Newton received a lot of favorable publicity earlier this month when it announced that the city would be the first in the state to purchase all of its electricity from renewable sources and, in the process, save its taxpayers more than $300,000 over the next three years.
“What this shows is you can go green and save money,” Newton Mayor Setti Warren told CommonWealth. Gov. Deval Patrick applauded Newton for setting an example for communities across the state. Lt. Gov. Tim Murray told the Newton Tab that the purchase was “another feather in Newton’s cap.”
But the green energy tale being told by Newton is a bit misleading. The community is going green, but not in the way most people would think.
Newton’s electricity will still be coming from the same sources – natural gas, nuclear, coal – as it always has. What’s changing is that Newton is going to spend a little bit more to support the development of wind power, but not here in Massachusetts or even New England. The wind power being supported by Newton will probably be developed in west Texas.
Robert Rooney, the chief operating officer in Newton, makes no apologies for supporting Texas wind. “This is a global problem,” he says, referring to climate change. “It’s not a Massachusetts problem. We’re looking at the bigger picture.”
The reason Newton will save $300,000 on its electricity bill over the next three years has nothing to do with green power. The municipality’s bill is going down because the price of natural gas, the fossil fuel used to generate most of the electricity in the region, is going down.
Newton put its electricity needs out to auction and Reliant Energy of Houston was the winning bidder, offering to supply 70 million kilowatt hours of electricity to the city over the next three years. Reliant’s price was 6.6 cents a kilowatt hour for all of the city’s electricity except what flows to street lights, which was priced at 5.1 cents per kilowatt hour. For comparison purposes, the six-month basic service contract NStar will be offering to commercial customers starting July 1 will be priced at the single rate of 6.686 cents a kilowatt hour.
Reliant officials say they will buy Newton’s power on the wholesale market at the cheapest price they can find. Newton officials acknowledge the electricity will come from the usual “brown power” sources, but the price will also include the cost of purchasing enough renewable energy credits, or RECs, to offset all of the city’s “brown power” purchases – hence the claim that all municipal power needs will be purchased from renewable sources.
Anyone who produces renewable energy receives a REC for each megawatt they produce. The renewable energy developer then sells the power it produces and the RECs it receives for generating that power. Think of RECs as an extra source of income, or subsidy, for renewable energy developers.
Some RECs are called compliance RECs because electricity customers have to buy them. Under Massachusetts state law, electricity customers have to buy regionally-produced wind, solar, methane, and biomass RECs equal to 7 percent of their consumption, a number that ratchets up 1 percentage point a year. (The REC purchase is actually handled by whichever company sells the customer the power.) Since renewable energy isn’t that plentiful in the region, the demand for RECs exceeds the supply, and drives up the cost. The price of a compliance REC in Massachusetts ranges from 3 to 6 cents a kilowatt hour, a cost that is included in the power supply portion of a customer’s bill.
Reliant says it will comply with the Massachusetts REC requirements, but to offset most of the rest of Newton’s brown power purchases it is also buying RECs on the national, voluntary market. The voluntary market is supplied by renewable energy producers who generate power that no one is required to buy; customers buy voluntary RECs simply because they want to promote green energy.
The price of voluntary RECs tends to be very low, a fraction of a cent per kilowatt hour, according to some estimates. At that price, Newton can afford to go green. But its green is very different from the green associated with more local projects such as Cape Wind, the proposed wind farm in Nantucket Sound. Cape Wind is expected to generate power at the price of 18.6 cents per kilowatt hour, a price that includes RECs. While Cape Wind electricity will be expensive, the hope is that the project will create jobs, spur other, similar projects, and help drive down the price of electricity in the region.
