The world is in the midst of a climate crisis, and minimizing the damage it causes will require action across the board. Federal and state action is crucial, but local governments around the country are also trying to rise to the challenge.
One way cities and counties can have an impact is by committing to getting 100% of their electricity from renewable sources. As we explained in a recent white paper, many of those places are meeting those goals with the purchase of renewable energy credits (RECs).
That’s a great start, but if local governments are truly going to help pave the way to a 100% renewable future, they’re going to need to use more than one of the many clean energy tools in the toolbox.
If you’re new to this issue, here’s a little background: RECs are a financial and tracking tool that represent the “renewable-ness” of renewable electricity generation and which can be bought and sold separately from the electricity itself. A wind farm or solar array that generates one megawatt-hour (MWh) of electricity also produces a REC that, when “retired” – or taken out of circulation – means the entity that retires it can claim that it used one MWh of renewable electricity. That means if, say, a corporation or a local government wants to say it uses 100% renewable electricity, it can simply buy enough RECs to cover its energy use.
RECs were a crucial tool in the early stage of the transition away from fossil fuels, and they are still an important tracking mechanism and source of revenue for developers of renewable projects. But renewable energy is cheap and getting cheaper – especially in places like Texas and the Midwest where there are tremendous renewable energy resources distant from population centers – and our capacity to produce renewable electricity is expanding rapidly.
That means that the “renewable-ness” of wind and solar power comes at less of a financial premium than it once did. REC prices on the voluntary market – the market that companies and local governments buy from, distinct from the market to comply with renewable electricity standards – are quite low, having recently fallen after an increase in the first part of 2021. These low prices make RECs a small source of revenue for developers and less likely to make the difference in a project being financially viable. At the same time, RECs on the voluntary market can often be bought without geographic constraint, rewarding big, low-cost projects far from demand centers instead of local projects and increasing reliance on long-distance transmission.
We’re in a new stage of the transition to renewables – one in which the kind of renewable energy we’re building, and how we’re using and storing that energy, is increasingly important. If cities are going to play a central role in the transition to 100% renewable energy, they will need to employ new tools to complement RECs.
In the 100% renewable energy system we need, there will have to be generation capacity everywhere, both close to demand centers and further away in places with potentially better resources. Local generation reduces the need for transmission infrastructure (which is expensive and slow to build, and which has its own environmental impacts), reduces the risk of power disruption from problems with transmission lines, and serves to replace local fossil fuel generation more easily. But generation is only part of the equation: we’ll also need storage capacity to help variable energy sources like wind and solar provide power 24/7/365, and we’ll need to do everything we can to reduce the amount of energy we use, because the less we need the easier the transition will be.
Just as local governments have helped drive the growth of renewables through the purchase of RECs, they can now increase their impact and provide real leadership by investing in local renewable energy development, storage capacity and energy efficiency programs.
The best tools for doing that vary from locality to locality. Places with publicly owned utilities can build their own renewable generation capacity or use power purchase agreements (PPAs) to secure 100% renewable energy, while investing in storage and efficiency programs. Cities serviced by a monopoly utility can use their franchise agreement – the contract through which the utility gets the right to serve the area – to secure renewable energy for residents and bolster storage and efficiency programs as well. In places that allow community choice aggregation (or that allow opt-in municipal/county aggregation), local governments can negotiate for bulk discounts on renewable energy while helping residents with efficiency upgrades and investing in energy storage. Even focusing on the government’s own energy demands and installing distributed generation capacity or using a PPA to cover that energy use with renewables can be a great start.
Any local government, large or small, can make an impact on the lives of their residents, the future of the energy system and the fight against the climate crisis. But the cheapest and easiest path is not always the one with the greatest impact. As America’s energy system continues to move toward 100% renewable energy, cities and counties should open their sustainability toolboxes to ensure they make the biggest contribution to a livable climate.
Policy Analyst, Frontier Group
Bryn Huxley-Reicher is a policy analyst at Frontier Group focusing on issues related to clean energy and the new economy. He has a BA in applied mathematics focused in earth and planetary sciences from Harvard University.