Viewing electricity as an undifferentiated commodity, economic rational choice theory (RCT) tells us that individuals and communities will choose the lowest cost provider regardless of the source. However, there are a growing number of examples where this is not what is happening in the marketplace. Individuals or communities who adopt distributed energy, abandon incumbent utilities, and source their own low-carbon electricity, are often making judgments—and purchasing decisions—that reflect personal or community values.
In The Full Cost of Electricity (FCe-) study, our white paper (Integrating Community Values into the Full Cost of Electricity [PDF]) discusses recent examples where public values impacted community decisions about local electricity supplies. The success of public policies coupled with technological advances in manufacturing and design are lowering the cost of distributed energy systems like photovoltaics, making it much more feasible for individuals to generate their own electricity.
These policies and advances are also enabling a parallel movement: community or values-based energy systems. Four common expressions of this movement are considered here:
- District energy utilities
- Community-owned renewable generation
- Community approved use of eminent domain
- Community Choice Aggregation
District energy systems allow power, heating, or cooling to be generated at a central location in a neighborhood to serve a defined local area. The energy sources used are often waste heat or steam from some nearby process, like waste water treatment. In dense urban settings, they can provide another option to provide heat and light for neighboring buildings.
Community-owned electric generation provides a similar model to district energy systems in which energy is produced and used locally, often on public land, with public values providing a key motivation for initiating the projects. This mechanism enables anyone in the community to participate in a renewable energy system whether they own a home or not. The community will own a wind turbine or photovoltaic installation within a city park, for example, and the electricity from that renewable source is available to community members. Thus renters and businesses in leased buildings, which normally don't have the option to install rooftop solar panels, are then able to choose to source their energy from that shared community asset.
Eminent domain is an option for community-owned utilities (municipalities) to potentially “retake” a utility from private to public ownership, and in doing so it offers a way for a community to express their values. In November 2003, the city of Boulder, Colo. voted more than 2-to-1 against an initiative of the incumbent monopoly utility that proposed restricting Boulder’s exploration of a locally-owned alternative. Consequently, Boulder has envisioned a city-owned electric utility that “maximizes local benefit rather than shareholder returns, that generates power in town rather than importing it, and that maximizes renewable energy instead of clinging to fossil fuels,” according to Grist.
Community Choice Aggregation (CCA) provides communities with an alternative to eminent domain that allows for values-based choices in electricity generation, but allows community members to opt out of that electricity source and leaves ownership of the transmission and distribution assets with the incumbent utility. CCA allows communities to pool electricity demand in order to purchase power on behalf of residents, businesses, and municipal facilities within the jurisdiction. Six states passed CCA laws as part of electric restructuring legislation in the late 1990s and early 2000s: California (2002), Illinois (2009), Massachusetts (1997), New Jersey (2003), Ohio (1999), and Rhode Island (1997).
Community energy, in any of these four forms, may be dismissed as a small or insignificant trend. But such a dismissal seems premature. The present business model for production and delivery of electricity to consumers is a complex web of processes managed by the federal government and various states (see the Full Cost of Electricity’s white paper and blog on History of the U.S. Electric Industry). The current patchwork has evolved through attempts to meet local needs in the most efficient way, at the lowest cost, while mitigating any negative effects of local decisions on the wider population. But the historic balance achieved in the United States is being undercut by today's changing technology. When viewed in this context, community energy efforts may be the initial steps towards another re-definition of the electricity delivery business model, bringing decisions from the state level down to much smaller communities.
Carey W. King is the assistant director and a research scientist at the University of Texas at Austin Energy Institute.