focused solely on rate savings, leveraging its buying power to secure lower rates from conventional sources. The Local Energy Aggregation Network (LEAN) speaks of the proliferation of CCAs in its website:

After a banner day for aggregation at the ballot box in November 2011, Cincinnati and 53 other cities are in the process of forming CCAs. Although the majority of Ohio cities forming CCAs are focused entirely on rates, Cincinnati’s new CCA will be worth watching. An environmentally progressive sweep of City Council promises an emphasis on cleaner and more efficient power in place of the over 86% coal that currently supplies that city’s 200,000 residents. [6]

More and more cities and counties are taking notice and CCA referenda are becoming common. And the fact that PG&E has spent millions of dollars trying to curtail CCAs in California is an indication of the power of this idea.

When MEA launched a tender last Fall to purchase 40 MW of solar power, PG&E boasted it would receive no bids. As it turned out, MEA received bids totaling 600 MW at competitive prices. This implies that there seems to be enough supply out there to make the CCA model sustainable. And if other counties or municipalities launch their own CCAs, they could create enough demand for truly renewable electricity to reach economies of scale. And this could be a boon for generators of renewable power struggling to be competitive in a market skewed by a glut of cheap natural gas. With the recent bad publicity around fracking and Fukushima, consumers may well continue to opt for clean power for a slightly higher price rather than being forced to internalize the external environmental costs not incorporated into the price of natural gas, oil, coal or nuclear power. CCAs offer just such a possibility at a time when public opinion is divided and government is unable to act. If speaking with a vote in state and federal elections is not enough, CCAs will allow citizens to wield local power and speak loudest through their pocketbooks.

[Inset: Launch of Community Power Cornwall, a pioneering cooperative in the south of England that enables local communities to own and benefit from renewable energy installations]