Unwinding the Logic of Green Power in Texas

Michael Giberson

In addition to the wind energy developments that Lynne noted a few days ago, in Texas the Public Utility Commission is working to implement changes to that state’s renewable energy law. The Houston Chronicle reports that a battle has broken out over how to count mandatory and voluntary purchases of renewable energy for purposes of determining whether utilities in the state are satisfying renewable energy requirements.

Some of the battle is over interpretation of Texas Senate Bill 20, passed last year, which increased requirements for purchase of renewable energy. I have no particular expertise in interpreting Texas law, so I won’t venture an opinion on what the law does or does not require. I do, however, have a passing familiarity with the requirements of logic, and it was a matter of logic that caught my eye while reading the Chronicle story. To wit, consider:

Reliant’s position could limit the development of renewable energy sources in Texas, forcing those who want to buy clean energy voluntarily to look outside the state, according to comments from the EPA filed with the PUC.

According to the story, Reliant Energy is of the view that voluntary and mandatory purchases should be added together to determine whether or not the state’s energy consumers are paying for enough renewable energy to meet state goals. This perspective makes some sense — if the requirement is for X amount of renewable energy to be produced in the state, and consumers voluntarily purchase amount Y, then the remaining “mandatory” purchase should be X – Y.

Opponents of this view assert that only mandatory purchases should be counted toward meeting state requirements. This position also makes some sense. After all, “voluntary” implies doing something beyond or other than what is required, right?

But, and here is where the logic thing comes in, I couldn’t see how Reliant’s position would force “those who want to buy clean energy voluntarily” to look outside the state. Other comments suggested that a policy of adding mandatory and voluntary purchases together would make it harder for consumers to voluntarily buy renewable energy. Neither of these positions seemed logical to me, at least at first.

After digging the EPA comments out of the Texas PUC’s website (PDF version), the first of the two positions began to make sense, at least in a certain kind of bureaucratic/regulatory fashion. As the EPA comments explain, if Texas begins to add mandatory and voluntary purchases together when determining whether renewable energy purchases in the state meet state requirements, then the voluntary purchases would no longer meet the requirements of the EPA’s Green Power Partnership. After all, EPA doesn’t want to grant you the added PR value, if any, of their green blessing, unless you are going above and beyond what is required. If Texas changes its rules, EPA explained in its comments, the 200 or so Texas organizations participating in the Green Power Partnership would have to buy renewable energy credits out of state to continue in the program. So, the rule change wouldn’t actually force people wanting to “buy clean energy voluntarily” to shop outside state, but they would have to shop outside the state to stay in the EPA program.

On the other hand, consumers wanting to buy renewable voluntarily but not caring about the EPA’s blessing would find it cheaper to get what they want under the “add ’em up” approach. Adding would reduce the amount of mandatory utility purchases, which should bring down the renewable premium paid. If that causes the EPA to withdraw its blessing from Texas renewable energy credits, and some Green Power Partners in Texas switch to supporting out-of-state renewables, so much the better for the voluntarist. After all, the cheaper it is for clean energy consumers to buy clean power, the more that resources will be left over to devote to recycling, or saving whales, or other goals.

7 thoughts on “Unwinding the Logic of Green Power in Texas

  1. Mike,

    Texas has air quality problems. The government is not ready to require utilities to fully address that, but the Texas legislature did set up a market based system whereby utilities must buy a small percentage (about 4% by 2015) of renewable energy, thus diversifying our energy supply with cleaner, home-grown electricity.

    Since then, some utilities have bought more wind power than required, perhaps because they realized it was a good value (like TXU and Xcel) and that their customers want it (Austin Energy). The irony is that many of Austin Energy’s customers who locked into the 10-year fixed rate for wind – higher than the fossil fuel rate at the time of their initial purchase – are now paying less. Natural gas prices – not the renewable energy program – bear more responsibility for Texas’ electricity rate hikes.

    So as to your question about adding the voluntary to the mandatory purchases – customers are willing to pay more for green power because they believe they are contributing to MORE clean electricity generation than would be built if they made no voluntary purchase.

    This is a customer protection issue.

    Customers who are concerned about pollution from power plants should be able to take an action above and beyond, and know that their purchae means something. Buying Texas renewable energy – which can have a positive effect on local pollution problems – is one option citizens should have. The current system for tracking those renewable attributes – Texas renewable energy credits – works well, and is a nationally recognized and respected program. Why mess with that?

  2. I agree that there is a certain amount of logic to saying that only mandatory purchases should count to the legal requirement, and that “voluntary” purchases should be considered as efforts to go beyond the state requirement.

