Green Grid Power: When Rooftop Solar is not an Option

Distributed solar generation has become economically viable for a broader segment of the residential market.  Chinese-manufactured solar cells and panels have dramatically reduced material costs.  Federal, state, and local incentives along with feed-in tariffs have also contributed to the surge in rooftop photovoltaic installations.  However, not everyone can actively participate in the residential solar power revolution.  Consumers left on the sidelines may include multi-family housing residents and single-family home renters.  Local ordinances and financial constraints may also limit installations among otherwise eco-conscious consumers.

Indirect Alternatives

For these residential electricity customers, grid-based renewable energy may be their only option.  Utilities are more frequently offering renewable energy alternatives.  In deregulated markets, marketers commonly offer electricity plans with 100% renewable energy content.  The National Renewable Energy Laboratory (NREL) estimates that more than half of all U.S. electricity customers have the opportunity to purchase renewable energy from a retail electric supplier.

These renewable energy plans are sometimes offered at premiums as little as $0.003/kWh over standard generation electricity rates.  This allows residential customers the opportunity to support renewable energy for as little as $30 per year assuming annual usage of 10,000 kWh. 

However, without having dedicated solar panels on their roof, how do consumers know that grid-based renewable energy actually lives up to its claims?  This is where renewable energy tracking and certification come into play.  These concepts are complementary and necessary to protect customers from false or inflated renewable content claims.

Renewable Energy Credits (RECs) are the basis for most grid-based renewable electricity plans.  When a renewable electric generator operates, it creates two products. The first is electricity, which transfers to the power grid and combines with the energy from other generation resources.  The second product is a REC.  A REC represents the environmental attribute of the electricity generated by a renewable resource.  The renewable energy generator, a wind farm for example, is credited with 1 REC for every MWh of electricity that it generates.

NREL estimates the retail renewable energy sales in voluntary markets were around 62 million MWh in 2013.  This accounted for 1.7% of total U.S. electricity sales that year.  Furthermore, states that more than half

Tracking Renewable Energy

There are nine regional REC tracking systems covering the United States, Canada, and the Mexican state of Baja California.  REC tracking systems, or registries, were developed between 2001 and 2010 primarily for demonstrating utility and retail electricity provider compliance with state Renewable Portfolio Standards.  Power grid operators issue the RECs and assign each of them a unique serial number.  The RECs are then registered with the tracking system.  The REC can then be bought, sold, traded, or used to meet regulatory requirements or fulfill product claims.  A REC is “used” when it is retired within the tracking system.  The tracking system limits the environmental benefit of the REC to only being used one time.

While these systems do a great job of facilitating the transfer and retirement of RECs, they do not validate utility or electricity provider product claims.  Consumers need to have confidence that the premium rates they are paying are supporting renewable energy.  This is why certification is important for consumers interested in grid-based renewable energy.

Verification of Product Claims

The Green-e Energy program administered by the Center for Resource Solutions is the leading voluntary certification program in North America.  Over 75% of the voluntary renewable energy market is certified by Green-e.  Nearly half of the installed wind capacity in the US participates in Green-e certified transactions.  RECs used by companies seeking Leadership in Energy and Environmental Design (LEED) green building certification must be Green-e certified or meet equivalent criteria.  Without a doubt, Green-e is the gold standard for renewable energy certification.

To qualify for Green-e Energy certification, REC products must comply with the Green-e Energy National Standard.  This comprehensive document limits Green-e Energy certification to the highest quality renewable generation sources.  The national standard also limits certification to renewable energy produced from facilities constructed or repowered within the last 14 years.  This requirement encourages construction of new renewable generation rather than just supporting existing facilities.

In addition, rigorous annual audit and verification requirements provide customer assurance that renewable energy product claims are accurate.  This is where certification and tracking interface as the audit protocols require proof of REC retirement and the absence of double counting of compliance and voluntary retirements.

An alternative to Green-e Energy certification is to perform a third-party audit.  Some energy providers hire independent auditors to verify that their REC transactions support their renewable energy plans.  While the details of the audit contain confidential and proprietary information, some electricity providers will provide customers with a copy of the independent auditor’s opinion as to whether the renewable energy content claims are valid.

Criticism of RECs

Not everyone supports the concept of RECs as a retail renewable energy product.  Critics view RECs as a regulatory product that does not figure prominently in the economics of renewable generation projects. 

An argument can be made that money spent on RECs would have a greater economic benefit if it was spent on reducing energy wasted in the home.  Eliminating standby power loads (energy vampires) and caulking around doors and windows can significantly reduce home electricity usage.  Conservation, in turn, offsets generation.  If the goal in supporting renewable energy through purchasing RECs is to offset carbon-based generation, conservation may substantially deliver the same result.

There is also criticism of RECs from the perspective of additionality.  Additionality holds that support of renewable energy should focus on the construction of new renewable generation resources.  While Green-e Energy limits its certification to RECs from new sources, there are those who feel the definition of new sources (i.e., constructed or repowered in the last 14 years) is too broad.

Finally, REC opponents cite geographic concerns.  To the extent that RECs encourage displacement of combustion generation by renewable generation, location matters.  The argument is that RECs originating in states heavily dependent on coal-fired generation are preferable to those generated in states with more carbon-friendly generation fleets.  Critics claim that REC purchasing programs do not adequately focus on buying from the “dirtiest” states.

These criticisms of grid-based based renewable energy have some merit.  However, RECs provide an affordable and practical means for electricity customers to support renewable generation regardless of location or type of housing.  For those customers unable to participate directly in the solar market, combining conservation and RECs can make a positive difference in reducing carbon emissions.

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Charlie Hewitt has more than 20 years of in-depth energy experience having served in executive and managerial roles at some of the largest retail energy providers in North America. He holds advanced degrees in business and geology and was a TXU environmental research fellow. He founded ElectricityMatch as to assist consumers with choosing retail electric providers and plans.

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