When a green option doesn’t make things greener…

California’s largest electric utility, the Pacific Gas & Electric Company (PG&E), has proposed to offer a Green Option Program through which individual customers could choose to pay a little extra for power that is 100% renewable.  In a move clearly designed to discourage local governments from starting their own green power programs, PG&E displays endorsement letters from a number of Northern California mayors. Some of those mayors express hope that that the Green Option will support their cities’ efforts to reduce greenhouse gas emissions.  However, there is nothing about the program as proposed by PG&E that would promise or likely produce reductions in greenhouse gas emissions.

How could this be?  Doesn’t renewable energy use always mean less reliance on fossil fuels and less carbon in the air? The fact that the answer to this question is “no” says something about the way PG&E crafted its proposal, but it also says something about the nature of current climate policy in California.

In the next few months, California initiates its greenhouse gas cap and trade program through which PG&E and other utilities will be required to limit the carbon emissions related to the power they sell. As part of this process, the state will give each utility emission allowances which it can either use for its own purposes, save for later use, or sell to another polluter. One thing is clear: somebody is likely to use those allowances to release greenhouse gases into the air. So if PG&E uses more renewable power in a way that reduces its emissions to levels below its current cap, it will either save the unused allowance for a time when the cap is even lower, or sell the allowance to somebody else.  Either way, the same amount of greenhouse gas will eventually enter the atmosphere.

PG&E seems to understand these limitations.  Other than its use of the word “green” in the title of the program, the utility does not make any claims about environmental benefits that it might produce.  As PG&E presents it, the program is about giving customers a choice about the composition of the power they buy. The utility does not describe the program as a way to reduce greenhouse gas emissions.

If every PG&E customer chose the Green Option and PG&E actually bought deliverable renewable power to serve all of its customers, this would provide a real opportunity to reduce carbon emissions.  But, of course, this will never happen.  We don’t solve our societal environmental problems through voluntary action – think, for instance, about the proliferation of sports utility vehicles when consumers could choose more fuel-efficient cars. Think of the mountains of plastic water bottles when consumers could drink water from the tap. PG&E must be relying on this aspect of human nature because it has never asserted that it could reliably operate its system in 2012 or within the next few years on 100% renewable power.

With a slight modification to its proposal, PG&E could make this program meaningful. This would involve pledging that for each megawatt hour of renewable generation added as a result of Green Choice, it would “retire” an equivalent amount of greenhouse gas allowances. Then, it could say with confidence that participating in the program could make a difference by truly eliminating greenhouse gas emissions.

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Reader Comments

16 Replies to “When a green option doesn’t make things greener…”

  1. This seems like it has implications beyond this program. Should those of us who live in C&T-regulated economies stop taking any personal actions to reduce our consumption of GHG-intensive products and services? By this argument, it seems like we’d just be shifting things around.

  2. This seems like it has implications beyond this program. Should those of us who live in C&T-regulated economies stop taking any personal actions to reduce our consumption of GHG-intensive products and services? By this argument, it seems like we’d just be shifting things around.

  3. I haven’t seen the details of PG&E’s proposal but I know the California C&T program has a mechanism for retiring allowances from voluntary renewable energy purchases. Does the proposal explicitly say they are not planning on using the voluntary renewable energy set aside?

  4. I haven’t seen the details of PG&E’s proposal but I know the California C&T program has a mechanism for retiring allowances from voluntary renewable energy purchases. Does the proposal explicitly say they are not planning on using the voluntary renewable energy set aside?

  5. To Marget Meidling who asks whether PG&E (in its Green Option rate proposal) has explicitly said that it did not plan to voluntarily set aside carbon allowance resulting from voluntary renewable energy purchases: No it didn’t. But more importantly, PG&E has not committed to retire any carbon allowances as part of the program. If it was PG&E’s intent to do so, the company would want to brag about it.

  6. To Marget Meidling who asks whether PG&E (in its Green Option rate proposal) has explicitly said that it did not plan to voluntarily set aside carbon allowance resulting from voluntary renewable energy purchases: No it didn’t. But more importantly, PG&E has not committed to retire any carbon allowances as part of the program. If it was PG&E’s intent to do so, the company would want to brag about it.

  7. California’s cap-and-trade program is in fact designed to lower the cap in response to voluntary purchases of generation that occurs in state or that is imported, through a “set aside” mechanism (§ 95831(b)(6), § 95841.1 Voluntary Renewable Electricity, and § 95870(c)). The set aside is a function of AB32 that the California Air Resources Board included to ensure that households and businesses buying renewable energy in these voluntary programs saw real emissions reductions.

