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The dirty secret behind some ‘clean energy’ offers

Power lines are seen under a cloudy sky, Wednesday, Aug. 10, 2022, in San Antonio. (AP Photo/Eric Gay)

As our climate spins out of control, an urgent need exists for clean energy advocates and watchdog organizations to ensure that protecting climate-conscious energy consumers goes hand in hand with efforts to support programs to address the climate crisis.

A recent Maryland study published by the Energy Supplier Reform Coalition illustrates this point. It found that residential retail competitive energy has cost families $1 billion more since 2014 than standard utility prices. That is an astounding amount at a time when energy prices are rising, consumers are struggling to pay their bills — and our climate is spinning out of control. Interestingly, consumers who chose renewable retail energy offers often paid some of the highest rates.

Even more distressing is that low-income households and communities of color often bear the brunt of these excessive charges. Both the Wall Street Journal and the Inside Climate News have reported on how some energy companies target low-income communities with teaser rates and doling out gift cards, then jack up the prices, causing financial chaos in families that can least afford these high rates.

How do some of these retail competitive markets mislead customers on climate claims?

States that have retail energy markets allow consumers to choose among competitive suppliers — often called third-party suppliers — and give homeowners many energy options to choose from, such as whether they buy natural gas or wind energy. Third-party suppliers compete against the regulated utility’s supply offers. These deregulated electricity markets exist in 17 states and the District of Columbia.  

If you live in a competitive, deregulated energy state, chances are you are constantly bombarded with mailers and advertisements offering you clean electricity at rates lower than your utility with promises of helping the climate.

In Maryland, I saw firsthand how this can work when a friend of mine was promised lower energy prices if she bought 100 percent renewable wind energy. Initially, that was true. However, her low introductory rate rapidly rose and soon became almost double the price she would have paid had she stayed with her local utility.

That is strange, since wind energy is often touted as cheaper than fossil fuels.

Worse yet, a quick review of her bill indicated she wasn’t really getting 100 percent wind power. Instead, her “green” energy provider was selling her energy produced with fossil fuels. To make the 100 percent wind claim, the energy provider bought cheap “unbundled renewable energy credits” from an old Iowa wind farm that came fully online more than a decade ago. In this case, the retail suppliers then bundled, or paired, fossil fuel electricity with the cheap unbundled renewable energy credits to claim “100 renewable electricity.”

The use of “unbundled renewable energy credits”  allows energy providers to claim credit for renewable energy produced and sold elsewhere — in this case, Iowa — while continuing to buy electricity generated from fossil fuels. In these scenarios, energy providers can make money by jacking up prices on their “clean energy” product to an exorbitant rate; brokers can buy cheap energy credits from an old wind farm and sell it to energy providers, while the wind farm can get extra money for a project that was already financed.

And the consumer is left holding the bill.

The amounts paid for these clean energy products are not chump change. In Maryland, nearly 100,000 accounts in 2021 paid an extra $350 each for this renewable energy certificate-based “green” electricity.

Yet, no amount of clever accounting or climate magic is going to turn the electricity that Maryland consumers buy from fossil fuel into clean energy by using renewable energy credits from old wind farms in the Midwest. And there is no evidence that the millions of dollars consumers are paying in premiums for these types of climate products are being used to develop new clean electricity sources.

This is troubling news, both for energy consumers and the climate.

So, what is the fix? Are we stuck in an energy system where energy companies, energy brokers and politicians can just ask us to trust that the “market forces” will fix this?

The good news is that the fixes are simple.  First, in deregulated states, state lawmakers must end variable pricing on energy products. Second, states should require that energy providers buy real clean energy and phase out the use of unbundled renewable energy credits as much as possible. Finally, energy markets should be completely transparent.

Consumers should have a right to know the real sources of energy they are buying — and, if renewable energy credits were purchased, the type, location, age and costs of those credits.

If consumers are to have confidence in the climate solutions they are paying for, then protecting consumers must go hand in hand with supporting aggressive climate programs.

Tim Whitehouse is the executive director at Public Employees for Environmental Responsibility, an environmental protection non-profit organization. Follow PEER on Twitter: @PEERorg

Tags Climate change Energy Fossil fuels Renewable energy

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