Gridium digs into the latest state level emissions data, and finds for many providers the promise of clean energy has not yet arrived.
California released surprising data this week with big implications for energy users who rely on green power programs to reduce their emissions footprint. You may be paying more and getting less.
Many Gridium customers’ carbon reduction targets are exploring green power programs as a potential solution. The idea is simple – by buying renewable energy from the local utility, usually at a premium, customers can zero out their carbon emissions from electricity.
In California, these programs have soared in availability and in popularity due to regulatory changes that have resulted in a proliferation of local utilities known as community choice aggregators (CCAs). CCAs are essentially buying clubs that bundle up local energy users and pool their purchasing power to procure electricity that is – hopefully – cheaper or cleaner than what the monopoly provides. At least, that’s the idea.
California publishes data on the carbon content of electricity from every provider in the state. Data just released for 2021 (numbers lag by a year) is genuinely shocking: in over 60% of cases, buildings get cleaner energy by sticking with the standard offer from the monopoly utility. More disturbingly, there are eight retailers in California where paying more for a “green option” actually increases your carbon emissions!
How did we get here?
First some background on carbon accounting. The electrical grid is a series of interconnected networks that route electricity to balance supply and demand. It isn’t possible to trace every electron back to its unique source, so carbon accounting protocols have historically used regional averages to compute how much carbon is emitted from a kilowatt-hour of electricity. This accounting is called the “location-based method” because carbon emissions are calculated based on the location where the energy is consumed.
The problem with the location-based method is that these grid averages don’t reflect the individual choices that companies make when purchasing electricity. Many companies purchase renewable energy credits, or contract for clean energy supply, or sign up for green power programs. Unfortunately, these often laudable efforts aren’t reflected in their carbon footprint as calculated using the location-based method.
In 2015, the World Resources Institute, the main non-profit for voluntary carbon reporting, announced a new method of accounting for emissions from electricity use that attempts to address this problem by allowing companies that have choice in electricity products to reflect the carbon benefits of those choices in their voluntary reporting. This accounting is called the “market-based method” because it is based on individual supply contracts.
California mandates that all electricity suppliers in the state report the carbon content and generation mix of each of the products they sell. That data, which serves as an input to the market-based accounting method, reveals the surprising situation we now find ourselves in, with many CCAs selling dirtier electricity than the local monopoly and some green power programs looking very much the opposite of green.
Myth #1: the CCAs’ standard product is cleaner than the monopoly utilities
Part of the pitch of community choice aggregation was that they would provide cleaner power than default utility service. Ten years into the experiment, the data is decidedly mixed.
In PG&E territory, only four of the thirteen CCAs reduce carbon emissions compared to PG&E. Over half of the CCAs increase carbon emissions by five times!
For Southern California Edison, a similar picture emerges. Only three of the providers offer cleaner electricity than SCE, and the largest, Clean Power Alliance, only comes out 3% ahead.
Overall, of the 22 CCAs in California, fourteen increase your carbon emissions relative to sticking with the monopoly provider. Remember, customers are enrolled in CCAs unless they explicitly opt out, so you may be buying power from a CCA whether you know it or not.
Myth #2: upgrading to the “green” option lowers your emissions
You can’t see green power, so good data is essential to the integrity of these offerings. Here the result is eye-opening. There are eight utilities where paying extra for green power actually increases the carbon emissions of your electricity compared to default service, including significant increases at municipal utilities like Palo Alto and SMUD (munis are not the same as CCAs, but the same carbon accounting considerations apply).
So what’s going on?
The obvious question is why a regulatory program that is meant to encourage clean energy supply and provide customers with greener choices appears to be doing the opposite. The answer is somewhat complicated, and it mostly boils down to competing policy goals and differing ideas about the best way to measure environmental impact.
The CEO of East Bay Clean Energy graciously replied to me on Twitter when I asked him about EBCE’s carbon numbers:
There is a lot to unpack in the thread, but the crux of the issue is that many CCAs have prioritized investment in new clean energy supply over purchasing existing clean energy supply. There is a valid logic to this decision. New clean energy supply is critical to decarbonizing the grid.
The problem, however, is carbon accounting protocols understandably aren’t concerned with future energy supply. They are designed to provide insight into the environmental impact of energy use today. Companies using these methodologies to manage toward their own net zero goals are now stuck with a lot of surprisingly dirty energy on their balance sheets.
It is worth reiterating that these higher carbon emissions numbers only affect market-based accounting. Location-based accounting relies on grid-based averages that don’t reflect fine-grained purchasing decisions. Although market-based accounting is becoming more popular, location-based accounting is still the dominant reporting method.
Gridium customers interested in this topic should reach out. All Gridium customers receive location-based emissions reporting in the software, and market-based reports are available for portfolio customers.