In a bid to price its electricity rates to be competitive with PG&E, the new CleanPowerSF program will likely have to rely heavily on renewable energy credits — essentially carbon credits — instead of electricity received directly from renewable sources.
Under a five-year, $19.5 million contract with Shell Energy North America that was approved by the Board of Supervisors last fall, about 100,000 San Francisco utility customers will be automatically enrolled in CleanPowerSF, tentatively scheduled to begin in March of 2014.
Customers will be given the choice to buy California state-certified green renewable energy from the program, or opt out of the program and continue buying power from PG&E.
Currently, CleanPowerSF energy customers can expect to pay about 11.90 cents per kilowatt hour, or about $6.51 more per month on average than if they stayed with PG&E, according to the San Francisco Public Utilities Commission.
That's a lower rate than was proposed earlier in the year, but in order to offer utility customers power that's priced competitively with PG&E's, CleanPowerSF has had to rely more heavily than expected on "renewable energy credits."
Renewable energy credits are bought and sold on the open market, similar to how carbon credits are bought and sold by companies under cap-and-trade rules.
At least 45 percent and as much as 85 percent of CleanPowerSF's energy is expected to come from renewable energy credits, according to the San Francisco Public Utilities Commission.
The result is that as little as 15 percent of CleanPowerSF's energy, under one possibility, would be gleaned directly from renewable energy sources.
The exact mix in the energy cocktail — and what power sources would produce the energy that becomes state-certified green with the purchase of credits — has yet to be determined.
The commission was scheduled to approve key provisions of the program in April, but that decision has now been delayed to July.
The energy cocktail that requires 85 percent renewable energy credits is the "least green," said Kim Malcom, CleanPowerSF's director, at an April meeting of the commission, but such a mix "is the only way we can get the rate down and find some revenues for build-out."
The rate needs to stay low in order to keep customers from dropping out of CleanPowerSF and staying with PG&E, which could reduce income from the program that is supposed to fund the construction of The City's very own renewable energy resources.
Build-out of The City's own green energy infrastructure would be financed by future bonds. And bonds can only be sold if the program runs smoothly and produces revenue for two years, said Barbara Hale, the SFPUC's assistant general manager for power.
Such a heavy reliance on credits "is not what we originally anticipated, but it's now the best pathway to affordability while allowing financing for a build-out," said Supervisor John Avalos, who chairs the Local Agency Formation Commission that will be asked to approve the energy cocktail. "It's just the starting point — and the mix of [credits] can be reduced as we move forward."
Other community power programs in California are launching with energy portfolios that are cheaper than or cost roughly the same as PG&E's – but they are not 100 percent renewable.
In Sonoma County, Sonoma Clean Power is rolling out next year with an energy mix that could be slightly cheaper than PG&E's, but offers only 33 percent renewable energy.
PG&E is also expected to launch a slightly cheaper "green option" of its own sometime in the next year.