Local Energy Rules Episode 21 – One City Utility is Carbon Neutral, Today

It’s one thing to own your utility and have a commitment to renewable energy, but it’s another thing to deliver. The municipal utility in Palo Alto, CA, set an ambitious target of 33% renewable energy by 2015 and to ultimately deliver a carbon neutral electricity supply. They will reach 48% renewable power in 2017 and met the carbon neutral goal starting last year.

Learn more about the strategies one municipal utility pursued to drive down its carbon emissions and acquire solar energy in this interview with Jim Stack, Senior Resource Planner of the Palo Alto Utilities, recorded via Skype on Feb. 27, 2014.

How Can a Utility be Carbon Neutral?
The foundation of Palo Alto’s energy supply is hydropower, making up as much as half of their total electricity generation each year. But other renewable energy supplies the other half, at a time when most utilities have targets of 25% renewable or less. The chart illustrates how Palo Alto plans to get 23% of its energy from solar, 11% from landfill methane recovery, and 12% from wind power in 2017.

The carbon neutral target, while impressive, doesn’t mean that no fossil fuels are used. The statement means that on an annual, net basis, the cities electric customers produce no carbon emissions.

Building on Low-Cost Solar
The drive toward renewable energy and a carbon neutral energy supply was aided by dramatically falling costs for solar energy. When the utility went out for bids in 2012, it found solar producers willing to sell the utility power for 7¢ per kWh, a price that’s remained relatively steady since then. Low cost solar energy has meant that the city’s nationally recognized green energy purchasing program, with 20% customer participation, eliminated the price premium because clean energy was no more expensive than traditional power.

Having Control Matters
“If you were a customer of an investor owned utility, you’d be much less likely to see a program like [Palo Alto’s] put in place simply because investor-owned utilities have a much more traditional business model focused on profits and the bottom line,” says Stack.

Local control was a key to the success of the pursuit of a low-carbon energy system in Palo Alto. They aren’t hampered by regulators and the city’s bond rating means the municipal utility can also access lower cost capital than investor-owned utilities.

Municipal ownership has one big drawback, however, making the transition to renewable energy that much more impressive.  The city can’t access the 30% federal tax credit for solar energy projects that private developers can.  While they can still sign contracts with these developers to deliver solar, they miss the economic opportunity of direct ownership.

Keeping it Local
Palo Alto hasn’t been able to develop as much power in town as it would like, confesses Stack. As a mostly built-up urban environment with high land costs, and in a very sunny environment, local solar energy costs nearly twice what it costs to buy from projects nearby. All their renewable power comes from California, however, within a two hour drive of the city.

The city does have programs focused on local distributed generation and energy efficiency, however. Already, 6.5 MW of solar energy has been installed on local rooftops (serving about 4% of peak demand). The utility intends to use its feed-in tariff, community solar, and other initiatives to increase local solar to 23 MW, serving 15% of peak energy demand and 4% of total sales.

Can it Work for You?
Stack says there’s nothing stopping other municipal utilities from moving in the same direction.  Renewable energy is less expensive than just about anything else and offers long-term price stability.

For communities without municipal utilities, he suggests lobbying for voluntary green purchase programs, community solar, and working on developing community-based renewable energy projects.

For more information on Palo Alto Utilities, see the section on Palo Alto in ILSR’s 2013 report showing 8 ways cities can boost their economy with local renewable energy: City Power Play.

Article by John Farrell, appearing courtesy Institute for Local Self-Reliance.