What Is Renewable Electricity and What Do Consumers Accomplish by Purchasing It?

What Are the Environmental Impacts of Different Types of Electricity Sources?

Why Does Renewable Electricity Cost More Today?

Can Consumers Get Renewable Electricity Delivered to Their Home or Business?

What Are Renewable Energy Certificates (RECs)?

How Can Consumers’ Purchases of RECs Increase the Supply of Renewable Energy?

What is Renewable Electricity and What Do Consumers Accomplish by Purchasing It?

Renewable electricity (also called “green power” or “clean energy”) refers to electricity produced in ways that are considered to have fewer harmful environmental impacts than burning fossil fuels or running nuclear facilities. Although the definition of renewable electricity can vary, the term is generally applied to electricity from renewable energy sources: The sun, Wind, Small low-impact waterpower. Bioenergy (wood and other plant matter including landfill gas), Geothermal (the Earth’s heat), Waves, and Tides. In addition to yielding significant environmental benefits, greater use of renewable electricity can help reduce reliance on natural gas and imported oil, diversify Massachusetts’ energy portfolio, and ensure greater energy security. And, if properly managed, most renewable resources will never run out.

What Are the Environmental Impacts of Different Types of Energy Sources?

All energy sources—renewable as well as nonrenewable ones—have environmental impacts. Even such a seemingly benign technology as a solar photovoltaic panel, which has no moving parts and no air or water pollution emissions, still has impacts. After all, the panel needs to be manufactured and that process requires materials and energy.

Overall, renewable energy sources are much cleaner and environmentally beneficial than fossil fuels—coal, natural gas, and oil. In fact, Americans’ use of fossil fuels for electricity, transportation, and heating causes more environmental damage than anything else we buy or consume. The vast majority of air pollution and global warming can be traced back to fossil fuel use. Although less obvious, there are also significant water pollution impacts from power plant mercury emissions, oil spills, and other causes.

Electricity generation plays a big role in this environmental damage. Fossil fuel power plants are responsible for two-thirds of the country’s sulfur oxide emissions, one-third of the nitrogen oxide, and one-third of the carbon dioxide. They also release dust, hydrocarbons, smoke, and soot. Breathing the air pollution can cause cancer and a wide range of respiratory problems. According to the Union of Concerned Scientists, when a single 1.5 megawatt wind turbine replaces fossil-fuel generation, it can annually reduce emissions of approximately 2,700 tons of carbon dioxide, 14 tons of sulfur dioxide, and 8 tons of nitrogen oxide emissions.

But that doesn’t mean that renewable energy sources are perfectly clean or environmentally perfect. The only way to avoid environmental impacts entirely is to not use energy in the first place. Even though some renewable energy sources—solar, wind, and water—do not emit air or water pollution, they still have other impacts. Wind farms in a few locations have caused significant bird and bat deaths. Some people find wind turbines to be visually offensive. The manufacture of solar panels requires considerable energy (although much less than they save once they are put into use) and the manufacturing process can cause modest health risks if not conducted with care. Hydroelectric dams can interfere with fish migration or flood land.

The greatest environmental concerns related to renewable energy relate to the use of bioenergy (wood, plants, and other organic materials), because here there are air emissions. It is hard to generalize about bioenergy, because different power plants use different organic fuels and rely on different technologies. Some are significantly cleaner than others, yet some pollutants are always released. An older, conventional bioenergy facility can actually emit as much air pollution as a coal-fired power plant. Many newer facilities release much less air pollution—at levels comparable to a natural gas plant. In Massachusetts, any bioenergy facility eligible to be a source of new renewable energy certificates for the Clean Energy Choice program must use advanced technologies and stringent pollution controls, so its emissions will be at the low end of the bioenergy emissions spectrum.

In virtually all cases, bioenergy facilities are much better than fossil fuels in terms of global warming impacts. As long as the wood or other feedstock is grown in a sustainable fashion, the net impact on global warming is minimal, since roughly the same amount of carbon dioxide that is released when the fuel is burned is taken up by the trees or other plants that are grown to replace it.

Why Does Renewable Electricity Cost More Today?

Electricity derived from most renewable resources currently costs more than that generated by burning fossils fuels. The higher costs are generally caused by the high initial cost of constructing a renewable energy facility. Consumers’ purchases of renewable electricity can provide project developers and owners with additional income needed to make their projects economically sound.

In the future, further experience with manufacturing and installing renewable energy technologies will likely lead to lower costs. Moreover, the cost of fossil fuels may continue to increase. Electricity from renewable energy may then no longer cost more.

Even in the near term, some businesses and institutions that require large quantities of electricity may choose to sign long-term contracts for renewably generated electricity to guard against the risk of fossil fuel price hikes.

Can Consumers Get Renewable Electricity Delivered to Their Home or Business?

