This blog is designed to highlight the diversity of views and news stories on urban energy topics that appear daily in the media. They are intended to provoke discussions on how cultural, geographic, political, and institutional influences shape the way energy markets operate and energy policies are made in cities around the world.
Wednesday, September 12, 2012
SF clean-energy program may profit Shell
Phillip Matier and Andrew Ross
San Francisco Chronicle
September 11, 2012
In an ironic twist, San Francisco's effort to go green with its own clean-energy program could wind up adding tens of millions of dollars to the coffers of one of the biggest oil companies in the world - Shell.
Under the terms of the CleanPowerSF program now before the Board of Supervisors, the city would contract with Shell Energy North America - a subsidiary of Shell Oil - to provide households and businesses with 100 percent renewable electricity.
The original idea was simple enough: Buy five years of clean energy on the open market and resell it to locals who want to go green.
The politics were equally attractive: Break the stranglehold that Pacific Gas and Electric Co. has long had on consumers, while encouraging the growth of local green alternatives like wind and solar power.
But the final product isn't what everyone expected.
For starters, Shell Energy - whose parent company just started drilling for Arctic oil off the coast of Alaska - wound up winning the contract.
"Unfortunately, as much as we've tried, Shell was the only company that was responsive to the city's bid process," said Supervisor David Campos, who has taken up the green energy cause at the board.
Having Shell as the city's green alternative is just one of the potential troubles the five-year, $19.5 million deal is encountering.
The initial sales pitch also included the idea that the program could beat PG&E prices. Instead, both the city controller and budget analyst have concluded that it could actually cost the average household nearly 23 percent extra.
What's more, PG&E has just filed papers with the state Public Utilities Commission announcing its intention to start offering its own 100 percent green energy program in competition with Shell, and probably at a cheaper rate.
If San Francisco's program can't compete or goes sideways, the city would be on the hook for Shell's losses, which could total $15 million or more, says the budget analyst.
According to city fiscal experts, about 90,000 ratepayers - or about a quarter of the city's residential customers - will need to sign up for the green program to break even.
Mayor EdLee has begun to express concerns over the risks and costs, including a provision that would automatically enroll San Francisco ratepayers - meaning that anyone who didn't want to participate would have to request to opt out within 60 days.
"He looks forward to a robust discussion at the board on this," said Christine Falvey, the mayor's press secretary.
Proponents counter that it is worth the gamble. They say going green may not be easy out of the gate, but that in the long run it will pay off.
"The hope is once we bring in enough revenue through the program, we can build it out to generate our own wind and solar energy and we don't have to do business" with companies such as Shell, Campos said.