I do not want to alarm you, but in case you haven’t heard, the globe is hurtling towards a future of a severely warmed climate (ok, I admit, that was meant to alarm you). Here in the US it is pretty clear that each individual is going to have to take action on their own to help lower the chances of disaster.
According to the EPA, the transportation and the electricity production sectors are about tied as the two largest sources of emissions in the US, representing almost 60% of emissions. The root cause of the problem is fossil fuels power those sectors. For example, approximately 68 percent of our electricity comes from burning fossil fuels, mostly coal and natural gas.
If you are going to prioritize your actions based on where emissions are coming from, you’d want to start with either the electricity to power your home or the emissions coming from your tail pipe.
If you want to tackle the emissions associated with powering your home, there are a few choices for switching to renewable energy. The one most people think of is getting solar panels installed on your roof. I have also read about small scale wind turbines for individual homes. Finally, geothermal is another expensive option that involves a backhoe and digging up your lawn.
Or, in many states in the US you can switch to 100% renewable energy with the click of a button. Before I tell you more, let’s talk about what is powering the electricity in your home now.
IS YOUR IPHONE CHARGING WITH COAL?
The overwhelming majority of households in the US get their electricity from a local utility. According to the US Energy Information Agency (part of the Department of Energy), 87% of residential electricity customers used their local utility to power their homes.
These companies generate electricity and then deliver that energy to your home over a complex system called the power grid, or the “grid.” If this describes your household, it means you are likely powering your home with mostly dirty energy. In the US, on average, natural gas is the most used fuel, representing 35% of the total, followed very closely by coal at 28%. Less than 10% of your energy likely comes from renewable energy (assuming your state is around the national average).
A few years ago I stumbled upon a Washington DC government web page that listed the fuel mix used to generate my electricity delivered by the local utility, Pepco. I was shocked that the largest source of my electricity was coal! Coal usage was five times larger than the use of renewable energy.
GOING GREEN IN DEREGULATED ELECTRICITY MARKETS
There is a different model in many states for getting your electricity. The one described above, where you get your electricity from the local utility is the default model. The same company that generates the electricity also delivers your electricity.
If you live in a state with a deregulated energy market (see map below, or here courtesy of the American Coalition of Competitive Energy Producers), you can decouple that arrangement. You can choose a different company to generate your electricity and your local utility will handle the delivery of electricity.
These electricity programs go by a few different names – retail choice markets, energy choice markets, and customer choice. But they are all essentially the same thing.
In most states, the local utility is a monopoly and is the only show in town for keeping your lights on. In a deregulated market, the local utility still owns the “poles and wires” and you still pay them to deliver the power. However, customers can choose their electricity supplier and there is open competition in the market among companies vying for your dollars.
As an example, if you look at my electricity bill below, you can see that I have charges from my local utility and my supplier since I have decoupled the two. The supplier charges, from the company generating electricity from 100% local wind power, is a separate charge on my bill.
HOW DO I SWITCH TO RENEWABLE ENERGY?
Unfortunately, since each state is regulated by different entities, it’s kind of the wild, wild West out there. If you search for “switching to green energy” on Google you get tons of results, but many of them are companies selling electricity. When you put in your zip code, you don’t get a comprehensive list of providers, only the ones paying Google to get listed first on a search.
Here is my step-by-step suggestion for how to switch:
STEP 1: IS YOUR STATE DEREGULATED?
Go to the American Coalition of Competitive Energy Suppliers state page and look up your state.
STEP 2: SHOP FOR A ELECTRICITY SUPPLIER
If you state is deregulated, there will be links to a electricity shopping site, or like in Washington DC (where I live), there will be a link to a list of certified electricity suppliers or to your public utility commission, the entity that regulates your electricity market.
For Washington DC, the public utility commission provides a PDF of all the electricity providers, their rates, the terms of the contract, among other helpful info. Here is an example of what the electricity supplier shopping site looks like for Ohio. It is well done, you can choose various filters, including the percentage of renewable energy.
STEP 3: HOW MUCH DO YOU PAY AND HOW MUCH ENERGY DO YOU USE NOW
It will be helpful to know your current electricity rate and how many kilowatts hours you typically consume. The easiest way to do this is to have a recent electricity bill handy.
On my electricity bill below, the rate I would pay if I didn’t choose renewable energy is helpfully highlighted. The bill also has my energy usage for the month as well as historical usage over the last two years (not pictured).