The electrons in the electricity generated from renewable energy sources are no different than those derived from burning fossil fuels. After electricity from renewables or any other energy source is generated, it flows into the regional power grid along with electricity from every other power plant that is online at that moment. Thus, electricity from wind turbines goes into the power pool together with electricity from coal-fired power plants, nuclear power plants, and other facilities. It is all then transmitted through the electric wires to consumers.

All consumers in the same location—regardless of whether they decide voluntarily to purchase renewable power—get the same undifferentiated electrons from the electric wires in their neighborhood. In most cases, when Massachusetts consumers purchase renewable electricity, they in effect buy “Renewable Energy Certificates” in addition to the regular electricity they get from their electricity supplier. You can see below how this works.

What Are Renewable Energy Certificates (RECs)?

All power added to the New England electricity grid is registered and tracked by the New England Power Pool (NEPOOL) through a Generation Information System (GIS). NEPOOL keeps tracks of how much electricity added to the power grid was generated from each electricity generating plant, the year the plant was put in service, its fuel sources, the emissions characteristics of the plant, and other attributes of the electricity. For each unit of electricity added to the grid, NEPOOL issues a GIS certificate attesting to these attributes. Those certificates associated with electricity from renewable energy are commonly referred to as “Renewable Energy Certificates” (RECs).

The NEPOOL GIS administrator keeps careful records of each certificate. Once issued, RECs can be traded separately from the undifferentiated electricity generated by the renewable energy facility. RECs can be purchased by retail electricity suppliers to satisfy regulatory requirements under the Renewable Portfolio Standard or by renewable electricity suppliers for resale to consumers. The same REC cannot be held by two different parties at the same time, so there can be no double counting.

RECs serve as the basis for most renewable electricity products offered to Massachusetts consumers. Consumers interested in contributing to renewable electricity continue to pay their electric utility the cost of the undifferentiated electricity that the utility procures for them.  In addition, they pay a clean power supplier the cost of the RECs from renewable energy facilities. Together, these two transactions are combined to have essentially the same effect as if the consumer purchased both energy and RECs from the same supplier. The purchase of RECs provides owners of renewable energy generating facilities with extra income that helps them to compete.

How Can Consumers’ Purchases of RECs Increase the Supply of Renewable Energy?

When consumers purchase clean electricity in the form of RECs they are generally doing so because they hope to increase the supply of renewable energy. But because the clean electricity they buy comes from facilities that are already in existence, there is no guarantee that their purchases will lead to additional construction. For example, if a renewable energy facility has been in existence for a long time, has ongoing customers for its electricity, and is not in danger of shutting down because of high production costs, then buying RECs from that plant does not directly cause additional renewable energy facilities to be built.

In Massachusetts, the best indicator of how much a purchase will contribute directly to the development of more renewable energy is the percentage of the product that is classified as new. The 1997 Massachusetts legislation that restructured the electricity industry made it useful for consumers to purchase RECs from facilities that began operating during or after 1998. The legislation defined these facilities as new and set up a mechanism, called the Renewable Portfolio Standard, which requires all electricity suppliers to get a gradually increasing percentage of the electricity they sell from these new renewable energy facilities. For this reason, there will be a gradually increasing demand for new RECs. This increasing demand should lead to the construction of additional renewable energy facilities.

When a consumer purchases new RECs, this effectively retires these RECs and therefore even further increases the demand for new RECs. Because these RECs have been taken out of circulation, electricity suppliers can’t use these same RECs to fulfill their legal obligation under the Renewable Portfolio Standard to include new renewables in the electricity they sell. They then need to get RECs from other renewable energy facilities. Theoretically, this should cause even more renewable energy facilities to be built than the Renewable Portfolio Standard requires.

Currently, because of a shortage of renewable energy generating facilities, energy suppliers are having difficulty obtaining a sufficient supply of new RECs to meet their obligations under the Renewable Portfolio Standard. In a situation like this, the Renewable Portfolio Standards law requires them to make an Alternative Compliance Payment which will be used by the Commonwealth to help develop renewable energy facilities. Because of the difficulty of siting and financing renewable energy power plants, it is hard to know how soon the situation will change and it impossible to guarantee that additional renewable energy facilities will be built because of any consumer’s renewable electricity purchases. Yet, at a minimum, a consumer’s purchase of new RECs increases the amount of money the Commonwealth will have to spend through the Alternative Compliance Payment fund. The purchase of new RECs remains considerably more likely to lead to increased renewable energy generation than “old” RECs. Consumers should therefore consider the percentage of new RECs in the renewable electricity products they consider purchasing.

In addition to the percentage of new RECs, there can be other ways in which a renewable electricity purchase can influence the overall supply of renewable energy. For example, a clean electricity supplier may guarantee it will add additional renewable energy facilities once it sells a certain quantity of RECs. Or a supplier may be able to show that the RECs it is selling come from an older facility that would shut down if it did not receive income from the sale of RECs.

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