A new start-up is offering ratepayers in Louisville another opportunity to get their electricity from renewable sources. Arcadia Power is selling Renewable Energy Certificates to customers around the country; now between Arcadia and a similar program offered by Louisville Gas and Electric, Louisvillians have two choices for buying renewable energy.
One Renewable Energy Certificate, or REC, is generated with each megawatt hour of electricity produced by renewable sources, whether by wind, solar, biomass or hydropower. So if your home or business is getting electricity from fossil fuels, buying a REC means you take ownership of that bit of renewable energy and helps negate the environmental damage done providing power to your home. Once a REC is purchased, it’s retired, so no one else can take credit for that unit of renewable energy.
Here’s how Arcadia works: you sign up on their website and provide your utility account and banking information. Every month, Arcadia receives and pays your LG&E bill. Then, the company bills you for the full amount it paid LG&E, plus a surcharge of 1.5 cents on every kilowatt hour of electricity you use to cover the cost of buying RECs from the renewable energy source.
“The idea was to make clean energy simple,” said Arcadia CEO—and Kentucky native—Kiran Bhatraju.
Large corporations buy a lot of RECs to meet sustainability goals, but Bhatraju said he found that many homeowners weren’t aware they could do the same thing.
“[Renewable energy] was really only available to certain people in certain places, a lot of folks just didn’t know that they could access this market,” he said. “And when you look at the rooftop solar industry, which is great, it’s really only a tiny sliver of Americans that can really access that. So this is kind of a great alternative, and that was kind of the genesis of the company.”
But in Louisville, residents and businesses are already able to buy RECs through utility Louisville Gas and Electric’s Green Energy Program. Now consumers interested in green power have a choice. So, what’s the difference between Arcadia and LG&E’s programs?
‘A REC is a REC’
“From an environmental quality standpoint, a REC is a REC,” Center for Resource Solutions spokesman Jeff Swenerton said. “If the REC came from Alaska, if the REC came from Texas wind, if the REC came from rooftop solar in Louisville, no matter what, you can say ‘my household is powered by 100 percent renewable energy,’ if you’ve bought enough.”
Swenerton’s organization administers Green-e, which is one of the largest REC auditing firms in the country. Green-e audits LG&E’s program, and Arcadia intends to become certified and audited through the company as well. Green-e’s audits make sure companies selling RECs deliver what they promise. Swenerton said this extra layer of scrutiny is necessary, because the REC industry is one that’s essentially unregulated.
“I mean, you can’t, like, defraud customers. There’s laws against selling snake oil,” he said. “But there’s no requirement that companies retire, turn over the same amount of RECs that they’ve sold. There’s no government oversight over this industry that’s essentially selling electrons that are already present in the system. It’s an interesting gap in the regulatory system.”
This year, LG&E bought RECs generated by wind farms in Illinois and Missouri, though in the past, hydropower and landfill gas have also been part of the mix. Currently, all of Arcadia’s RECs come from wind farms in the Midwest, Northwest and Texas, though the company plans to expand in the future.
Regulation of RECs
Because Arcadia isn’t actually generating power in Kentucky, the company isn’t subject to regulation by the Public Service Commission. The company’s website initially triggered alarm, because Arcadia advertised that it was “unbundling” power—a practice which is not legal in Kentucky. When that was brought to the company’s attention, the reference was removed and the wording changed.
PSC spokesman Andrew Melnykovych said it doesn’t seem that Arcadia is actually participating in unbundling, but there are other potential issues. He’s concerned that customers relying on Arcadia to pay their monthly bills could be left in the lurch if somehow—intentionally or unintentionally—the bills didn’t get paid.
“I would just caution people before a customer engages in any kind of relationship with a third party relating to their utility service that you just be extremely careful, you research it thoroughly and you make sure that it is in some way an appreciably better deal than what you’re going to get through the regulated service,” he said.
LG&E spokeswoman Natasha Collins echoed Melnykovych’s concerns. In an email, she wrote:
“While customers are free to pursue using the services Arcadia provides, LG&E and KU offer customers a program that offers a similar opportunity…..The LG&E and KU Green Energy Program is subject to oversight by the Public Service Commission, while third party services offering similar programs are not and, therefore, may not offer the same form of customer protection.”
Arcadia CEO Bhatraju said so far, there haven’t been any issues with bills not being paid, but because LG&E accounts remain in the ratepayer’s name, both Arcadia and the ratepayer would receive notification of a pending electricity shutoff.
Cost and Benefits
The price of RECs can vary wildly; Swenerton of the Center for Resource Solutions says one REC can cost anywhere from $3 to $300, depending on how and where it’s generated. And even auditing programs don’t examine what companies pay for RECs, and how much profit they make off of selling them to consumers.
For the average household that uses about 1,000 kilowatt hours of electricity a month, Arcadia Power ends up being slightly more expensive than LG&E. For $5 a month, the utility offers a “block” of 1,800 kilowatt hours worth of RECs. Arcadia bills customers only for what they use; 1,000 kilowatt hours would cost $15 a month.
Bhatraju said the benefit to Arcadia customers is the company offers a one-for-one match to ensure that RECs cover an entire home’s energy usage.
“It matches your home energy use. That’s the reason we do it through the bill,” he said. “And we make it simple. It’s not a voluntary purchase you have to actively make every month. If you use 100 kilowatt hours at home, we will buy 100 kilowatt hours in renewable energy certificates to match your home’s energy use.”
Bhatraju said part of Arcadia’s mission is to invest and support renewable energy projects around the country, as well as raise awareness about renewable energy programs. And according to Swenerton, increased awareness is something that’s greatly needed. Despite numerous, affordable options in many places, only 2 percent of ratepayers are signed up for a green energy program.
“This seems silly. All you have to do is just sign up one time, pay less than $10 a month to get 100 percent renewable energy, and yet only 2 percent of people sign up?” Swenerton said. “The electricity generating sector of our economy is the source of most greenhouse gases in this country. More than transportation. More than flying and driving.”