STEP 4: SHOP FOR THE BEST DEAL (PRICE VS. ENVIRONMENTAL SUSTAINABILITY)
Now that you know your current usage and rate, you can shop around and find the best deal for your household. One thing you will immediately notice is that the renewable energy options are more expensive than the standard electricity rate.
However, there are many options and you can choose what works best for you. Many companies offer partial plans where a certain percentage of your energy is from renewable sources, like 50% renewable and 50% non-renewable.
There are also some plans that involve a contract where you agree to buy energy from the company for a period of time, such as a year, two years, or whatever. Sometimes the longer contracts will offer lower rates.
In the Washington DC area, there are plenty of options. I choose WGL’s “CleanSteps WindPower” program. It consists of electricity generated from regional wind farms in states such as Pennsylvania and West Virginia. I pay about 3-4 cents more per kilowatt of electricity for this plan. This is one of the more expensive plans offered but I like the idea of supporting wind power close to my house.
STEP 5: SIGN UP (BUT BUYER BEWARE)
Signing up to switch your electricity supplier is really easy, literally as easy as (WARNING: shameless plug alert) buying fantastic, thoroughly tested and helpfully reviewed sustainable products made from recycled material on the web (sorry, couldn’t help myself, but we do need more people buying recycled products in this world).
My experience is that once you find the company and the plan you want, you just go to that company’s website and sign up. It is good to have your most recent electricity bill handy as I believe you’ll need some info from it.
Here is the hardest part, not because it is actually hard but because it is annoying. You need to read the terms and conditions. No one likes to read those things, including me. But see my Buyer Beware section below, the bottomline is you are signing a contract and you want to make sure you are not agreeing to something unawares.
At the very least you’ll want to pay attention to:
- price and whether it changes after a period of time (i.e., a teaser rate),
- the length of time you are obligated to purchase electricity from the company
- early cancellation fees or any other fees
- Whether you are agreeing to be auto-renewed into another contract at the end of the period (e.g., you get signed up for another year, or whatever length of time, automatically)
I’m guessing there might be some variability to the process across states, so you might need to do a little research. Starting on your local utility commission or consumer protection counsel might be a good place to look if you need more info. I’m assuming my experience is more typical though if a state has deregulated. Companies competing for your business have a strong incentive to make changing suppliers seamless.
STEP 6 (OPTIONAL): REVISIT THE DECISION LATER
If you want to ensure that you are getting the best deal, set a reminder on your smartphone to revisit your electricity supplier and shop around again later in the year. If you are signing a contract for a year or six months or whatever, set your reminder for a few weeks before the contract runs out. Definitely do this if your rate changes after a set period of time, such as if you get a price guarantee for a year (which is common).
If you want to avoid this hassle, then try to sign up for a plan that doesn’t have a variable rate. Then you can skip this step, assuming you are comfortable with the rate you are paying.
A REAL WORLD EXAMPLE OF HOW THIS WORKS
As mentioned, I get 100% wind power purchased from regional wind farms. I pay about 3-4 cents more per kilowatt hour of energy than I otherwise would. What impact does this have on my wallet?
Over the last 24 billing periods, our house has consumed about 360 kilowatt hours of electricity per month, on average. According to my local utility’s website, we consume less energy than the average household, so your number might be higher.
We live in a smallish house in the city, about 1200 to 1500 square feet in size, and we are working hard to improve the environmental sustainability of our house. For instance, we have outfitted all the lights with high efficiency bulbs (mostly LED). Also, I have a charming (I like to think) propensity to walk through the house turning off lights and I generally prefer a darker house (I could be part Vampire, don’t know, haven’t taken one of those family DNA tests yet). When the weather is nice, I also hang dry our wash, so that might make a dent in our electricity usage as well.
Buying renewable energy has increased my bill by an average of about $13 per month over the last two years (about a 25% premium). If you look at the chart below, you’ll notice in the early months of last year my bill was much higher than the regular, dirty fuel rate I would have paid. That is because I learned the hard way and didn’t follow my own advice above (frankly I didn’t know better). I got hit with a price increase after signing up for a low teaser rate. It took me a few months to figure it out.
If you exclude those early months and only count the months when I was on my current plan (100% local wind energy), then I’ve paid about $7 more per month for renewable energy (or about a 15% premium).
In my region, specifically in the state of Maryland (and also in Massachusetts) there was some controversy about deregulated electricity markets. Studies found that on average, people who had switched their energy supplier paid more for electricity as compared to the base rate. The study in Maryland excluded renewable energy suppliers, so this was people signing up for regular electricity but paying more over time.
