What is a Green Power Plan? How It’s Different Than The City of Chicago’s “no-coal” Provision

Green Power Plans are those electricity plans that you can select as a customer so that all of your electricity is produced by electrical plants that use renewable energy. Renewable energy is broadly defined to include solar power, wind power, and hydro-power. There is not a universally accepted definition of what is “green energy”. Some at one extreme contend that land-fill gas and nuclear energy should be considered as “green power”, and others at the other extreme that contend that only certain types of hydro-power should be considered “green”. Their argument is that large hydro-electric dams cause significant environment damage to the surrounding areas, and only run-of-river or tidal generation that does not damage the surrounding environment should be considered. For the sake simplicity, and for drawing a line in the sand, we’ll consider solar power, wind power, conventional hydro and landfill gas as “green” for this article. (Since I live in Illinois where conventional hydro and landfill gas account for 0.1% and 0.3% of our electricity generation, I’m not being very contentious.) I’ll get back to this point a little later in this article.

What does it mean to select a Green Power Plan?  First, let’s being by dispelling one of the largest myths related to being on a Green Power Plan – it does not mean that the electricity you use is only being produced by green power sources. There is a single electrical grid that carries all the electricity from all the places it is being generated, whether from a coal plant or a wind farm, to all the places where it is being used. Since the electrons are all being carried over the same wires, it is impossible to direct the “traffic” from one power plant in one direction and those from another power plant in another direction. You know those electrons – they just go where they want to go. (See my article about “Getting to Know Integrys Energy” for more details) So, when you are on a Green Power Plan, you are getting the exact same mix of electricity as your neighbor (give or take a couple electrons).

If there is no difference in the electricity you receive, why would you ever choose a Green Power Plan?  When you choose a Green Power Plan, you are paying for more green energy to produced, even though you may not be getting the electrons that are produced by that green energy power plant directly. The way your electricity supply does that is by purchasing Renewable Energy Certificates, or RECs on your behalf, and retiring them, so that your electricity can be called “green”.

RECs, SRECs, and TRECs

So, what are Renewable Energy Certificates?  Renewable Energy Certificates, or RECs, are the “green” attributes associated with the electricity that is being produced.  When a coal power plant produces electricity, it only produces electricity. But, when a wind farm produces electricity, it produces two things – electricity and a Renewable Energy Certificate, since the “fuel” that created the electricity is renewable. The electricity is treated just like all other electricity and goes into the electrical grid. The Renewable Energy Certificate is a separate product that can be sold independently of the electricity. It embodies the “green” attributes of the electricity generation. A REC represents 1000 kWh, or 1 MWh, of electricity produced using a renewable energy source.

In order to make your electricity “green”, you simply need to buy enough of these RECs to cover your entire electricity use, and retire them to claim their “green-ness” for your electricity use. Retiring a REC simply means that you’re not going to sell it to someone else. You could ultimately buy your own RECs to cover your own energy use, but your electrical supplier takes care of all of this for you if you select a Green Power Plan.

So, what’s the difference between a REC and an SREC?  Quite simply, an SREC is a Solar Renewable Energy Certificate.  An SREC is a REC that has been created from a solar energy source.  The reason we end up with SRECs is that in some states, the state requires that a certain amount of the electricity that is produced for the state comes from solar energy.  Since it’s more expensive to produce electricity using solar than other renewable energy, a solar based REC has a special designation as an SREC, and has a higher associated cost.  (Solar RECs in New Jersey are around $80 per SREC, and normal RECs are about $2 per REC.) RECs produced from wind could technically be referred to as WRECs, but the wind RECs are about the same price as all other RECs, so a separate designation doesn’t make sense.

There are also T-RECs. In this case, I don’t mean the friendly little guy below. T-RECs are tradable RECs.  T-RECs are unique to the state of California. In the state of California, the “green attributes” cannot be sold independently from the electricity. The sole exception to this being the use of RECs from outside the state of California to meet a small percentage of the California renewable energy goes.  These RECs that are traded into California are known as T-RECs.

As compared to the City of Chicago’s “no-coal” Provision

How RECs lead to more “green” electricity

How is this different than what the City of Chicago is trying to do with their “no-coal” provision?  The purchase of RECs leads to increased demand for “green” electricity, while the City of Chicago’s provision has little to no impact on which power plants are used to produce electricity.  (I wrote in depth as to mechanisms that is the “no-coal” provision, so please refer to my other article “Getting to know Integrys Energy” from more information.)

Every time someone, like you, chooses a Green Power Plan, there is now slight increase in the demand for RECs.  In the short term, the supply for SRECs is fixed. So, what happens is that every time someone chooses a Green Power Plan, the price of RECs goes up. And once the number of RECs demanded and the price reaches a certain threshold, it becomes economical for someone to build another renewable energy electricity plant. By choosing a Green Power Plan, you’re directly contributing to the construction of more renewable energy!

The Gist

If you’re already on a Green Power Plan (like I am), thank you! You’re helping to make sure we have plenty of renewable energy power plants in the future.  If you’re not yet on a Green Power Plan, take a look at one.  As more renewable energy plants are being built, the difference between “regular” power plans and Green Power Plans is becoming very small.

At the end of the day, it’s all about the democratization of energy. If you want an all solar energy plan, you should be able to choose one. Or, all landfill gas, or all tidal, or all run-of-rive hydro…

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