A number of retail energy suppliers claim to provide “green” energy to their customers. Some carry premium prices. Some of these “green content” claims may be valid but none of them are verified by third parties. Moreover, customers would be surprised if they learned what was often behind them.
Here are some sample descriptions of these products, pulled from the internet, supplier websites and utility “shop and compare” pages:
Many utilities already purchase renewable energy for a significant portion of their energy supply. They are required to do so by law, under so-called Renewable Portfolio Standards adopted in most states. The RPS standards are similar to the CAFÉ standards for automobile emissions: Just as the CAFÉ standards set minimum fuel efficiency levels, in order to reduce smog-producing pollutants from car engines, RPS standards set a minimum for the amount of renewable energy that must be supplied by any utility or retail energy marketer as a percentage of overall deliveries.
The RPS standards range from 10-30% and are intended to scale upward over time, just like the CAFÉ standards. Suppliers meet the RPS standards by building renewable power plants such as wind and solar and delivering that power into the utility grids. Alternatively, suppliers can purchase from third parties energy certificates that represent the so-called environmental attributes reflected by renewable production. The most common RECs are WRECs or Wind Renewable Energy Certificates or SRECs for Solar Renewable Energy Certificates. (Connecticut for some reason refers to solar RECs as Z-RECs. Go figure.)
A wide variety of renewable energy sources are eligible for RECs. Solar and wind are always considered renewable. In many states hydro-electric production is usually not considered renewable although large hydro may qualify as distinct from small run of the river hydro. In Ohio nuclear energy is considered a renewable energy resource although this is highly controversial. Some states will only give RECs to new renewable sources; existing facilities such as solar will not be eligible in order to encourage new projects.
An on-line marketplace has developed for RECs. Several brokerage platforms have evolved that facilitate the sale by projects owners and the purchase by utilities and other energy suppliers for these certificates.
The price of RECs is set by supply and demand forces. If there is a shortage of renewable energy that meets the state RPS requirements, prices will go up as suppliers compete the purchase the RECs needed to meet the RPS. Likewise, if renewable production increases the price will probably come down. Over the past few years SRECs have experienced wide price ranges in states like New Jersey where supply and demand have changed periodically.
Most suppliers purchase the bare minimum amount of RECs required to meet their RPS requirements. Where suppliers wish to sell their customers electricity with a higher minimum than legally required they can purchase more in the marketplace. Since the price of renewable energy is often higher than conventional sources the retail price will likely rise with the percentage of renewable energy sold.
When customers pay a premium for “green” products they probably intend to contribute to the overall supply of renewable energy in their state. Otherwise why would they knowingly pay a premium?
These green customers might be surprised to learn a few facts:
Renewable energy claims are on the verge of being a renewable energy scam. Customers probably think that regulators are watching out for them. They probably assume that if electricity marketers were making false claims about renewable energy content they would be required to back them up with third party verifications.
Regulators are not overseeing claims of renewable energy content. They are not prosecuting retail electricity scams. Don’t blame them for this: They simply don’t have the resources or manpower to police these claims. The electricity marketplace must police itself, through vigilance, due diligence and articles such as this.