Green power choices: RECs or my local utility’s program?

LA DWPA TerraPass customer writes in with the following question: should he buy his green power from the Renewable Choice Energy program offered at Whole Foods, or from his local utility, the City of Los Angeles Department of Water & Power?

Mike wants to shift to green power for his home. We don’t have the specifics of his electricity use, but let’s assume he consumes about 6300 kWh of electricity a year, the average for a California home. This equates to a carbon impact of about 5,000 lbs per year, or about the same as driving a Prius.

When we crunched the math (spreadsheet here), we were pretty shocked at the difference in prices. LAWPD sells at $4.37 per MWh, Renewable Choice at $20 per MWh. To put these numbers in terms of carbon dioxide emissions, LAWPD sells at $12 per metric ton and Renewable Choice at a much steeper $31 per metric ton. TerraPasses sell at about $9 per metric ton.

But there is more to green power than just price. Let’s look more carefully at the issue.

What is being bought? Both providers source from 100% wind energy. LAWPD buys from local California sources; Renewable Choice from wind farms in North Dakota and Colorado. There is a slight difference on the carbon claim one can make from each resources, but the real difference here is that Renewable Choices invests in the costs associated with being a Green-e certified marketer. That means claims they make about their green power being new and above RPS requirements are independently certified by a non-interested party. LADWP makes the same claims in their annual report, but no one is watching over them.

Of course, the folks at LADWP are well-intentioned, and even with a fab $50 Whole Foods card that comes with your purchase, you’re still looking at shelling out an additional $100. Still, we’d pick quality ahead of price, and support Renewable Choice.

Of course, in the shameless plug department, you can have the same CO2 impact, and achieve both certification and verification, by simply buying another Hybrid TerraPass.

Author Bio

tom

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  1. Andrew - June 7, 2006

    I live in NY, and my utility ConEdison gave me 2 or 3 choices for renewables. One cheap dirty renewables, and the other two were wind (essentially the same source). While I work in this area and read alot of about RECs, the woman working the phone suggested I buy directly through the utility’s program because it shows support for the program and when they do “utility green power program” surveys, only buying this option would contribute to enhancing the results…It made alot of sense to me. (especially given it was still quality local wind)

  2. Eric Olson - June 7, 2006

    I live in Newton, MA, and here we also have choices to make between Whole Foods (we have two Whole Foods stores in just this one town) and a local recs program. I have not done the per ton math yet, but the benefits to the local program are four-fold. First, by purchasing through the non-profit Mass Energy Consumers Alliance the buyer can claim a tax deduction for every penny spent. Second, the overseer of our recs (Mass Technology Collaborative) will match the purchase, cutting a check to the City of Newton. This money comes from our mandated renewable fees on our electric bills, and will be used for education about renewables in the local schools. For example a well-monitored PV system is going up on one of our middle schools this summer. Third, another check is cut (second match, same source) and this goes to energy efficiency measures in low-income housing. Fourth, the money itself goes to support new local wind, PV, and biomass development, near where we are consuming the juice. All in all a better option than investing in distant unmatched projects, as laudable as those might be. A “hybrid” approach is probably best though, for people that want to go fully carbon neutral, but to be sure it would be great to have a one-stop-shopping website for all the national and regional recs programs, stating their price per ton and other attributes plus contact information. Does such a resource exist?

  3. Tim E - June 7, 2006

    I am puzzled by your preference to pay $19 per tonne more for wind power from Whole Foods than wind power through the local utility simply because of the Green-e certification attached to Whole Foods’ program. Surely a Green-e cert doesn’t cost $19/tonne. Doesn’t it boil down to a preference help Whole Food’s shareholders rather than the utility’s shareholders? If not this, to what should I attribute this economically inefficient recommendation? Conspicuous consumption?

  4. tom - June 7, 2006

    Tim: the question from Mike, our customer was very specifically, “Am I throwing my money away if I don’t buy from a certified marketer”. Our answer is maybe. And that maybe makes us cautious about buying from LADWP.

    Consider one item that we worry about a lot — the double counting of voluntary REC purchases and RPS requirements. This is one of the things that Green-e certification checks for and assures the customer that a real reduction is being made.

    Why they don’t pay the verification fee is a whole other matter. The total cash outlay would be a maximum of $10K. Their program grossed $3M in 2004 and had $1.5M in net income.

