Fungible (and Vintage?) Green Virtue, For A Fee

Renewable energy certificates can have a vintage? Some might prefer fresh solar or wind power.

by Steve Haner

Like most major electric utilities now, Dominion Energy Virginia has a certain amount of energy generated by processes now designated “renewable.”  Hydro power has been around for a long time, and now that is supplemented by a growing number of solar generators – owned by the company or under contract to it.

All Dominion customers are getting some of their electricity from those sources.  Everyone is a little bit green.  But for an extra $4.21 per 1,000 kilowatt hours, some other customer can take away your green power and leave you less green or totally not green, at least on paper.  Overall the utility’s output stays the same, but it might pick up a few more dollars per month from up to 50,000 of its customers. 

That in a nutshell is Dominion’s proposed “100 percent renewable” Rider TRG.  The May 31st application (here) is the only major documentation pending so far in the case before the State Corporation Commission.  Other case participants – the Office of the Attorney General, the environmental group Appalachian Voices – are joining, but the testimony and briefs have not begun to fly.   The hearing is set for November 21.

How the monopoly utilities propose to provide “100 percent renewable” power is important to understanding their efforts to prevent anybody else selling it in their territory.  Preventing that competition is the real gain for the utilities, and state law only allows consumers a choice if the monopoly utility doesn’t offer its own 100 percent renewable product.  This is Dominion’s third try.

Along with its Gaston and Roanoke Rapids hydro plants and the collection of solar fields, Dominion also proposes to include four generators that burn biomass (wood) and the percentage of power from wood waste coming out of its coal plant in Wise County.  Yes, Virginia, your General Assembly was talked into counting burning wood as “renewable energy,” even when mixed with coal.

Today’s Richmond Times-Dispatch has the display ad announcing yet another Dominion solar project, to be financed by all ratepayers with a rate adjustment clause (just like the previous ones) and then presumably sold at a premium to a subset of customers.   As usual, this set up is the General Assembly’s doing.

The law defines renewable as energy derived from sunlight, wind, falling water, biomass, sustainable or otherwise, (the definitions of which shall be liberally construed), energy from waste, landfill gas, municipal solid waste, wave motion, tides, and geothermal power, and does not include energy derived from coal, oil, natural gas, or nuclear power. Renewable energy shall also include the proportion of the thermal or electric energy from a facility that results from the co-firing of biomass.”

And if the SCC approves this new tariff, no Dominion customer can sign up for renewable energy either produced or packaged by a competitive service provider (CSP), even though that might further reduce demand for energy from coal, natural gas or other “non-renewable” sources.  Existing CSP contracts at the time of approval can remain.

It now works that way for Appalachian Power Company customers.  In January the SCC approved APCo’s Rider WWS, adding $4.25 to that sample 1,000 kWh bill to buy a different way of accounting for the same power sources they were already paying for.  APCo has some new wind resources in the mix, but it also relies heavily on old hydro facilities already in its portfolio.

Here is the marketing on its website and here is its first annual report to the SCC, from May when things were just getting started.  Once things are up and running it will regularly report “the sources, vintages, quantities, and WWS premium rate of RECs (renewable energy certificates) retired on behalf of Rider WWS customers; and the sources, vintages, quantities, and prices of RECs sold to third parties from RPS resources.”  For Bordeaux, 2015 was a great vintage. Buying old hydro power RECs might not have the same cache.  Customers might prefer it fresh.

Note it will be reporting on renewable energy certificates, RECs, and their value, not the cost of producing the power.  There is a complicated minuet involved with the RECs on these generation sources, which are sold and then replaced with lesser valued RECs, and which seem to count both for this tariff and for meeting the company’s existing renewable portfolio standards.

The SCC approved APCo’s Rider WWS over the objections of its own hearing examiner, the consumer counsel at the Office of the Attorney General and that same Appalachian Voices group. Its attorney William Cleveland wrote:

“APCo’s proposal adds no new renewable energy to its generation portfolio, and yet the Application requires participants to pay a premium. If participating customers are paying more for this offering than standard service, it should be because the acquisition of new resources necessitates them to pay more. Instead, the Company proposes to charge customers more than they currently pay for the privilege of claiming the output of certain resources already in APCo’s fleet. And yet, by APCo’s admissions, those specific resources actually cost less than its other resources. Put another way, APCo wants to charge customers above market for resources that cost below market. This is not just and reasonable.”

While seeking approval of its own renewable tariff, APCo also sought in another case to oust the one CSP already operating in its territory, Collegiate Clean Energy.  Collegiate Clean Energy burns landfill gas to make power in Virginia and other states and several of its customers are private colleges.  The gas, mostly methane, breaks down into water and carbon dioxide, but CO2 is a less potent greenhouse gas than methane, so this is an environmental gain. If not used for power generation it is burned off in a flare.