    But also I think it very easy to get unmoored from the goal of creating programs that provide public benefits, and into entrenching the use of governmental authority to force support of private interests. Take wind energy, for instance, since it is a big part of the debate in Texas: while wind power has pollution avoidance benefits relative to fossil fuel generation, there is little way through these sorts of state mandates to link whatever spillover public benefits are created to the costs of obtaining those benefits.

    I like the “customer protection issue” argument raised by Susan Williams Sloan, it is clever. But I don’t buy it. It only looks at the customers that are willing to pay more for green power and it ignores the wishes of the customers who would rather pay less for power even if it isn’t so green. If “customer protection” is your goal, then we should (1) abandon renewable power purchase mandates, (2) allow consumers to contract with the suppliers of their choice – green or not, (3) protect against fraud and misrepresentation, and (4) protect consumers by enforcing those contracts.

    There is an environmental side to customer protection, and a range of environmental policy choices to deal with them. Another goal of these kinds of renewable energy policies is to stimulate research, development and deployment of technology. I don’t oppose government efforts in support of these goals, but “research and development” support shouldn’t mean “endless subsidies.”

    (I admit the pleasing irony of low prices for Austin Energy customers that subscribed to 10-year wind power contracts, but a few people getting lucky doesn’t really have much bearing on the larger policy issue.)

  3. Reliant’s goal is that, if someone buys and retires a renewable energy credit voluntarily, that reduces the amount of renewable energy REPs will be required to purchase. In effect, instead of increasing the amount of renewable energy used in Texas, someone retiring a credit will simply be giving a gift, in the form of reduced requirements, to the REPs.

    EPA’s decertification would simply recognize that buying RECs would no longer represent actual increases in the amount of green power used. This isn’t some sort of bureaucratic game by the EPA, it is a recognition of what the RECs actually represent – under the current program, consumer purchases and retirement of RECs represent actual additional production of green power above and beyond the mandated amount, while under Reliant’s alternative, they represent ‘points’ for the REPs toward that mandate, with no connection to actual output of green power above and beyond that mandate.

  4. The Reliant position leaves off the %10 overproduction requirement of total power (for reliablity reason). In other words, the amount of power consumed by the state is “T.” The PUCT requires T * 1.10 to be able to be produced to cover spikes and other jumps in the production.
    So the state should count the production seperate from the voluntarily consumed power until the production is greater than the overproduction. If the state wind production produces more than the 110% there is a good reason for doing what Reliant suggest. Until then no.

  5. I don’t think we want to get renewable power mandates mixed up with reliability plans in the way John suggests. Actually, I guess I’m not clear on what the suggestion is, how would you “count the production separate from the voluntarily consumed power until the production is greater than the overproduction.” Maybe explain it to me again in other words.

  6. I don’t think we want to get renewable power mandates mixed up with reliability plans in the way John suggests. Actually, I guess I’m not clear on what the suggestion is, how would you “count the production separate from the voluntarily consumed power until the production is greater than the overproduction.” Maybe explain it to me again in other words.

  7. Until we have enough capacity for wind power to power every bit of consumption plus 10% it does not make sense to count the “voluntarily consumed power” being from anywhere but from intra-state sources. Interstate consumed power from Texas to other states or Mexico should be added to the mandate as well. It does not make sense to import our power needs from other states with our amount of resources we have. Develop what we have!

    Think of it like this: sell oil to the OPEC nations, why because it make it “cheaper” for the rest of us to use. It does not make sense. We have been called the “Saudi Arabia of wind.” All we have to do is make the “wells” or in this case turbines.

    Second, it would build upon the mandate requirement until the power is exportable. Just as the EPA is saying we should do – treat the mandate as a floor, not a ceiling. However, because wind power, on average, only is 30% of its nameplate power other types of renewables can be used to fill the gap. Once every type renewable can cover the 110% production then the amount of fossil fuel being used will drop to a minimum. This would add to the reliability by having diverse ways to power the grid instead of the 80+% fossil fuels we currently have. If any major cutoff happens, which has happen before with gasoline, the grid will still be able to work.

    We should not just try to power the homes and businesses in Texas, we should power more than that with the renewable resources we have.

    By cutting the mandate, as Reliant suggest, the reliability of the grid is hurt because of the lack of diverse power.

    Third, wind is, currently, the cheapest type of power when all economic cost are counted. Solar, will take winds place someday.

    Forth, remember the task of the PUCT is to make reliable power which consumers can afford. As more wind power is brought “online” the cheaper wind power becomes. That is what the mandate is about. The same is true with solar, however there is no real mandate to bring it online.


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