Want to pay a little more for green energy? It’s not so simple

a close-up of a wind turbine
a close-up of a wind turbine
Blue Planet Studio

Want to pay a little more for green energy? It’s not so simple

What are companies like Green Mountain Energy actually selling?
April 5, 2018

Live in one of New York City’s crunchy enclaves like Park Slope, Brooklyn, for long enough and you will undoubtedly be accosted by representatives from Green Mountain Energy Co. You may even see them so often that you can recognize them from afar, the moment you spot young people in dark green shirts tabling on the sidewalk or in a movie theater lobby.

Green Mountain is one of New York’s roughly 150 energy service companies, or ESCOs, from which consumers can buy electricity. Many ESCOs, including Green Mountain, pitch their services to potential customers as a way of going green. The details vary, but the idea is always to direct your money toward cleaner or renewable energy, such as wind and solar. Sign up at the table in five minutes and, for a few extra dollars per month, you can help save the planet.

But there are so many ESCOs to choose from. How does a consumer choose? Greenwashing – the practice in which companies hawking everything from gasoline to dish soap claim their products are environmentally friendly to gain a market advantage – is widespread throughout the economy. So it’s hard to imagine that ESCOs are immune, especially since it is a notoriously shady industry often marketed by sales representatives who work on commission. So how does anyone even know that the companies claiming to use clean or renewable energy actually are doing so?

The short answer is that the consumer usually doesn’t. To personally investigate the claims made about energy sourcing would be impossibly confusing for the average consumer. “What are you supposed to do, go look at their Securities and Exchange Commission filing?” asks Russ Haven, general counsel at the New York Public Interest Research Group. “Trust the salesperson at the other side of the phone?”

Of course, eco-friendly certification systems, such as LEED for buildings, have sprung up in other sectors. But for the overwhelming majority of ESCOs, their public declarations about energy sourcing for each of their products are not independently verified.

Plenty of consumers are probably under the impression that when they sign up for a plan they are actually buying green energy itself.

The only widely respected independent certification company for ESCOs is Green-e, a program of the Center for Resource Solutions, a San Francisco-based nonprofit. Jeff Swenerton, the Center for Resource Solutions’ communications director, said the nonprofit requires a company to turn over everything from contracts with energy providers to marketing materials during its verification process, which he described as costly and “an administrative hassle.”

Since most consumers are unaware that Green-e exists, it does not necessarily pay off for a company to obtain the certification. Hence, in New York, only two companies are certified by Green-e for residential green energy products: Ambit Energy has a 100 percent wind option called Ambit Green Northeast, and Constellation NewEnergy has a 100 percent wind option called Wind Power. (Green Mountain Energy has Green-e certification for products aimed at commercial consumers, who tend to be more interested in seeing the certification. Consumers can look up online what certified programs are available in their ZIP code.)

Curious customers can, with some difficulty, find disclosures from ESCOs on the source of the power they are selling on a state website. Those who do might be surprised to discover that most of the energy sold by Green Mountain, and many other nominal sustainable energy providers, does not come from renewable sources.

That does not necessarily mean that any of them are lying. Often, when someone signs up with an ESCO, the customer does not actually buy green energy but only the renewable energy credits, or RECs, generated by green energy providers.

Here’s how it works: In North Dakota, for example, wind is ample but the energy cannot be plugged into the New York grid. So a North Dakota wind farm sells wind energy to Midwestern consumers. When it does, it creates a credit for the environmental benefit – the carbon savings compared to the standard utility energy fuel mix – that can be bought by people elsewhere. This helps defray the extra cost of generating renewables and makes it economical for the wind farm to offer its energy to the local utility at a competitive price. Green Mountain’s most popular program in New York, for instance, offers “100% clean, renewable wind energy,” but what it actually sells is the equivalent number of RECs needed to offset the carbon footprint of your energy consumption. But the disclosures do not account for RECs.

The result is that on Green Mountain’s environmental disclosure label in 2016 – the most recent year of data available – it said the company used 4 percent coal-fired power and 45 percent natural gas. Those fossil fuels are the two major sources of carbon emissions from electricity generation. Even the low-carbon energy provided by Green Mountain overwhelmingly comes from sources like nuclear and hydroelectric power that face widespread opposition among environmentalists due to their other ecological downsides.

Some ESCOs offer consumers the opportunity to pay a premium for clean energy, even down to the level of choosing a particular solar provider. This is perhaps a distinction without a difference, since even that energy goes into the consumer’s local utility mix. Technically, it cannot be directed from one power plant to one particular house.

Generally speaking, environmentalists view the REC system as a legitimate means of supporting renewable energy expansion. Plenty of consumers, however, are probably under the impression that when they sign up for a REC-based plan, they are actually buying green energy itself.

And who is even checking the RECs to make sure they are only being sold once?

Not anyone, necessarily. Companies can attempt to check on it themselves, of course. Green Mountain engages an outside auditor and posts the clean bill of health on its website. But many companies may not even do that. And how does one know whether to believe the company’s auditor?

The Public Service Commission, which regulates ESCOs, has been very slow to address deceptive ESCO sales practices. It did pass a rule in 2016 preventing ESCOs from selling to low-income consumers, in order to protect those customers from being misled and hit with an unexpectedly big bill. The Public Service Commission said it may eventually take some similar regulatory action regarding clean energy claims. “The provision of renewable energy products by ESCOs is one of many issues that we have expressed concern about as part of our ongoing investigation into ESCOs,” commission spokesman James Denn wrote in an emailed statement. “We have prohibited ESCOs from serving low-income customers unless they can guarantee a savings, and we are reviewing the residential and small business market to make sure customers get the services and products as advertised, including renewable energy offerings.”

Russ Haven, the New York Public Interest Research Group general counsel, said that until the commission takes action, environmentally conscious consumers should make sure any green energy product is Green-e certified. But, he argued, verification should be taken over by the government. “We think the PSC can do it administratively and, in fact, should have,” Haven said, referring to the 2016 rule. The PSC, Haven said, should provide an online marketplace, similar to an Obamacare health insurance exchange, in which consumers can comparison shop between the different ESCOs and view government-issued report cards on whether the companies are living up to their claims.

For its part, Green Mountain Senior Manager for Product Innovation Sam Telleen said, “While not all of our products are Green-e branded, every single one goes through a Green-e process.” Swenerton, however, offered a different take on any products that have not been certified by Green-e: “Buyer beware.”

Ben Adler
is City & State’s senior editor.
20181216