These studies found that some of the energy suppliers employed unscrupulous business practices to drive up their revenues. The studies also found that low income households were more likely to pay more for their electricity and that some companies were targeting low income areas, many with deceptive practices that seemed to trick people into signing up for bad deals.
To add insult to injury, in Maryland many of the low income households who were paying over 50% more for their electricity received support from the government to pay their bills. Basically transferring government funds to companies with unethical business practices.
According to the Maryland study, some states such as Ohio, New York, and Pennsylvania have restricted electric choice for their low-income customers. Some states have designed programs that guarantee rates lower than the base rate offered by the local utility.
The bottomline is you need to be a little careful out there. As with anything, due diligence is in order when signing a contract. I won’t get into the policy debate here, but it also seems like the deregulation market needs some government oversight to rein in misleading practices.
Lastly, when shopping around, you should pay attention to whether the company offers certified renewable energy. The company I use, WGL, is certified by a nationally recognized program called Green-e Energy Certification. Read on if you want to learn more about why this is necessary, or just trust me and look for some type of certification that the energy you are buying is actually from clean, renewable sources.
IS RENEWABLE ENERGY NOW DELIVERED STRAIGHT TO MY HOUSE?
After you make the change to renewable energy you might wonder, “I don’t see any wind turbines near my house, where is my renewable energy being generated, and how does it get to my house?”
The answer is: it doesn’t.
When you sign up for renewable energy in a deregulated market, more than likely you are signing up for Renewable Energy Credits, or RECs (see the helpful video below from the EPA).
When you get electricity from the power grid, you are getting energy from a mix of energy sources, fossil fuels, renewable energy, and nuclear energy, for instance. There is no way to deliver only renewable energy to your house, unless of course you produce it yourself using solar panels, wind turbines, or a geothermal system.
You can think about the power grid as a big ole’ bathtub with multiple faucets to choose from, the coal faucet, the nuclear faucet, the renewable energy faucet, etc. All those flows mix together. When you choose renewable energy, you are opening up that renewable energy faucet and adding it to the mix.
Owners of renewable energy generation systems get a REC for every megawatt of energy they produce and add to the power grid. To carry the analogy forward, they get credit for turning on the renewable energy faucet and adding clean energy to our bathtub of energy. Owners can sell those RECs to people or organizations that want credit for “using” renewable energy.
Many states have requirements for how much renewable energy has to be used in their state, this creates value for RECs and thus a market for buying and selling renewable energy. There are elaborate tracking systems for assigning tracking numbers for RECs, basically putting an ID on each megawatt of renewable energy that is created. When you buy a REC and thus claim that megawatt of renewable energy it is “retired” so it is only used once.
Buying renewable energy builds demand for more renewable energy generation across the country. As demand grows, companies step in to build more solar panel farms, more wind turbines, and less dirty energy. Not only does this drive more renewable energy capacity, it will also drive down prices (eventually), making renewable energy more competitive with dirty sources like coal. (Note to all you economists out there: I realize this is a ridiculously simplified model of how it works, so forgive me…comments welcome below, but be gentle, it has been a few years since my Microeconomics classes in grad school).
Unfortunately, this story gets more complicated. The risk is that some unscrupulous companies are trying to sell the same REC to multiple people.
RECs that are certified by third parties help ensure that energy isn’t being double-counted and that it is really from clean sources. These third parties, like the Green-e Certification program I mentioned above, certify that the renewable energy is transparent and accurate. They help track the certified renewable energy from generation to retirement to ensure individuals and businesses are getting exactly what they paid for.
Frankly I have no idea how prevalent “fake” renewable energy is in the market (future blog post maybe?). But my perspective is, if I am going to the trouble to pay more for renewable energy, I want to make sure it isn’t fake. If it means paying an extra cent or two cents per kilowatt, I am ok with that.
If you live in a state with a deregulated energy market you can switch to 100% renewable electric with the click of a button (ok, maybe a few clicks). However, you need to be careful as you shop around to ensure you can afford the change in your electricity rate. You also want to make sure you are switching to a reputable company that is truly producing renewable energy (i.e., has a certification) and avoid shady contracts with lots of hidden fees or other tricky clauses in the contract. By switching to renewable energy you not only help keep our air cleaner and our globe cooler, you build demand for renewable energy, sending signals to the market and eventually resulting in a virtuous cycle that results in a future of more, cheaper renewable energy and less, (eventually more expensive) dirty energy.