Upfront: Power to the people
by Peter Seidman | Posted: Friday, May 17, 2013 9:00 am
The Marin Energy Authority this month approved a plan that takes the concept of local clean-electricity generation and marries it to public power.
That's one of the enticing goals the founders of Marin Clean Energy (MCE) envisioned: the possibility that MCE could own clean and renewable power projects within its geographical jurisdiction. Marin Clean Energy customers would own the power-generating facilities, which could assure stable rates and true green energy. Unlike investor-owned utilities such as PG&E, no shareholders would be knocking at the door demanding a chunky dividend. Revenue generated above the cost of supply could be funneled toward local green projects. That could increase the supply of clean, renewable energy and also boost the local economy.
When the board of the Marin Energy Authority voted in the first week of May to set aside a portion of revenue MCE generates and put it in a "local renewable development fund," the move made real the dream of the founders who created Marin Clean Energy. It's not an end-all proposition. But it's a start that's getting out of the blocks in a way that could and should spur increased purchase of the MCE product known as Deep Green.
The Marin Energy Authority is the joint powers agency that administers Marin Clean Energy, which was created after the state Legislature approved a plan that allows cities and counties to join and purchase power from any provider they choose in an arrangement called community aggregation.
Marin Clean Energy offers two power plans. One, Light Green, delivers electricity that is 50-percent renewable. For a relatively small added charge, customers can receive electricity that is 100-percent renewable. Currently about 2 percent of MCE's 92,000 customers are receiving the Deep Green product. That's about the industry average, according to Jamie Tuckey, the MCE communications director.
That's a drop from the 8 percent of MCE customers who had signed up for the Deep Green product. But the higher percentage came earlier in the sign-up process from customers who got on board the clean-energy train early, before a big second-phase rollout. In addition, Deep Green customers could start receiving the product before a general admission procedure. That stimulated the Deep Green program early because the motivated customers generally favored the 100-percent clean portfolio. The percentage dropped when Marin Clean Energy increased its enrollment and spread out in the county in a second phase of enrolling customers.
The opt-out procedure mandated by the state legislation led to strong criticism aimed mistakenly at Marin Clean Energy. Another criticism, which remains emblazoned in the minds of staunch critics, centers on the definition of clean energy.
MCE's Light Green energy portfolio includes about 27 percent of renewable power generation. Using renewable energy certificates brings the total to over 50 percent. The MCE Deep Green product, including renewable energy certificates, (RECs) is all renewable. The ultimate goal aims to provide 100 percent renewable to all MCE customers.
Renewable Energy Certificates are part of a nationwide strategy to stimulate the renewable market. When a wind farm, for example, produces 1 megawatt-hour of renewable energy, it gets one renewable energy credit (REC). That's called a bundled REC. The wind farm can sell the energy along with the one REC. The REC proves that the energy was produced from a renewable source. The RECs can be sold along with the energy or decoupled and sold separately as an unbundled REC, which can be a tradable commodity. Once they are bought and put into an agency's renewable portfolio, the RECs are retired and can no longer be bought or sold. Marin Clean Energy renewable credit transfers are administered through a clearinghouse for renewable energy transactions and tracking called the Western Renewable Energy Generation Information system. Green-e, a recognized independent nonprofit, certifies the renewable energy certificates.
Although some clean-energy proponents view RECs as a hindrance to the proliferation of clean energy faculties, the RECs serve as a transition, albeit one that has yet to be proved in the long run. The Environmental Protection Agency notes that RECs have played an important role in stimulating clean energy across the country.
When Marin Clean Energy was in its nascent stage, critics continually charged that the dream of providing local clean power was just that, a dream. But projects like the solar project at the airport in San Rafael show that local generation is indeed possible.
The local development fund takes the concept more than a step further. "We've had a lot of skepticism about local projects," says Tuckey. "It's taken a while, but [last week] we had a three-year anniversary of supplying power to customers, and we're excited about [the local renewable development idea]."
Marin Clean Energy Deep Green customers pay about $5 more per month for their 100-percent green energy product. In 2012, the Deep Green program yielded revenues of $103,073. The Marin Energy Authority voted to take about half that amount for the renewable development fund. The revenue from Deep Green is expected to increase as MCE rolls out its programs in Richmond, and that could mean more annual money for the fund. Marin Clean Energy will start signing up about 30,000 new customers there in July. MCE has sent opt-out notices. And as in Marin, Richmond customers who choose to sign up for the Deep Green product can join MCE before the general admission date.
The Marin Energy Authority vote authorizes taking $52,000 of 2102 Deep Green revenue and using it to pay for what are called pre-development costs for local clean power facilities. Marin Clean Energy staff has identified a number of potential sites that could accommodate solar power generation. They range in size from 250 kilowatts to 1 megawatt.
