On April Fools’ Day, Daniel Press, the head of the environmental studies department, wrote an opinion piece in the San Jose Mercury News deriding UCSC’s recent purchases of renewable energy certificates, calling them a “feel-good scam” and saying that the school, which purchased certificates for 57,000 megawatt-hours of clean energy in 2007, “was getting fleeced by green-energy scammers.” Despite the cover date, however, his piece was no joke, and it was completely wrong.
In 2006, UCSC students voted to raise their tuition by $3 in order to purchase renewable energy certificates to reduce the carbon footprint of the school’s electricity use. Because its utility, PG&E, doesn’t have a green power program that would allow the school to pay extra for a greener mix, the school chose to buy certificates. In 2006, they were for California-based geothermal power. In 2007, over half came from California wind, the rest from a mixture of biomass in Florida and wind in Oklahoma, Texas, and the Dakotas.
In his piece, Press said “certificate brokers have persuaded hundreds of colleges to buy the ‘environmental attributes’ of wind, landfill gas and solar energy – but not the electricity itself.” And he is exactly right. Renewable energy certificates are a market-based answer to a simple physics problem that Press understands well: once electricity is on the grid, you can’t route “clean” electrons to those who pay extra for it and away from those who don’t.
Part of that has to do with the sheer complexity of the electric grid. With the need to respond instantly to shifts in demand and the lack of ability to store energy, the grid is a deeply intertwined, delicate system, cobbled together from midcentury infrastructure designed to service always-on coal plants and the comparatively recent additions of intermittent renewable resources like wind and solar. It’s a mixed-up, tumbled-around creature, and the power you get out of the outlet under your desk is a mashup of electrons from any number of sources, much like a cup of water dipped from a river formed by a thousand small tributaries. Trying to divine where each drop came from is impossible.
Normally we don’t care about the details – the lights turn on just the same whether the electricity was generated from coal plants, wind power, or gerbil wheels. But now that we’re demanding cleaner electricity from renewable resources, we want to be able to pay extra to get our electrons from the wind and sun, not belching smokestacks. By paying extra for green power, so the argument goes, it should incite investors to build renewable energy, which is more expensive to build than fossil fuel plants and has a longer payback time. But if we can’t route green power straight to our homes, how can we give people and universities the ability to send an unequivocal economic signal to build more wind farms and solar arrays?
The idea, first instituted in the late 1990s, was a pretty revolutionary one, and went like this: assign every megawatt hour of clean energy a unique serial number (a certificate), and then sell the certificate as the sole claim to that generation, but independent of the actual electrons. That way the wind farm has two things it can sell: first, the undifferentiated electricity (it’s not “wind power” anymore) to the local utility, and second, all the good environmental benefits of that electricity embodied in the certificate, which can then be sold to the highest bidder on national commodities markets. The final buyer (say, UCSC) has sole claim over the renewable attributes, and once the transaction takes place, the serial number is retired so no one else – not the state it was generated in, or even the owner of the wind farm – can claim the environmental benefits of that megawatt hour.
There’s no other system quite like it, but it works. Individuals and companies can buy renewable energy whether their utility offers it or not, and renewable energy generators get paid for more than just the electricity they produce. They are compensated for the environmental benefits we all enjoy. Before this system of certificates, our common natural resources were given away free to industry to use up and pollute, and there was no financial gain in avoiding the environmental pillaging that was fully allowable by law. The system of renewable energy certificates is an artificial system, but it’s effective as both a way to monetize the act of not polluting, and to incentivize new renewable development. All this in a market-based system of commodity trading where the market determines the price.
And here are the results: wind power capacity has grown on average by 24 percent per year in the U.S. since 2000, 46 percent in 2007 and over 50 percent in 2008. Certificate prices rise and fall but have trended sharply upward over the last decade, improving financing options for new facilities. According to the National Renewable Energy Laboratory, in the last decade households and businesses collectively have provided a larger market for new renewable energy developers than all state government renewable programs combined, and these voluntary purchases support more than 4,000 MW of new renewable energy capacity nationally, steadily increasing over time. Every state uses certificates to track their renewable energy generation and progress toward their renewable energy goals, and the U.S. Environmental Protection Agency recognizes big purchasers of renewable energy like UCSC and Intel as part of its Green Power Partnership program.
Columbia Energy Partners, a developer of wind energy projects in the northwest, finds certificates are crucial for getting new projects in the ground. “Wind projects are immensely capital intensive, often requiring funds way in advance of project development,” they said. “As wind turbines are becoming more and more expensive, you have to have every revenue stream on the back-end to cover your costs. Renewable energy certificates are critical to our projects. Apart from the financial imperatives, in the presence of global warming, any incentive for renewable energy only makes sense.”
Basin Electric Power Cooperative, a utility purchaser of wind energy in North Dakota, has a similar story. “We started out planning for one turbine, but then when we started seeing the interest from the U.S. government and from [consumers] in purchasing renewable energy certificates, we decided that we could build more wind. Certificates make wind competitive with coal or other traditional forms of energy.”
Because of its purchases, UCSC is No. 6 on the U.S. EPA’s Green Power Partnership Top 20 College & University list, just below the entire California State University system. Chancellor Blumenthal is a signatory of the American College & University Presidents Climate Commitment, a pledge by over 600 college and university presidents to at least partly reduce their schools’ environmental impacts by purchasing or producing at least 15 percent of their institutions’ electricity consumption from renewable sources. The only way this purchasing can be done is through certificates, and in purchasing 100 percent renewable energy, the school has done far more than the minimum required by the commitment.
President Obama’s energy plan calls for increasing the nation’s use of renewable energy to 25 percent by 2025, up from the current 2 percent. Twenty-five percent might not sound like much, considering the urgency of the climate crisis, and it is far less than the 100 percent goal Al Gore challenged the nation to last year, but getting there will take all the political will, private investment, and public action we can muster.
This means that we have to start cutting back on our energy use and buying renewable energy now, just as the school is doing. Renewable energy sales last year to individuals and businesses were responsible for more demand than all the state goals put together, and we need both markets if we’re going to build enough renewable energy to wean ourselves off foreign supplies, stop destructive coal mining, and stave off the coming climate crisis. Along with reducing our overall energy use, buying renewable energy is one of the most important environmental steps we can take, and UCSC should be commended for doing both. Keep it up.
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Jeff Swenerton is communications director of the Center for Resource Solutions, a San Francisco-based nonprofit working to advance sustainable energy. He can be contacted at jeff@resource-solutions.org.
