We are increasingly appreciating how local governments are playing a key role in the low carbon energy transition. Silvia Zinetti, a previous contributor to EiD, is a sustainable energy expert and policy advisor, based in California. Many of you will remember Silvia when she was working in Brussels in sustainable energy. She brought her experience to the US to support sustainable energy policies both at the federal level and at the local level by working closely with the local communities towards their transition to sustainable energy and GHG reduction. Recently Silvia has been analysing an innovative business model to bring low carbon “choice” to the local level. Let us know if you think this could work in Europe?
Community Choice Energy: A concept to replicate in Europe or elsewhere?
Cities and local governments in California are certainly gaining momentum in leading the way towards sustainable energy transition. There are some innovative approaches that give a good indication of what can happen at the local level – and not only in California.
Today the focus is on Community Choice Energy (CCE), also known as Community Choice Aggregation (CCA), an innovative business model tailored for cities and local governments that are planning to decrease their overall GHG emissions and to shift towards sustainable energy.
I have been analyzing two projects, Marine Clean Energy (MCE) and Sonoma Clean Power (SCP) in Northern California, and in my estimation, they have proven it right. From the experience so far, the CCE model works and is effective in delivering to consumer reliable electricity generated from renewable energy. Both MCE and SCP offer a higher percentage of renewable energy in their electric service at competitive prices, and in only a few years have contributed, among other benefits, to local and regional renewable development, GHG emissions reduction, and local clean energy jobs creation.
Reality or dream?
Can cities and local governments choose their electricity sources, set their electricity prices, and reinvest the profits in local renewable energy and energy efficiency projects? Yes, they definitely can. CCE allows cities and counties to aggregate and serve the electricity requirements of their residents and businesses, while the investor-owned utilities (IOUs) continue to deliver the power through their transmission and distribution system.
What are the real benefits for cities?
CCE creates competition in the retail market, it provides project financing for renewable energy and energy efficiency investments, and offers several benefits to a local community by giving local control over its energy sources, a choice to the citizens, the potential to provide electricity to its residents at lower costs, and a significant contribution to reduce the GHG emissions.
In Europe, for instance, CCE could be of great support to the EU’s Energy Union policy areas of ensuring energy security, increasing energy efficiency, and significantly decarbonizing the economy. At the local level, the signatories of the Covenant of Mayors for Climate and Energy – with a vision to make cities decarbonized and resilient, with citizens having access to secure, sustainable and affordable energy – could certainly benefit from this model by providing funds to implement the actions outlined in their Sustainable Energy and Climate Action Plan (SECAP).
Can this model be replicated in Europe and elsewhere?
As easy as it seems, the initial process to get CCE up and running requires a considerable amount of time along with a consistent amount of capital. The following are key points to take into consideration for repeater projects:
– Understand your external environment
Analyze the electricity market, the current legislation and regulation, and the consumer’s trends and choices.
In the United States, the Investor-owned utilities – IOUs – and municipal utilities are mostly vertically integrated, thus CCEs face strong opposition from the incumbent utility, which is also their main competitor. In Europe there is the unbundling of the power supply and generation from the transmission, and therefore the market is characterized by retail competition.
– Create a focused mission and long-term vision
It is important to have a clear and focused mission that reflects the organization’s value propositions and key objectives, along with a long-term vision with interim and measurable goals in support of the overall mission.
– Plan carefully
Explore the different renewable energy sources available locally, the funds to dedicate for the investments and the continuous changes in technology.
– Have a diversified energy portfolio and ensure price stability
Market conditions can change quickly, and prices could rise significantly. It is important to build a strong and diverse portfolio of energy resources and to ensure price stability through long-term contracts for the power purchase.
– Put a particular emphasis on customer & local needs
CCE is local, and so it is extremely crucial to know and fill local needs. Strong customer relationship is key to ensuring their loyalty, along with an effective communication channel that delivers the message to them.
CCE Strategy Map
In my research paper I have developed a Strategy Map to provide strategic guidance to cities and local governments that wish to start a CCE:
“Life is a journey, not a destination” – Ralph Waldo Emerson
As we can see, many complex elements have to be brought together from the beginning to ensure a successful CCE. Concerted actions from policy makers, utilities, consumers, and other related stakeholders are definitely needed to guarantee CCE a safe and prosperous journey.
With the Paris Climate Agreement recently entered into force, increasing evidence of the effects of climate change, and more and more cities committing to 100% sustainable energy, CCE concept has the perfect “window” to be replicated, improved and adapted in Europe and more widely globally as a great tool to reduce the GHG emissions in a big way and to shift toward sustainable energy in the years to come.