San Diego’s Community Choice Energy Technical Study Stands Up Under Scrutiny

Conservative Assumptions Camouflage this New Energy Option’s Benefits

Originally published by the San Diego Free Press on October 27th 2017
For a primer on Community Choice Energy, see this San Diego Free Press article.

Credit: Pixabay

By Tyson Siegele / San Diego 350

San Diego struggles under the yoke of the highest electricity prices in the state. Meanwhile, thousands of cities across the United States have executed a plan to reduce their electricity prices, called Community Choice Energy. City officials hired an expert to determine if Community Choice would work here too. The technical study, also known as the feasibility study, found that San Diego would benefit from Community Choice, just like thousands of cities before it.

In July, when the City released the technical study, several publications such as the San Diego Union-Tribune and the Voice of San Diegohighlighted the main finding of the study: “San Diego could provide cheaper, greener energy than SDG&E.” Now, having had several months to digest the findings and compare them to Community Choice Energy programs across the state, additional conclusions can be teased out of the study.

SDG&E provides high-cost energy with average clean energy content

To understand the technical study better, one needs context. Stating that CCE can provide “cheaper, cleaner” energy does not allow us to adequately judge the program. How much cheaper? How much cleaner? The following table lists the percentages of *pollution-free electricity from various providers in California.

*Pollution-Free includes all greenhouse-gas-free sources. The “California Average Utility” energy percentage includes nuclear and large hydro. The CCE programs listed include large hydro, but no nuclear energy. Large hydro and nuclear are not considered renewable energy in California.
Source: SVCE website and Power Content Labels for SCP and SDG&E

The first two providers in the table, Silicon Valley Clean Energy and Sonoma Clean Power are both California Community Choice Energy Programs. The least expensive electricity rate offered by those programs are 100% and 90% pollution free respectively. Each of those options is also less expensive than SDG&E electricity which is only 43% pollution free. Those numbers are not outliers either. All six Community Choice programs operating in PG&E’s service area offer a 100% renewable energy option for a lower cost than SDG&E charges its customers.

The third entry in the table allows another type of comparison: SDG&E versus average pollution-free energy. Not only does SDG&E not compare well to high performing energy providers, it does not even beat the average utility in the state when comparing pollution-free energy.

CCEs provide high amounts of pollution-free content and they provide cheaper energy too. All of the active CCEs in California provide lower cost electricity than the Investor Owned Utility against which they compete. A Community Choice program in San Diego should have an easier time outperforming the utility since SDG&E charges the highest electricity rates in the state.

Understanding how high SDG&E prices are is important. The following is an apples-to-apples comparison. Sacramento’s Municipal Utility provides its customers with exactly the same percentage of pollution-free energy as SDG&E. The California Energy Commission requires each electricity provider in the state to disclose how their electricity is generated in a standard form called the “Power Content Label.” The content labels below list the 2016 generation sources for Sacramento’s utility and SDG&E.

California Energy Commission chart showing Power Content Labels for Sacramento Municipal Utility District and San Diego Gas & ElectricThe California Energy Commision published electricity generation sources for 2016
Source: California Energy Commission, Power Content Labels
(click for larger image)

Both utilities use 43 percent pollution-free energy and a nearly identical percentage of natural gas. Thus Sacramento provides a particularly useful comparison when reviewing how expensive SDG&E electricity should be. According to Sacramento’s 2016 annual report, SDG&E charges its customers 77% more than Sacramento’s rates pointing out that SDG&E rates should be much lower.

Graphic showing typical monthly residential bills

SDG&E charges the highest rates for electricity in the state of California
Source: Sacramento Municipal Utility District, 2016 Annual Report, page 5

Feasibility study conclusions

 Armed with some insight into how cheap and clean electricity can be, the conclusions of the City of San Diego’s feasibility study appear obvious. San Diego could use Community Choice to achieve cleaner, cheaper energy. That simple statement belies the strength of the conclusion though. Page 122 of the feasibility study highlights that every criteria of the City’s Sustainable Energy Advisory Board the authors reviewed was found to be feasible.

Chart showing results of San Diego Community Choice Energy Feasability Study results

All the Sustainable Energy Advisory Board minimum performance criteria that were studied were found to be feasible
Source: San Diego Community Choice Energy Feasibility Study, Table 35, page 122 (pdf page 160)
(click for larger image)

CCE works in San Diego even with conservative assumptions

The general findings from page 122 (pdf page 160) lead to the conclusion that the city should support community choice. However, the most powerful piece of information in the study might be the least obvious. It does not reside on any of the splashy tables or charts. The most powerful data in the study is the extremely conservative price point used for the cost of renewable energy. The authors initially state the wholesale market price of renewable energy… and then use a different dollar amount entirely for their calculations.

