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The Power of the Collective Energy Purchasing – Episode 20 of Local Energy Rules

| Written by John Farrell | No Comments | Updated on Apr 17, 2014 The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/power-of-collective-energy-purchasing-episode-20-local-energy-rules/
KC Doyle

“We can’t do it as an individual, But four hundred communities aggregating and asking for local wind power and solar power – that’s really powerful.”

Oak Park, IL, is one of hundreds of Illinois towns using their authority to buy electricity in bulk on behalf of its residential and small business customers. So far, most communities have used the policy – known as community choice aggregation – to negotiate for less expensive electricity compared to the default electric utility, Commonwealth Edison. Many have also purchased renewable energy credits with their power, but it’s not clear if the practice is greening or green-washing the power supply.

Learn more about the incremental steps forward with community choice aggregation in Illinois and the potential for much greater collaboration between cities in this interview with outgoing Sustainability Manager K.C. Doyle of Oak Park, recorded via Skype on Mar. 28, 2014.

K.C. is also the founder of the Prairie State Local Government Sustainability Network, providing peer-to-peer networking of municipal officials around sustainability and climate planning.

Apologies for the egregious keyboard noise and sniffling, we had some technical difficulties with muting our host’s microphone.

Starting an Avalanche of Local Control in Illinois

The Illinois state legislature authorized “community choice aggregation” in 2009, allowing cities in this already deregulated electricity market to buy energy in bulk for their customers.  It’s a 20-year-old policy, and such local city (or county) aggregations serve about 5% of utility customers in Illinois, Ohio, Massachusetts, Rhode Island, and California. Most states

Uptake of local aggregation was slow at first. Only a couple other communities had tried it when Oak Park city staff brought the issue to their town board in December 2010. The city held its referendum in April 2011, and two-thirds of voters approved of the city taking more control over electricity purchases.

By the end of 2012, dozens of Illinois communities had held votes approving local electricity purchase aggregation.

Cheap, Clean, or Both?

Once the town board had voter approval for aggregation, it began discussing options. The city could simply bid for cheaper electricity, or it could focus on more energy efficiency and renewable energy.

One of the city’s goals was to use a small fraction of the potential energy savings to set up an energy efficiency fund to offer energy audits or upgrade city lighting. That concept was dropped because of concerns that, amidst what was already a somewhat complex discussion for a small city, residents might perceive this fund as some sort of energy tax.

On clean energy, the decision was easier, although the outcome remains murky. Doyle notes that citizens were very clear in their interest in renewable energy:

“The answer was overwhelmingly…yes, we want the best price possible and yes, we want renewable energy as our power mix.  In fact, we want it all renewable energy.”

In fall of 2011, the city went out to bid for green energy, with 100% of it covered by renewable energy credits (RECs) from wind power.

RECs – Renewable Energy Credits

ILSR and others have explained the concept of RECs elsewhere, but what’s important to understand is that buying RECs didn’t change the actual source of electricity flowing to Oak Park homes and businesses, nor did it mean the construction of new renewable energy facilities.

“We are not getting wind power through our electric socket…we’re getting the same mix everyone in northern Illinois is getting from ComEd…but we can say we offset that purchase with the purchase of wind RECs,” says Doyle, by “buying the environmental benefit of an already built wind farm in our energy market area (PJM),” which spans five states and part of Canada.

What’s clear is that the competitive energy market doesn’t offer small cities like Oak Park much choice.

“If you’re a large enough aggregation (e.g. Chicago), you can go right to the source” and get wind energy from a specific wind power provider in Illinois or even sign a long-term supply contract. With just 20,000 electric accounts, Oak Park doesn’t have the market leverage. Using long term contracts wasn’t of interest to the city board, either, since the board didn’t want to sign contracts longer than their terms of office (6 years).

Organizing to Move Beyond RECs

But cities like Oak Park do have a choice to increase their market power: join with their neighbors.

The North Shore Electricity Aggregation, for example, serves eight municipalities north of Chicago and bids on behalf of the entire group. The Metropolitan Mayor’s Caucus also established a “reverse auction platform” allowing cities to solicit bids simultaneously from energy supply companies. But that platform still only helps communities with similar energy use profiles.  “The more alike you are,” says Doyle, “the easier time [suppliers] have bidding on your aggregation.”

The move toward larger aggregations may also help promote local renewable energy. While their first bid was limited to wind RECs in the larger PJM market area, the 2014 bid from Oak Park will ask for RECs from Illinois-only wind farms. Perhaps in future years they’ll shift toward procuring renewable energy locally, as Marin Clean Energy has done in northern California.

The focus on clean energy is tricky, though. The city remains “very price sensitive” as ComEd’s rates come down, says Doyle. They “want to remain competitive.”

What’s Next for Local Energy Aggregation?

Early aggregations in Illinois were able to take advantage of a unique situation to obtain much lower energy prices, but that situation has changed. They’ll need strategies beyond price to keep aggregation a “value add” for their residents.

Cities can take up and invest in energy efficiency.  They can solicit bids for electricity contracts that include real-time pricing or demand response. And they should always ask for a price for local renewable energy, says Doyle:

“Every single community should ask the question…you are showing the suppliers that you have a very, very interested community in supporting the local renewable energy industry.  It’s powerful information for decision makers, legislators, Illinois Power Agency…four hundred communities aggregating and asking for local wind power and solar power – that’s really powerful.”

Ultimately, communities should build on the success of collective action.

“We do this really great thing together, we banded together, we went out for a cheaper price and we saved a ton of money.  $5 million in 2 years…there’s a lot of [community] pride around that.”

 

You can learn more about community choice aggregation by reading our 2009 report, by listening to our podcast about local aggregation Marin Clean Energy, or from the Local Energy Aggregation Network, a nonprofit based in California that provides information and technical assistance to states and communities considering local aggregation.

This is the 20th edition of Local Energy Rules, an ILSR podcast with Senior Researcher John Farrell that shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion. Other than his immediate family, the audience is primarily researchers, grassroots organizers, and grasstops policy wonks who want vivid examples of how local renewable energy can power local economies. It is published twice monthly, on 1st and 3rd Thursday. Click to subscribe to the podcast: iTunes or RSS/XML

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Thanks to ILSR intern Jake Rounds for his audio editing of this podcast.

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About John Farrell

John Farrell directs the Energy Self-Reliant States and Communities program at the Institute for Local Self-Reliance and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. More

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