In Rush to Buy Clean Energy, Coal and Gas Have Hidden Role

Across California, local governments are trying to slow down climate change by starting their own agencies to buy and sell energy. In some cases, though, the green power they buy may be replaced with dirty power.

These government agencies are known as community choice aggregators, or CCAs. Solana Beach is about to start one. San Diego is thinking about forming one, too.

Two of the state’s oldest CCAs are Marin Clean Energy and Sonoma Clean Power. Marin, in particular, is a model for governments across the state hoping to fight climate change and wrest control of the energy market from power monopolies, like San Diego Gas & Electric.

Almost all CCAs start without any power to sell. So, to quickly enter the market, they sign contracts to buy energy from existing projects.

In 2016, Marin and Sonoma bought about 12 percent of their power from the Grant County Public Utility District in central Washington. Grant County owns and operates two hydropower facilities; both are over 50 years old.

About a half-million megawatt hours of electricity from those facilities ended up in Marin and Sonoma, helping both CCAs tout how much greener they were than Pacific Gas & Electric, the utility monopoly in Northern California.

Back in Grant County, the amount of coal and gas used by the utility increased by about a half-million megawatt hours. Grant County seems to have sold off hydropower it needed for its own customers and replaced it with dirtier power.

That makes Marin and Sonoma’s transactions with Grant County look like “a textbook example of resource shuffling,” said Danny Cullenward, an energy economist and lawyer for Near Zero, a group trying to reduce greenhouse gas emissions.

These deals are called “shuffling” because they don’t increase the amount of green energy available and they don’t reduce the amount of greenhouse gases going into the atmosphere.

Right now, Marin claims over 80 percent of its power is carbon-free.

Matthew Freedman, a staff attorney for The Utility Reform Network, has been arguing for more than a year that CCAs are not building new renewable energy projects, known as putting “steel in the ground.” Instead, they are taking credit for green power that already existed but that they pay to call their own. That’s the best-case scenario.

“Look, this isn’t going to do anything,” he said. “You want to know what matters in this market? Getting something new built. If you want to demonstrate superior performance, you have to produce a result.”

The worst-case scenario, Freedman said, is that Washington is exporting so much hydropower to California that coal and gas plants are kicking on to meet the demand.  That’s hard to prove, though.

California power company officials – who are used to seeing Freedman fight against their requests for rate increases – have been quoting him ever since he began talking publicly about CCA resource shuffling. SDG&E’s allies are interested in trying to cast doubt on the city’s plans to form a CCA.

But Cullenward said traditional utilities, not just CCAs, participate in shuffling.

“Ultimately, California needs to support the deployment and integration of new clean energy resources, not merely the re-allocation of existing generation,” he said in an email.

Voice of San Diego found the Grant County transactions by looking through regulatory disclosures Marin and Sonoma made to the California Energy Commission and similar disclosures Grant County has to make in Washington to state regulators and bondholders. Both Cullenward and Freedman reviewed the documents and agreed it was a concrete example of shuffling.

The three main parties involved – Grant County, Marin and Sonoma – all can claim ignorance, though, in part because Grant County didn’t deal directly with either CCA.

Grant County has a deal with several companies to sell off some of its hydropower, including Shell Energy North America. Shell pays Grant County for its hydropower, which Shell then sells to someone else, like Sonoma, who is willing to pay more for it.

In turn, Shell promises to make sure Grant County has enough power. To do that, Shell provides Grant County with “market power,” which is a mix of whatever power is available on the market in the Pacific Northwest. There’s no way to know for sure exactly how each electron was generated, but the best guess of the Washington’s Commerce Department is that it includes coal and gas-fired power.

Greg Nothstein, an energy policy specialist with the Washington State Department of Commerce, has been looking for cases of resource shuffling, but he does not think the Grant County deal is an example of it.

“A colleague and I spoke to Grant PUD about six months ago and they explained how they have turned to Shell Energy to market their excess hydro power, which we cautiously accepted as true,” he said in an email.

Whatever the case, none of the parties involved seems to do anything to prevent shuffling.

Freedman said that’s a problem.

“I think you should assume they are all playing the same game, and Shell is just capitalizing on market conditions,” he said.

Shell Energy North America did not respond to a request for comment.

Grant County spokesman Chuck Allen said his agency doesn’t restrict what Shell can do with its power.

Neal Reardon, Sonoma’s director of regulatory affairs, said resource shuffling is “rare and relatively insignificant.”

“In the worst case, building a new facility – when it isn’t needed – would cause an existing renewable facility to have no buyers and therefore be shut down,” he said. “This has already occurred with a number of Southern California solar facilities built 15 to 20 years ago, and is an increasing risk for solar facilities in California.”

The Marin County CCA, Marin Clean Energy, says it is trying to increase demand for carbon-free resources.

“Regardless of the choices made in Grant County (which we don’t control) MCE is directly adding greener resources through the purchasing power we have,” spokeswoman Jamie Tuckey said in an email.