You are shopping for great electricity rates but you also want to help the environment. The good news is that there is a wide selection of renewable electricity plans available from which to choose. As previously discussed in this blog, most electricity plans use renewable energy certificates (RECs) as the basis for their renewable energy content claims. However, how can retail electricity customers know they are getting what they are paying for?
Renewable Energy Markets
There are two broad classifications of renewable energy markets in the United States. The first is the compliance market where electricity retailers are required to purchase and retire RECs to meet regulatory obligations. Most states have Renewable Portfolio Standards (RPS) that specify how many RECs a retailer must purchase and retire. The RPS for each state is different but the requirements are formula-based depending on the amount of electricity sold to customers. REC tracking systems, or registries, verify electricity supplier compliance with RPS obligations. These systems verify that RECs are only retired once by assigning a unique serial number to each REC. In the US, there are nine different tracking systems.
The other primary REC market classification is the voluntary market. In voluntary markets, retail electric suppliers purchase RECs to meet their renewable content obligations to customers as opposed to state regulators. This is where things get a little tricky. Retail electric providers periodically tally up how many RECs they need to buy to satisfy their product claims. The tabulation factors in actual customer usage and the percentage of renewable energy content represented in the electricity plan. The energy supplier then goes to the market and purchases a sufficient number of RECs to meet their obligations. These voluntary RECs are usually transferred and retired though the same tracking systems used for compliance RECs. The problem is there is a lack of transparency to the customer.
Proving Renewable Energy Claims
A retail electric supplier could purport that a product had 100% renewable energy content, charge the customer a premium, and then never purchase and retire RECs to make the product green. Of course, that would be a foolish practice and the electricity provider would be subject to severe regulatory penalties as well as damage to their brand. However, most state regulators do not audit retail electric providers to verify renewable content claims.
One means of giving retail electric customers confidence in renewable energy plans is a third-party audit. Some retail electric providers hire independent auditors to verify that their REC transactions support their renewable energy plans. While the details of the audit contain confidential and proprietary information, some electricity providers will provide customers with a copy of the independent auditor’s opinion that accompanies the audit. This opinion states whether the auditor believes the supplier’s renewable energy claims are valid.
Another option for establishing credibility with renewable energy customers is participation in a recognized renewable energy product certification program. Several independent programs exist for purposes of audit and verification. However, Green-e is the leading voluntary certification program in North America. Green-e currently certifies over 75% of the voluntary REC market. The RECs certified by Green-e go through a verification process to make sure they 1) are from new renewable energy sources built for the voluntary market; 2) have not been double-counted; and 3) have not been used to meet a state’s RPS goal. Providers of Green-e certified products undergo an annual verification audit to document that their supply meets their sales in both quantity and type.
If you have questions about your retail electricity supplier’s renewable energy plans, contact them and inquire if their product is Green-e certified or if they use independent auditors to support their claims. You may find that smaller retail electricity providers do not take these additional steps to certify their product claims. However, keep in mind that the consequences of misleading customers are sufficiently severe to keep them honest.