    1. Replying to Peter Mayes, who cites portions of California’s climate law (AB 32) designed to retire carbon credits based on voluntary renewable energy purchases. The suggestion is that this portion of the law makes PG&E’s Green Option a good tool for retiring carbon allowances. As I mentioned in response to Marget Meidling, PG&E could design the program to accomplish this result. It simply has not done so. To qualify under the voluntary program, the source of the power must not have served load prior to July 1, 2005, it must meet the Renewable Portfolio Standards criteria, and it must be delivered into California. As PG&E has proposed its programs, it would assure none of the above. In fact, since the announced intention is to rely on Renewable Energy Credits, it is quite likely that the renewable power in question will not be delivered to California at all. PG&E can revise its program in ways designed to have it make a difference. It just has not offered to do so thus far.

  8. California’s cap-and-trade program is in fact designed to lower the cap in response to voluntary purchases of generation that occurs in state or that is imported, through a “set aside” mechanism (§ 95831(b)(6), § 95841.1 Voluntary Renewable Electricity, and § 95870(c)). The set aside is a function of AB32 that the California Air Resources Board included to ensure that households and businesses buying renewable energy in these voluntary programs saw real emissions reductions.

    1. Replying to Peter Mayes, who cites portions of California’s climate law (AB 32) designed to retire carbon credits based on voluntary renewable energy purchases. The suggestion is that this portion of the law makes PG&E’s Green Option a good tool for retiring carbon allowances. As I mentioned in response to Marget Meidling, PG&E could design the program to accomplish this result. It simply has not done so. To qualify under the voluntary program, the source of the power must not have served load prior to July 1, 2005, it must meet the Renewable Portfolio Standards criteria, and it must be delivered into California. As PG&E has proposed its programs, it would assure none of the above. In fact, since the announced intention is to rely on Renewable Energy Credits, it is quite likely that the renewable power in question will not be delivered to California at all. PG&E can revise its program in ways designed to have it make a difference. It just has not offered to do so thus far.

  9. [Peter Mayes is Center for Resource Solutions] RECs generated outside of California still include an avoided grid emissions benefit, since electricity generation outside the state that is not imported is not covered by the cap. So either as a result of the voluntary renewable energy set aside if generated within the state, or from REC retirement if from outside the state, voluntarily renewable energy provided to customers through a California green pricing program will include an avoided grid emissions benefit—the same carbon benefit as the use of renewable energy will in any other part of the country. In order for green pricing programs in California that source from in-state facilities to access the set-aside mechanism for that generation and therefore maintain the carbon benefit of the generation, the 2005 generator online date under AB32 would need to be met. These programs aren’t intended as tools for retiring carbon allowances, but as tools for delivery of renewable energy benefits to voluntary purchasers.

    1. Agreed. However, unless the REC is meaningless, it is reducing the carbon footprint for PG&E — which either places a greater-than-normal portion of AB 32 compliance cost on the volunteer customers, or frees up a carbon allowance to be banked or sold. Either way, unless one assumes that PG&E would never otherwise reduce its emissions to a level below the cap, where is the carbon benefit?

  10. [Peter Mayes is Center for Resource Solutions] RECs generated outside of California still include an avoided grid emissions benefit, since electricity generation outside the state that is not imported is not covered by the cap. So either as a result of the voluntary renewable energy set aside if generated within the state, or from REC retirement if from outside the state, voluntarily renewable energy provided to customers through a California green pricing program will include an avoided grid emissions benefit—the same carbon benefit as the use of renewable energy will in any other part of the country. In order for green pricing programs in California that source from in-state facilities to access the set-aside mechanism for that generation and therefore maintain the carbon benefit of the generation, the 2005 generator online date under AB32 would need to be met. These programs aren’t intended as tools for retiring carbon allowances, but as tools for delivery of renewable energy benefits to voluntary purchasers.

    1. Agreed. However, unless the REC is meaningless, it is reducing the carbon footprint for PG&E — which either places a greater-than-normal portion of AB 32 compliance cost on the volunteer customers, or frees up a carbon allowance to be banked or sold. Either way, unless one assumes that PG&E would never otherwise reduce its emissions to a level below the cap, where is the carbon benefit?

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Steven Weissman

Steve established and directed the Energy Law Program at Berkeley Law. He is currently a Lecturer at the Goldman School of Public Policy.…

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