The SCC denied APCo’s request (the case file is here) and left Collegiate in business, but the SCC’s final order set the stage for Dominion to make a unilateral decision to block customers joining competitive service providers in its territory.  Another round of briefs in that dispute is filed but not yet publicly posted, and a hearing will be held Tuesday.

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12 responses to “Fungible (and Vintage?) Green Virtue, For A Fee

  1. “[APCO] will regularly report ‘the sources, vintages, quantities, and WWS premium rate of RECs.'”

    I suppose that’s useful to auditors from a forensic accounting point of view — to prove the RECs were real, were duly retired, and to check on APCO’s profits. But for most customer purposes, one REC is the same as another.

    There’s no practical alternative to the “fiction” of RECs. Power on the grid is commingled; the electrons from a solar cell are the same as from a coal-fired generating unit. What you CAN sell is proof that someone generated a watt of solar power and put that into the grid in an amount equal to what the customer took out of the grid, and that the proof was only sold once, to one end user.

    Originally there were efforts to add proof that these injections and withdrawals occurred simultaneously. But that doesn’t work with wind and solar and hydro, which are intermittent sources; that means that in some hours, on windless evenings, there is no simultaneous injection to match every withdrawal. So a REC only guarantees the consumer that somewhere, sometime, a renewables generator created that REC quantity of electricity and that it is consumer (retired) only once. That’s why “vintage” is not a consumer concern.

    In order to allow trading between the different state REC markets, the definition of what qualifies as “renewable energy” has to be uniform across state lines. I am not aware of any differences — even if Virginia established its definition under Virginia law I think it’s the same as New Jersey’s, etc.

    As for why it should cost more: bear in mind that APCO is actually supplying the customer from all of its capacity resources as dispatched and augmented through the PJM wholesale energy market in every hour. The customer thereby gains the repliability of the entire grid, not just the reliability of a handful of specific generators. And, the customer can’t receive a lower “pure renewables” price unless that cheap energy were simultaneously removed from the blended price everyone else pays (they would pay more). Matching prices would require vintaging, which doesn’t work as discussed above. Plus it would be extremely expensive to try to track it all. Plus Virginia would have to persuade all the other PJM states and beyond to change the way they track RECs too. Plus, I suspect the REC customer would end up paying more not less, after the higher cost of the non-REC backup power was factored in.

    So I think a slight surcharge above the regular APCO rate to take care of RECs for those who want them is probably reasonable. How much is “reasonable”? What do the RECs themselves plus the extra REC accounting actually cost APCO? That’s for the SCC to decide.

    • Am I missing something here? Are they not simply creating some accounting trail that “moves” those “renewable attributes” from the many to the few, and then charging the few more? This strikes me as silly, but I’m open to correction.

      • I presume that people buying green energy are not only virtue signaling but also betting that enough other people will do the same to drive demand. Dominion can either keep raising the prices for the green energy they have or build more renewable generation. Given Dominion’s track record and our General Assembly I’d bet on the former.

  2. If someone COULD buy “direct” from a solar company – some amount of kilowatts – and the generator could only sell up to what they generated in total – then one can say that they bought the renewable power and it was “delivered” via the transmission infrastructure.

    and yes, once it’s put into the grid – it’s all generic electrons.

    But to the buyer – when they choose to buy some dollup of renewable – it means that that dollup displaces an equivalent amount of fossil-generated electricity – i.e. they have reduced the level of fossil-fuels used.

    Yes, it’s an “accounting” just like a lot of things – say – airline miles or Walmart Bonus Bucks or whatever.. it’s not a unheard of concept.

    And it’s a regulatory/legislative catch 22 of Dominion’s own making because they don’t want folks installing their own solar and just using grid power when they need it – AND yes, pay an additional “availability” fee.

    The bigger point here is Dominion’s influence on the choices and options – limiting them so that folks take whatever options they still can – even if they really don’t make solid sense.

    The bigger users are already wanting to do that , Colleges want their own on-site solar and some places want community solar and Dominion is doing everything they can to obstruct and deny those options.

    So JUST pointing at one part of this – which is basically being caused by Dominion is really not a fair or balanced perspective.

    Let people make choices right now just like they do with buying lottery tickets and timeshares and donations to Evangelical cults… etc.

  3. No, I don’t think that when a customer moves to a competitive provider that is merely an accounting process. If done right there is renewable generation that matches (on some balanced basis) the customer’s consumption. Where I see a pure accounting trick with the utility approach is they are taking generation they already have, energy they already produce, paid for by ratepayers generally, and selling it at a higher price to a subset of consumers. Right now I am buying at least some renewable power from Dom and if this approach is approved, I will stop doing so? Somebody else gets it? No, not really. Absolutely nothing changes but they collect more $$, and also benefit by blocking that competitive provider bring a new source to customers.

