Real Renewable Energy vs. Renewable Energy Credits

July 30, 2007

A couple of my friends have recently asked about the new renewable energy credit program that our local electricity utility, DTE Energy, is now offering. One friend asked me about it directly, and another raised the question on the state mailing list for the o2 Network. There was an interesting discussion about the topic on the 02 list, and I’ve included some of the information that other people shared on that list in this article.

In southeast Michigan, the local electricity company is DTE Energy. Although it has (or had) a number of business units exploring all manner of alternative energy production, DTE has been relatively resistive to including any renewable energy in its portfolio. Despite consumer demand for green energy, DTE has no plans to construct anything, and has been very resistive to connecting alternative producers to its grid. (This is the same company that fought against connecting a wind turbine installed at a local middle school from connecting to the grid.)

Looking at the renewable energy credit (REC) program that DTE is offering, there isn’t much to it. DTE is offering now has two options for residential customers. One is a premium of 2 cents per kilowatt-hour (kWh) on all electricity used. The other is to buy RECs in blocks of 100 kWh for $2.50 each (2.5 cents per kWh). These are supposed to come from in-state sources, to the greatest extent possible, but DTE has argued that there aren’t many in-state sources available to them.

Michigan’s Pubic Service Commission "Opinion and Order" (PDF) regarding DTE’s program recognizes the comments and criticism about the program and how much (or how little) it will do to encourage the development of renewable energy production in the state of Michigan.

"The primary criticism of the RRP made in the comments centers on the issue of whether and how much the proposed program will encourage development of in-state or in-service-territory renewable resources. Some of the commenters are of the opinion that procuring RECs alone will not prove sufficient to support the development of in-state renewable resources. Other commenters criticize the company’s proposal because Detroit Edison’s only responsibility will be to act as a broker that buys RECs at one price and sells them at a higher price."

The order from MPSC specifically disallows DTE from providing some out-of-state RECs, and has tried to steer the program toward emphasizing in-state energy production as much as possible. A presentation on the Ann Arbor (MI) website notes that "Importing Energy Means Exporting $$$" and goes on to add that 100% of the coal, 96% of the oil, and 75% of the natural gas used in the state is imported. This amounts to an annual outflow of $18 billion from the state. And this is exactly why Michigan (and the rest of the country, too) needs to develop local, renewable energy resources.

As tepid as the DTE program may seem, it’s the only program that I’m aware of that specifically includes funding development of alternative sources of energy in the state of Michigan. On the positive side, some fraction of the proceeds of the REC program will go toward development of in-state renewable energy. And participation in the program serves to indicate consumer interest in the program and a willingness ot pay a premium for green power.

On the downside, this is a company that has demonstrated very little interest in providing green energy for its customers. I’m not sure how much of an effect my participation in the DTE program is going to have towards actual new development. If I want to buy RECs, there are lots of providers around, and many of them are probably competitive with DTE’s rates. The REC program being offered by DTE is unlikely to do much on its own to spur the development of additional in-state sources of renewable energy.

On the other hand, a renewable energy portfolio standard (RPS) would mandate that a certain percentage of a utility’s power come from renewable sources. But that’s a whole further step, and something that some states have, but which the state of Michigan still lacks.

Right now, I’m not signed up with the new DTE program, and I’m not hurrying to do so. Once the portfolio of providers is available, I’ll re-evaluate. And in the meantime, I’m looking for another REC provider that supports renewable energy in-state.