Trending
ESCANABA -- The Escanaba City Council voted to approve the purchase of renewable energy certificates Thursday, but council members raised concerns about the high cost and sustainability of the legally-mandated certificates.
"It's really just an engineered product to drive investment," said City Manager Jim McNeil of the certificates.
Renewable energy certificates, also known as "RECs," function similarly to carbon offset credits or other green energy programs where an entity can purchase the environmental work of another entity. In the case of RECs, utility providers can buy the certificates from renewable energy producers or brokers to increase the amount of renewable energy they can report as part of their energy distribution without actually producing more energy through renewable means themselves.
Up until recently, RECs were optional. However, a state law passed late last year set new renewable energy standards that must be met by utilities. Any utility that doesn't meet the new standards using renewable energy it produces itself must buy the certificates to offset the energy produced through more traditional means, like coal or natural gas.
Starting this year, the amount of power a provider must offer from renewable energy sources is 15%. That percentage will increase to 50% in 2030.
The new law further complicates the REC process by limiting the lifespan of a single certificate to five years. After that, the REC is no long viable, though RECs can be purchased or sold anytime during that five year period to another energy provider, meaning not all RECs on the market have the full five-year lifespan.
The council was asked to approve the purchase of up to $135,000 worth of two-year RECs to meet the new requirements. This was based on an anticipated cost of $4.50 per REC or less, with the belief that the cost of RECs will increase substantially -- perhaps doubling or even tripling -- in the next few years as demand increases due to the changing renewable energy ratio requirements.
Currently, the city needs about 19,000 RECs to meet the 15% requirement. That is in addition the the RECs the city produces itself through its solar farm, located on about eight acres in the city's industrial park.
The ability to produce and potentially sell excess RECs intrigued members of the council. However, with one REC being equal to one megawatt-hour, the council and City Electric Utility Director Gerald Pirkola estimated a $2 million dollar expansion of the city's solar generation system would only yield 5,000 RECs annually -- far less than the city's current need.
While the council agreed that RECs were the more accessible option for the city, they did raise concerns that the cost of the certificates could impact utility rates. Pirkola noted that, while utility rate increases are likely on the horizon, the request before the council Thursday would not impact rates.
"Right now, this $130,000, I don't think it would affect it much, but we are looking at other factors that will affect rates," said Pirkola.
While the city's next fiscal year budget is not yet complete, a rate study for the electric department is expected to be included. The study would look at a variety of factors including the cost of RECs to develop a plan where rates could gradually increase to avoid hitting residents with sudden, high increases.
In other business the council:
-- Approved hiring Power System Engineering to investigate whether the city is able to deregister from it's current responsibilities to the North American Electric Reliability Corporation (NERC). The city initially registered with NERC as part of a mandate when the city operated its own power plant and now is registered at a lesser level. That level requires the electric department to conduct rolling blackouts if the grid is over stressed.
Deregistering would not stop the city from conducting rolling blackouts if necessary, but it could reduce costs for the city by eliminating staff time and work for reports and other compliance measures. If the city could exit NERC entirely, it could save the city as much as $10,000 a year.
-- Approved the purchases of a mini 2023 Caterpillar mini excavator and a Caterpillar wheeled excavator. The equipment will be used to increase efficiency and safety for water department projects, like valve replacements. Together, the purchases will cost the city not more than $414,000, following a trade in of the city's existing mini excavator, which is not powerful enough for the water department's projects.
-- Approved paying the State of Michigan Imagery and Lidar Program (MiSAIL) $12,210.90 to complete aerial photos of the city. The last time the entirety of the city was photographed was in 1998. The images will be used as an overlay for the city's GIS system, which is used by the public, multiple city departments, and engineers doing work for the city.