  4. Piece by piece, Haner has assembled a vast body of evidence showing how “green” energy lends itself to endless rent-seeking manipulation. There are no innocent parties here. Everyone is seeking regulatory advantage. If it’s not the utilities seeking to preserve their monopolies, it’s their competitors seeking to carve out exemptions and leaving retail rate payers holding the bag. As someone who leans libertarian, I would like to say that the solution is deregulation of generation (and perhaps transmission)… but even those functions require some legal/regulatory framework, and we all know they’re going go to be gamed. That is the nature of the beast.

  5. We should just do the work on how best to integrate renewables into the grid, maintaining full reliability, and go there and no further. A decade ago there was good reason to fear that renewable would be way, way too expensive but that has definitely changed. But we cannot sacrifice reliability on the altar of environmental worship. Some of the ideas (off shore wind) are still very expensive and risky. Yes, the rent seeking and insanity are rampant….

  6. Moral to this story is Never Say it cannot happen here in America either.

    Quote below is from Whatsupwiththat:

    “Renewable energy is a blackout risk, warns National Grid after chaos during biggest outage in a decade, by charles the moderator / 6 hours ago August 19, 2019”

    “From This is MONEY

    Company has downplayed the role of wind energy in the power cut. In April a study warned renewable power sources could risk network’s ‘stability.’ Half UK’s power generated from wind at one point on the day the power failed. (Here is balance of story.)

    By Helen Cahill For The Mail On Sunday

    Published: 18:01 EDT, 17 August 2019 | Updated: 07:10 EDT, 18 August 2019

    National Grid had evidence that the shift to renewable energy was putting Britain’s electricity supply at risk months before the biggest blackout in a decade, The Mail on Sunday can reveal.

    The company, which is responsible for keeping the lights on, has downplayed the role of wind energy in the power cut that caused widespread chaos earlier this month.

    John Pettigrew, chief executive of the FTSE 100 firm, described the outage as a ‘once-in-30-years’ event and said there was ‘nothing to indicate there is anything to do with the fact that we are moving to more wind or more solar’.

    Yet in April, National Grid published research warning that using more renewable power sources posed a threat to the network’s ‘stability’.

    In a report based on a £6.8 million research project, National Grid admitted that renewables increased the ‘unpredictability and volatility’ of the power supply which ‘could lead to faults on the electricity network’.

    The revelations come as energy regulator Ofgem and the Government continue to investigate the causes of the blackout.

    A report due out this week is expected to show the outage was caused by a series of failures, including a lightning strike which led to the almost simultaneous shutdown of two power stations.

    A gas-fired power station at Little Barford, Bedfordshire, and the Hornsea offshore wind farm in the North Sea both went offline just before 5pm on August 9.

    That caused the electricity network’s frequency – the rate at which power is transmitted to users – to drop below 50 Hz. Equipment can be damaged if it is higher or lower than this level.

    To maintain frequency, local distribution networks were forced to cut supply in some areas …” End of Quote.

    For the full story, go to:

  7. “Am I missing something here? Are they not simply creating some accounting trail that “moves” those “renewable attributes” from the many to the few, and then charging the few more?” Yes, exactly so. The utilities did not create the renewables fad, a subset of consumers did. RECs were created first in New England to satisfy that demand. Very popular, so other state commissions supported the concept too.

    Utilities build or buy from renewables strictly for least cost + max profit — except where the state establishes a renewable portfolio standard (RPS) requiring minimum renewable generation. But retail utilities don’t mind selling the evidence of “100% renewables” to consumers willing to pay extra for virtue signalling. Of course that means less renewable generation associated with everyone else’s consumption — but who’s counting?.

    RECs are sold in State-run markets under State law and State regulation and virtually ignored by the FERC and its ISOs. All PJM provides its LSEs is an accounting service to track RECs created, transferred and consumed — for a fee of course. Renewable fueled generators are dispatched by PJM under the same rules as all other generators, on the basis of their day-ahead offered price to run. Of course solar and wind power have such a low marginal cost they are usually dispatched “on” just about any time they are available — when the sun shines or the wind blows.

  8. Does the business model described in Steve Haner’s find post differ from “Branding.”

    One of endless examples is that for generations all vodka sold anywhere and everywhere was in all respects generic, the vodka sold worldwide was undifferentiated in quality one from the other no matter its label, including on the basis of content and taste, yet the price of various brands has typically varied wildly, all depending solely or in large part on the shape of its bottle, label, and marketing campaign effectiveness, these three elements alone creating customer demand and market share. This is true for many products. Its an key part of the genius of free commercial systems. So what, if anything, might make electricity different, pro or con?

  9. Pingback: Dominion's Move Against Green Competitors Fails - Bacon's Rebellion

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