Helping to Build More Renewable Energy While Keeping Costs Under Control

When we recently asked readers what they were wondering about, we got a lot of interesting questions that you’ll see showing up over the next several weeks. But one topic - the utilities’ voluntary renewable energy options - got mentioned a few times, so we thought we’d start there.

First, what are the voluntary renewable energy options? As we’ve written before, the utilities are required to make renewable energy options available to customers who want to support the building of more renewable energy mechanisms. Both Portland General Electric and PacifiCorp have run very successful programs that are often put at the head of lists naming top programs in the country. And it’s important to note that the utilities are financially indifferent as to how many customers participate in the program; they make no extra money from them. Here’s a good overview of the programs from a recent article in the Oregonian.

Essentially, ratepayers who choose to participate in the programs are supporting renewable energy projects by purchasing renewable energy certificates (or RECs), which are issued by specific renewable energy projects by helping them get built. These RECs are registered by tracking systems in various regions throughout the country to ensure that certificates are coming from actual projects and aren’t sold more than once.

In the western region, the tracking system is elegantly titled the Western Regional Energy Generation Information System (WREGIS). Being registered with WREGIS or another tracking system is a consumer protection, so that participating ratepayers can be assured that they are contributing toward more renewable energy in the system.

As another consumer protection, the portfolio of energy options is overseen by a group called the Portfolio Options Committee. Appointed by the Public Utility Commission, the committee is made up of consumer groups (including CUB), public entities, residential customers, business customers, other public interest groups, staff from the PUC and the Oregon Department of Energy, and the utilities. The POC’s role is to delve into the details of the portfolio options, make sure that the utilities are managing them adequately, and make recommendations on program and policy changes to the PUC. The committee has worked well for many years to keep the voluntary options affordable and effective.

In both PGE and PacifiCorp’s programs, we have managed to keep the price of renewable options very steady over the years. When the program first started, the options were required to be made up of a least half of “new renewables,” or power from projects built recently, not those that already existed. Today, 100 percent of the power needs to be from new resources. And, we only saw the first increase in the price of the options in 2008 after six years of operation.

Why did the price go up at that single point? Mainly, it’s because the cost of RECs had been increasing. And that increased cost comes from two reasons. First, more and more states, particularly in the West, have renewable energy standards: requirements for a certain amount of renewable energy. This causes a lot of pressure to buy some RECs to help meet the standards. Second, California has been considering some changes in its renewable energy standard that would create great demand for RECs there. So a lot of projects were holding on to their RECs in hopes for a new California gold rush, so programs like PGE’s and PacifiCorp’s couldn’t buy large amounts of RECs.

The POC recommended some adjustments, which were approved by the PUC, to allow the utilities to buy some RECs from outside the western region when it was necessary to keep prices for the renewable energy options under control. The goal has always been to try to support projects in Oregon, the Northwest or in the western region. That’s still the goal, but if pursuing that goal means paying an exorbitant amount for RECs, utilities can go outside the western region to buy RECs on a limited basis.

One of the things the POC has been exploring recently is whether one of the portfolio options can be fashioned so that it is not based on RECs. This raises a host of policy and regulatory questions, but since REC prices are expected to continue to rise, it seemed prudent to think about new ways to approach this problem. If the POC does come up with any new solutions, they would have to be approved by the PUC and would not go into effect until the fall of 2011, at the earliest. Tracking the progress of the POC’s discussions will be the next installment on this topic in a month or two.

Keep those questions coming!

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