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Green electric plans: rip-off or real-deal?
A certificate system ensures the legitimacy of what you’re buying.

Posted by Shane McLaughlin on 04/20/2012 at 8:03 PM

A skeptical commenter on our blog post “Six-month electric-plan prices rise and a look at the green premium” called such plans a “fraud.”
“Bill in Houston” didn’t say why he thought green energy was a fraud, but it did get us thinking. When you’re using electricity there’s no obvious way to tell exactly where it came from. So how would someone know if their power is really green or not?
A green electric plan does not mean the electrons coming to your home all came from renewable energy
It’s a misconception that if you purchase a green electric plan, you are being assured that the energy coming to your home is green energy. That’s not what happens. What you’re doing is paying for energy to be created by green sources.  What you get at home is a mixture of all of the different sources.
User-added image
Imagine the electricity your region uses as a huge lake. Power generating companies make power using various sources: coal plants, wind farms, solar arrays, etc. The electrons created by those sources all flow into the lake as water and get mixed around before retail electric providers sell you gallons of the lake water to power your home.
If you buy a green electric plan, it is likely that most of your electrons are not green electrons. But you are contributing green electrons to the lake that would have otherwise been created by non-green sources.
Understanding Renewable Energy Credits
But how do you know that the renewable energy you think is being produced is really being produced? That’s where Renewable Energy Credits (RECs) come in.
Renewable Energy Credits are used by companies to certify the power that they’re producing and selling comes from renewable sources. It’s like the certificate of authenticity that you’d get when buying a diamond or collectible.
Here’s how the REC is created and used:
  • A green-energy generator, such as a wind farm, applies to Electric Reliability Council of Texas (ERCOT) for certification
  • Once the generator is approved as renewable, the generator installs an electric meter to measure how much power they flow to the grid.
  • ERCOT awards a credit for each megawatt-hour of power produced.
  • The generator then sells those credits to retail electric companies. Once they have enough credits, they’re selling green electricity.
  • Even homeowners or businesses with solar panels can be certified to receive RECs and can sell them to companies that want to buy the credits.
Green plans are (usually, slightly) more expensive
Finally, the question of price: green electric plans are generally more expensive than other plans. The EPA explains why: “It has usually been more expensive than conventional electricity sources, largely due to the relative newness of renewable technologies and their gradual diffusion into mainstream markets, compared with conventional electricity.”
Fortunately, the cost of producing green electric power is falling, as noted by the EPA.  “[T]he cost of green power is continuing to fall as growing demand drives the expansion of manufacturing facilities and reduces production costs.”
So, rip-off or real-deal? It’s up to each consumer to decide if a green energy plan is right for them. But for anyone who’s thinking about signing up for one, now might be a great time to do so. As the  CenterPoint Energy Electric Price Index shows,  the price difference between green and standard fixed- rate plans is very small. For example, the average monthly price of two-year, fixed-rate plans using 100 percent renewable energy is only 35 cents more expensive per month than standard two-year plans.
Shane McLaughlin is a manager in CenterPoint Energy Services and produces the CenterPoint Energy Electric Price Index.

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