The local generation projects that currently supply power to MCE are owned and operated by third party entities. The first local facility that Marin Clean Energy would most likely add to its energy production mix will be at the Port of Richmond. Solar panels installed on the roof of a building and a carport shade structure that would house solar panels are two possible sites. The Port of Richmond project would produce 1 megawatt of power and cost between $3 million and $5 million. It could eventually expand to produce 5 megawatts. Also on the possibility list are two sites Golden Gate Transit owns in Marin.
According to a staff report, revenue from 2012 Deep Green will go toward paying $5,000 to $15,000 for environmental review, $5,000 to $15,000 for permitting, $5,000 to $15,000 for design and engineering, $500 for an "interconnection application," and an amount to be determined for "securing site control."
The Energy Authority can deposit money in the development fund thanks to advantageous purchasing markets for the Deep Green product. "Revenues generated by Deep Green are above what's needed to cover the cost," says Damon Connolly, San Rafael city councilman and chairman of the Energy Authority board. "We see the fund as a way to take a beginning step on a program that we hope will grow over time."
Money in the development fund will cover only pre-development costs. Money for actual construction will come from a variety of sources best applied to individual projects as they emerge from the program drawing board. In most cases the Energy Authority will not own the projects initially. A better arrangement for the Energy Authority involves entering into what's called a power purchase agreement or a municipal lease structure. Power purchase companies and lease companies can take advantage of tax benefits for which the Energy Authority doesn't qualify. After the tax benefits accrue, usually in six to seven years, the projects could be transferred to the Energy Authority. That cost would be lower than the Energy Authority could get using traditional debt financing. To build a solar facility, the Energy Authority also could use a bank loan or revenue bond.
It's a rather Byzantine financial process that would result in simple end result: Marin Clean Energy customers would own clean-energy facilities and receive clean energy at stable rates in the control of MCE.
The Energy Authority's Integrated Resource Plan calls for what staff categorizes as "an ambitious target" for deploying about 14 megawatts of new distributed solar capacity by 2019. So far all the local clean power projects contemplated are solar. The Energy Authority has a goal of adding a total of 21 megawatts of solar projects by 2021. That amount of solar generation would bring the total of locally produced power, including power generated from Energy Authority-owned projects, to 7.8 percent of the total load.
The percentages could go higher. The limit depends on the number of real estate parcels and rooftops and other installation sites that can accommodate solar project development in Marin and in Richmond.
It also depends on the enthusiasm of MCE customers. "The numbers are a conservative minimum from our Integrated Resource Plan, which gives us a very conservative view of what market conditions will be like," says Dawn Weisz, the authority's executive officer. "We certainly will endeavor to have a much higher percentage of local renewable, subject to market conditions and subject to customer participation in our Deep Green program. The more Deep Green customers we have, the more buildout we can have."
The plan to establish a local renewable development fund should provide an answer to critics who have said Marin Clean Energy couldn't produce local power. Although the starting percentages aren't huge, if Marin residents, and Richmond residents, want to increase the amount of clean power they receive, here's the opportunity, says Connolly. All they have to do is sign up for the MCE Deep Green program and half of the Deep Green revenue goes toward local renewable projects.
In Marin, where environmental protection and judicious use of resources is an abundant philosophy (or at least it used to be) MCE now offers a concrete way to participate in a nonambiguous local clean-energy plan. In addition to stimulating local clean energy, the renewable fund also stimulates a public power paradigm in which customers own the generation facilities. And Marin Clean Energy can reap the financial benefits of owning the facilities, benefits such as depreciating a power project capital asset. And MCE can take excess revenue and plow it back into the field.
The question will be whether Marin residents and Richmond residents think the environmental benefits and advantages of publically owned facilities are worth $5 a month, a little more than a gallon of gas.
As Marin Clean Energy rolls out its energy products in Richmond, the agency is embarking on a marketing campaign using its website and also through social media. According to a staff report, "Establishing a local renewable development fund tied to the ongoing Deep Green program revenues would create a mechanism for customers to directly support [Energy Authority-owned] local renewable projects and formalize the link between the Deep Green customer base and local [Energy Authority-owned] project development." The staff report also recognizes that creating local projects could beget more projects: "Visibility and interest in local renewable projects is likely to stimulate additional Deep Green customer enrollments and thereby provide support for even more local projects in the future."
In addition to using the Marin Clean Energy website and social media in a marketing push, "we also might do an advertising campaign," says Tuckey. MCE also will follow the advice of its staff and "let customers know that when they sign up for Deep Green they're supporting the plans for local projects."
Connolly says there's "a real potential" to cast the renewable development program as a milestone in the life of Marin Clean energy.
Now it's up to MCE customers in Marin and Richmond.
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