CITY LIGHT PURCHASES RENEWABLES



Well, sort of.  Actually, City Light has agreed to purchase what are called Renewable Energy Certificates (RECs) from two Idaho projects to help meet our obligations under Initiative 937.  I-937, which was approved by the voters in 2006, requires all electric utilities in the state to serve 3% of their load with ‘eligible resources’ by 2012, 9% by 2016, and 15% by 2020.

I-937 creates great policy, and will really push the development of new renewable resources, but, oddly, it is very challenging for City Light.  City Light’s energy is already both 100% carbon neutral and almost entirely renewable.  We operate several dams (all of which are fish-friendly – managed to maintain and enhance salmon runs), and buy most of the rest of our power from Bonneville Power Administration, a share of a wind farm, and a few other renewable resource contracts.  A small amount of fossil fuel energy is used at times, mainly as part of a market purchase to meet peak demands, but City Light buys offsets for all of that modest amount.  City Light, including long-term contracts, is also energy surplus – a policy that was set after the debacle of the 2001 experience, when being dependent on California energy purchases sent rates through the roof during the energy market manipulations by Enron and its cronies.

The problem is that I-937 does not count the existing resource portfolio, does not count hydro as a renewable resource, and limits the amount of conservation that can be counted against the targets.  It was designed to stimulate the growth of the renewable resource industry, which is an appropriate long-term goal.  City Light’s demand, however, is growing relatively slowly, and our policy has been to meet this  with conservation, phasing in new renewables as a supplement.

The drafters of the initiative recognized this problem, and provided a partial, if rather abstruse, solution.  They allow the renewable ‘attribute’ of a resource to be marketed separately from the actual energy.  Utilities like City Light that don’t need any actual energy, can buy the attributes in the form of Renewable Energy Certificates.  For City Light, this is cheaper than buying actual energy that the utility cannot use, and it provides capital that the developers of renewables can use to finance new projects.  So, while not exactly a win-win, it’s kind of a consolation prize-sort of win.

City Light is in the market for RECs, and has agreed to purchase 65,000 MWH worth from a geothermal project from 2011 to 2017, and another 65,000 MWH of RECS from a wind farm from 2015 to 2029.  The annual cost for each of these contracts will be about $1 million.

The REC concept is one of the interesting new ways in which markets are being used to promote environmental goals.  This use of markets has been very successful in addressing some pollution issues, and the use of carbon credits has been a strategy promoted to address climate change.  The I-937 example shows how difficult it is to figure out a fair way to manage market approaches.  City Light is in the odd position of having to pay because of its leadership – but RECs allow it to pay less than it would otherwise.  Fortunately we are confident that our voters support renewable development and want us to invest in them.  The Council unanimously endorsed these agreements.