There’s strength in numbers, according to the well-known saying, but what if that axiom was key to empowering entire cities to shift their power supply to renewable energy sources like solar and wind power?
It may sound like a weird trick, but bundling together power demand from thousands of utility customers into one large pool – a practice known as municipal aggregation – is doing just that in cities across the United States, and Illinois is leading the trend.
91 cities in Illinois have used aggregation (officially called Community Choice Aggregation (CCA) in the state) to switch their electricity supply to 100 percent renewable energy since 2009 through the state’s competitive retail energy market, according to the recent report Leading from the Middle.
That’s a success story by itself, but the benefits of aggregation go further by reducing pollution, saving ratepayers millions, boosting demand for renewable energy, and providing dedicated revenue to clean energy projects.
But before we get to the benefits, first a primer on how the weird trick works. Once authorizing legislation becomes law in a state, individual communities can vote to allow local governments to “bundle” their demand into one large pool. Illinois isn’t alone in allowing municipal aggregation – California, Massachusetts, New Jersey, Ohio, and Rhode Island also allow some form of aggregation – but it’s been the most successful state by far.
That community then issues an RFP for independent power suppliers to serve its demand based on specific criteria through a competitive market (i.e. all-renewable or lowest price). By negotiating with suppliers on a bulk basis, the community can secure cost savings or cleaner energy commitments.
Since electricity flows across power lines according to the laws of physics not contractual relationships, buying electrons from specific generation sources across the grid is nearly impossible. Instead, most aggregated renewables are supplied in the form of renewable energy credits (RECs). Each REC represents one megawatt-hour (MWh) of electricity generated from a qualified renewable generation source, driving revenue toward solar or wind projects.
Illinois’s all-renewable cities represent 1.7 million consumers, have boosted annual demand for renewables by over 6 terawatt-hours (TWh), and have reduced emissions equal to taking one million cars off the road or 250,000 homes off the grid.
Aggregation also creates benefits even if the cities don’t choose 100 percent renewables. More than 600 cities across Illinois have opted to aggregate demand for residential or commercial customers and then “shopped” for the best power deal.
Chicago, by far the largest aggregator in the state and country, used the bulk buying power of 900,000 customers to switch from 40 percent coal to five million MWh of electricity generated by natural gas and wind. Initial analysis of the 27-month contract estimates it will cut energy use 28 percent, avoid nearly 560,000 metric tons of greenhouse gas emissions, and save city residents hundreds of thousands in energy bills.
Fortunately for non-aggregated cities in Illinois and the other five states allowing aggregation, the Leading from the Middle report compiles best practices and is a great resource on how to get the greenest power deal possible and expand aggregation’s overall footprint. The report encourages cities to:
Request a local clean energy carve-out – Chicago mandated their power mix include five percent electricity from wind farms in Illinois, but cities can also build their own renewables and ask the competitive supplier to purchase power, capacity, or RECs from that project.
Invest in new local renewables – Cities can create a community clean energy fund for new renewables with a lump sum from the power supplier, a dedicated percentage of consumer rates, or bundled RECs through the power supplier.
Expand transparency of power content labeling – Cities can demand competitive energy suppliers verify their green energy claims by disclosing the type of power mix they supply or where generation is located, either of which can be used by cities to identify the most sustainable power supply.
While aggregation clearly has the potential to boost renewables, it’s far from a clean energy panacea. The largest competitive electricity suppliers (usually the ones with adequate resources to meet aggregated demand) often have coal or natural gas assets in their fleets. Some observers have also voiced concerns over the impact out-of-state RECs have on new renewable development in local markets.
In addition, the very nature of both competitive energy markets and the legislation enabling aggregation can cause logistical headaches down the road. Power prices in a competitive market fluctuate with macro energy trends, meaning consumers can pay more than initially expected. Opt-out language in CCA laws often allows consumers to leave the aggregated pool, creating uncertainty about overall power demand and limiting cities to relatively short-term contracts.
But even considering these caveats, aggregation stands out as a promising policy. And as more and more cities adopt the practice, the economic and environmental benefits make it seem less like one weird trick and more like one powerful tool for decarbonization.