Page 33 of the study lists that solar power costs 4 to 6 cents per kWh. Without a careful reading of the study, one would have every reason to assume that the study authors use the average of those numbers, 5 cents/kWh, for the cost of renewable energy in the study. They did not.

Graph showing cost of power over period 2020 - 2035

Feasibility study, figure 29 listing the cost of renewable energy assumed by the study authors starting in 2020 at 10.1 cents/kWh.
Source: San Diego Community Choice Energy Feasibility Study, Figure 29, page 122

Instead of 5 cents, the cost of renewable energy used in the pro forma (the financial calculations found in the appendix) opted to apply the cost of 10.1 cents/kWh for renewable energy in their 2020 scenarios, as seen in figure 29 above. The city’s consultant assumes that Community Choice Energy in San Diego would buy electricity for double the amount that their own expert said was available on the open market. Not only that, their expert had already built in a 25% or more margin in that number. The chart below compares the current cost of utility-scale solar to the figure used by the city’s consultant.

Chart showing Market prices for renewable energy in California versus feasibility study assumption

Market prices for renewable energy in California versus feasibility study assumption.
Sources: Modesto Irrigation District Solar, City of Palo Alto Solar; the Q1 2017 SEIA national average solar was $0.99/watt which was defined on page 33 of the feasibility study as 4 cents per kWh ($40/MWh); LA County CCA Business Plan page 42; 2016 IOU renewable energy costs from 2017 Padilla Report page 2; San Diego Feasibility Study fig 29

The price for renewable energy used in the San Diego Community Choice Energy technical study was set two and a half times higher than the 2017 market price for utility-scale solar. According to the study, the purchase price of wholesale power makes up approximately 80 percent of the CCE program costs. If the consultant had used market price energy instead of a price 2.5 times higher, the assumed expenses incurred by the Community Choice program would have been between $100-150 million dollars less per year.

San Diego needs an option other than SDG&E

SDG&E charges customers up to 77% more than other utilities while providing below-average percentages of clean energy. The City’s Community Choice Energy technical study found every criteria studied resulted in a feasible outcome. The study authors used assumptions conservative enough to lead to a built-in margin of safety of over $100 million dollars per year.

One might assume that all of these findings would have led our city officials to the conclusion that Community Choice Energy makes sense for San Diego, that we should join the more than 70 cities in California that have already adopted CCE programs. Strangely, fewer than half of the City Councilmembers have publicly voiced their support for this form of cleaner cheaper energy, and Mayor Faulconer fritters away our money and air quality while waiting for a clean energy proposal from SDG&E, the very company demanding extortionary prices for electricity, to begin with.

Call to Action:

San Diego ratepayers can do two things to support Community Choice Energy.

  1. Go to the Sustainable Energy Advisory Board meeting this Thursday, November 16th (see link for time and location) and voice your support for Community Choice during the time allotted for public comments. The Board will be voting to approve a recommendation on the Community Choice feasibility study.
  2. Give your city representatives a call or send a quick email. Let them know you would like Community Choice Energy. Let them know you would like cleaner, cheaper energy. Tell them you do not understand why San Diego is nearly the only major population center in California to have neither a municipal utility nor Community Choice Energy.

Community Choice Energy is more than just feasible. It is a necessity.

City of San Diego Contact Information:

Mayor:
Kevin Faulconer, Mayor (619) 236-6330 kevinfaulconer@sandiego.gov

Councilmembers:
Myrtle Cole, Council President (619) 236-6644 myrtlecole@sandiego.gov
Mark Kersey, Council President Pro Tem (619) 236-6655 markkersey@sandiego.gov
Barbara Bry, Councilmember (619) 236-6611 barbarabry@sandiego.gov
Lorie Zapf, Councilmember (619) 236-6622 loriezapf@sandiego.gov
Christopher Ward, Councilmember (619) 236-6633 christopherward@sandiego.gov
Chris Cate, Councilmember (619) 236-6616 chriscate@sandiego.gov
Scott Sherman, Councilmember (619) 236-6677 scottsherman@sandiego.gov
David Alvarez, Councilmember (619) 236-6688 davidalvarez@sandiego.gov
Georgette Gomez, Councilmember (619) 236-6699 georgettegomez@sandiego.gov

 

Tyson Siegele, a SanDiego350 member, is an architect who works to promote sustainable design and clean energy. He is the creator of ButItJustMightWork.com, a residential clean energy handbook chronicling things to do as well as things to avoid on one’s path to zero emissions.

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