This article first appeared in Utility Dive.
With clean energy leadership retreating from the federal government, many believe that local and state governments are carrying the clean energy banner forward. For example, in June of this year, the U.S. Conference of Mayors—a policy and advocacy group of over 1,400 mayors from across the U.S.—passed a resolution to support a transition to 100% renewable energy in cities nationwide. While this is an inspiring goal, the reality is that government leadership is unlikely to be the true driver toward a cleaner energy future.
Customers seeking clean energy for their homes, businesses, and communities—and not governmental leadership—will be the driving force for clean energy adoption over the coming decades.
In the late 1990s and early 2000s, nearly half of the U.S. experienced some form of restructuring in the electric sector. This restructuring brought forth a critically important concept—retail choice. Retail choice allows an electric customer to choose their electricity provider, which ranges from the incumbent utility supplier to an array of competitive suppliers. While this may seem like a simple change, it was a radical policy departure from a customer being captive to a single provider of electricity. In essence, retail choice increased the power of electricity customers by transforming them from captive consumers to key decision makers by giving them the power to vote on their energy options through their wallets and, in some cases, ideals.
Today, customer choice has expanded well beyond the original retail choice paradigm. The rapid advancement of disruptive technologies and business models are bringing an abundance of energy choices directly to the customer, allowing customers to bypass their electric service provider to source clean energy each and every day. In particular, the growth of distributed energy resources, such as rooftop solar generation, as well as new energy management technologies, such as smart thermostats, have allowed customers across the U.S. to find new ways to make decisions about their energy future. The continued adoption of new distributed technologies—ranging from energy storage to microgrids—will further increase the options available to customers.
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This revolution of choice has reaffirmed that electric customers are not just faceless blocks of consumers solely seeking reliability and affordable electricity; rather, electric customers are increasingly focused on how their energy is produced—including the impact that choice will have on the environment.
This choice is not just occurring at the residential level. Corporate sourcing of renewable energy in the commercial and industrial sector continues to play a major role in the push toward cleaner energy. In purchasing renewable energy credits, entering into clean power purchase agreements, investing in renewable generation, and participating in utility green power tariffs, companies such as Intel, REI, Kohl’s, and Netflix already source 100% of their electricity usage through renewable energy, while others are following close behind. Google, which currently sources 47% of its 2,600MW annual peak demand from renewable sources has recently announced that it will achieve its own 100% goal this year. This trend in corporate procurement of green energy already includes many smaller enterprises, and is likely to increase over time as the economic proposition for “going green” continues to improve.
Similarly, full communities are increasingly opting out of utility default service, often to pursue clean energy aspirations. For example, Community Choice Aggregation, which allows entire communities to opt out of utility electric service, is rapidly expanding across California. The California Energy Commission and Public Utility Commission has forecasted that by the mid-2020s more than 80% of electric demand from retail customers in California may no longer be served by traditional investor owned utilities. Moreover, other communities—such as Bainbridge Island in Washington State and the City of Boulder in Colorado—have explored the possibility of creating a municipal utility to not just bring cleaner energy to its citizens, but also to increase local choice over future electricity decisions.
To be clear, government leadership currently remains a significant driver toward the adoption and growth of clean energy. However, the electricity sector is fundamentally changing, shifting increased decision making power directly in the hands of consumers and less within the grasp of government leaders. Through this transformation, we are learning what customers truly value and what customers are willing to pay for. At the end of the day, while not all customers value clean energy, one trend is certain—as customer control increases, the responsibility for carrying the clean energy banner forward will rest squarely in the hands of the consumer.
David Cherney, Walter Rojowsky, and Charles Janecek are energy and utility experts at PA Consulting Group.