    Clarification: Whole Foods markets RECs from Renewable Choice Energy. I am not sure if they even take a cut of this product when you buy it.

  5. hamilt - June 7, 2006

    Two questions:

    1.I had trouble understanding the spreadsheet. The total kWh hours used was 6300. The rate was $0.0729 per kWh. Total bill should be something like $459.00 for LAWPD. Is the Family Plan from Whole Foods only a green surcharge and if so, are Family Plan purchasers also paying the $459.00 on top of the $180.00 shown in Option B.

    2. Are you saying that 100% of the electricity sold by LAWPD is from wind farms? If so, coming from relatively windy parts of Canada, LA must have an amazing inventory of wind generation.

    The discussion about four fold cutting of checks from MA was mind boggling to someone from North of the border. It sounds so totally at odds with George Bush’s texan style America.

  6. tom - June 7, 2006

    Hamlit

    1) The 7 cents is the rate charge for actual electrons — the green surcharge is just 6% of that.

    2) LA area has great wind resources in the central valley, not too far away (Palm Springs, etc).

  7. Brian - June 7, 2006

    I buy wind-generated electricity from my local electric utility (Xcel Energy). Many of the projects are in the same state, which is more efficient in terms of transmission and builds out wind farms closer to heavily populated areas. The utility is monitored by the state of Minnesota to ensure they are buying as much wind power as customers have purchased and then delivering the power to the end users. I know the state is monitoring the transmission issues since Xcel was the subject of local media reports recently after a state report showed they had exceed the limit of reasonable undelivered power. (The wind turbines sometimes go up before it is economical to build a transmission line. The state allows for a reasonable amount of slack in delivery of purchased power to give Xcel a chance to get the economics right with wind farm builders and operators.) So, I’m perfectly fine buying from my local utility.

  8. hamilt - June 7, 2006

    Thanks Tom. So are they paying Whole Foods 7 cents per kWh plus the family plan? And doesn’t Whole Foods end up buying the electrons from the utility? We are just starting on windpower in Ontario and understanding the fundamental dollar concepts in different settings is very helpful for those of us who are interested in helping it along.

  9. tom - June 7, 2006

    There may be some confusion about how exactly green pricing programs mechanically work. Let me attempt to clarify (although this may just raise more questions, which I am happy to answer).

    Both LADWP and Renewable Choice work by assigning a charge to the customer to put extra amounts of green power onto the grid (one is a monthly fee, the other a per kwh fee). Neither program is charging for actual electrons, although the LADWP happens to bill you at the same time as your regular electric bill. So the right comparison is the $4.37 per MWh that LAWPD charges as a premium vs the $20 per MWh that Renewable Choice charges.

    In both cases the electrons generated are sold separately in a power purchase agreement just like any other generation contract. Brian, to clarify one point, when you buy RECs from out of state, nothing changes with the electricity transmission to cause it to be less efficient (e.g. electrons move to the closest useable point, not to your house).

    This innovation of unbundling the renewable attributes from the actual electricity is a smart market mechanism that helps draw the widest demand for green power (all over the nations) to locales where supply is high.

  10. mona - June 20, 2006

    we enjoy using power there are no life with out power it is abasic of our life so we needed to save it from bad using

  11. Greg - June 20, 2006

    Hi Tom,

    LADWP is my electricity provider, and I’m considering paying the green surcharge. If I opt for the green power, I know I’m paying more in order to have wind power generate the electricity I’ll use.

    But with a TerraPass, it seems like I’m just making a donation to some green power producers and getting a couple of stickers in return. Making cash donations to businesses (which is what those green energy producers are) doesn’t sit well with me.

    Thanks for helping people like me understand how we can help the environment — being eco-friendly is getting more confusing these days! :)

    Greg

  12. phil - September 15, 2006

    I purchase 100% green power from my local utility in Michigan, Consumers Energy. I’ve been trying to convince others to do the same. Some people are skeptical that the surcharge really is used for wind energy as is claimed by Consumers Energy. Does Michigan monitor it’s use of this money like Minnesota does?

  13. Tom - September 15, 2006

    Hi Phil:

    Consumers Energy is Green-e certified (see their FAQ), so yes, the program is monitored and represents a quality green power program.

    -Tom

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