Consider pros, cons of choosing community choice aggregation to source local electricity

Published on June 03, 2019 by Kim Riley


Warning: Undefined variable $post_id in /var/www/dailyenergyinsider.com/wp-content/themes/dei/single.php on line 31

Warning: Undefined variable $post_id in /var/www/dailyenergyinsider.com/wp-content/themes/dei/single.php on line 36
© Shutterstock

Community choice aggregation (CCA) is becoming a more widespread method for local areas across America to source electricity, according to the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL), and there are pros and cons to consider in deciding if it’s the right choice.

Under CCA programs, cities and local governments generate or buy electricity most often from renewable energy sources based on the needs of their residents and businesses, according to NREL, which notes that CCAs are a hybrid between municipal utilities and standard investor-owned utilities.

Under a CCA program, the CCA purchases the power, while the investor-owned utility maintains the grid and provides customer service, NREL says.

“The increasing interest of local governments and environmentally conscious groups in clean energy, and the gradual improvement in installed cost of utility-scale solar and wind resources, seem to have combined to spark interest in CCAs,” says Cristin Lyons, partner and energy practice leader in the Raleigh, N.C., office of ScottMadden Inc., a management consulting firm specializing in energy.

However, there are challenges, or risks, involved with CCAs.

For instance, Lyons says that community choice aggregators face traditional contract risks in their procurements, such as counterparty performance, deliverability of resources and commodity price.

Additionally, for communities seeking locally sourced renewable resources, Lyons says there may be insufficient physical resources nearby to meet their local needs.

“We would note that there are factors to consider that may not necessarily be categorized as risks, but as realities,” Lyons says, noting that “exiting aggregators may need to provide some compensation to an incumbent utility for supply contracts or generation resources originally executed or built on their behalf, effectively compensating the utility for reasonable stranded costs.”

“This is also important to avoid cost-shifting to non-CCA customers,” she adds.

Further, the aggregator (or the utility or some other party on its behalf) retains ongoing responsibility for system balancing to ensure reliable service. Finally, a CCA does not eliminate the role of the wires company in delivering power and ensuring reliability.

Some of the advantages associated with CCA, according to the U.S. Environmental Protection Agency’s Green Power Partnership (GPP), are a potential reduction in retail electric rates; the capacity to rapidly shift to greener power resources; local control of electricity generation; expanded consumer choices; and the potential to spur local jobs and renewable energy development.

“Advocates tout benefits such as the ability to more closely align energy decisions with policy objectives and citizen objectives, such as procuring renewable resources and implementing energy efficiency programs,” Lyons told Daily Energy Insider.

In some cases, like-minded communities also could band together to improve scale economies, she said, pointing to Cape Light Compact in Massachusetts — the nation’s first CCA — which represents 21 towns on Cape Cod, Martha’s Vineyard, and Dukes County.

“There [also] may be some benefits provided by the aggregator for retail customers who are underserved by competitive retailers,” says Lyons.

In addition to Massachusetts, CCAs currently are authorized in California, Illinois, Ohio, New Jersey, New York, and Rhode Island, according to GPP, and several other states are considering CCAs.

“CCAs are an attractive option for communities that want more local control over their electricity sources, more green power than is offered by the default utility, and/or lower electricity prices,” says GPP.

GPP also points out several challenges, saying CCA implementation is dependent on enabling state legislation and requires successful navigation of a variety of CCA regulations.

EnergySage Inc., an online comparison-shopping marketplace for rooftop solar, energy storage, community solar, and financing supported by the Department of Energy, also notes that CCAs must comply with regulations set in states having renewable energy mandates, just like any utility company generating power.

“However, if there aren’t regulations in the state or local laws about the type of power your government can procure under a CCA, much of the electricity in your CCA may be generated from fossil fuels,” according to the company.

There are also administrative costs, as well as opt-in versus opt-out clauses that may be confusing to consumers, according to GPP.