On May 26, 2023, Brendan Biddlecom of Calpine Energy Solutions gave a presentation at Kendal entitled “Understanding the Power Markets and Green Energy Options”. If you didn’t catch it in person or on Zoom, you can watch the video here. Biddlecom’s presentation answered many questions about how the electricity market in our area works, and what that means for Kendal and Crosslands.
Biddlecom started his presentation by introducing his company, Calpine Energy Solutions. It is a subsidiary of a large power-generation company, Calpine Corporation. Calpine Corporation has dozens of generating plants in various states, but concentrated on the east and west coasts, and in Texas. Almost all are fueled by natural gas.
The subsidiary that Biddlecom works for, Calpine Energy Solutions, is a separate line of business: helping customers to efficiently acquire the electricity they need. Biddlecom is the rep for the KCC account, and in that role he helps us contract for our electricity, balancing the needs for both low cost and price stability. Under our current 3-year contract with Calpine Energy Solutions, Biddlecom said, half of our electricity is supplied at a fixed rate that Calpine Energy Solutions guarantees, and half is variable, depending on the current price in the electricity market. Biddlecom said that his company is constantly in the market, looking to acquire power at competitive prices. He did not know how much (if any) of our power comes from Calpine Corporation, the parent company.
Pennsylvania has a “deregulated” energy market, meaning that customers can buy electricity from any of dozens of suppliers. Some other states have regulated markets, where one utility has a monopoly on the generation and distribution of electricity. In our part of Pennsylvania, our utility is PECO but it has a monopoly only on the wires that deliver power locally. PECO handles power outages and reads all the power meters, but no one is required to buy power from PECO. Other companies (well over 100 of them, I would note) generate the electricity Pennsylvanians use and manage the long-distance (“transmission”) wires.
In the US, most electricity is generated by burning natural gas these days. Use of natural gas is rising, at the expense of declining coal generation. Renewables are rising too, but they are far behind natural gas. Among renewables, wind is the biggest resource, followed by solar. Both are growing rapidly. Here in Pennsylvania, however, the grid is powered by 53% natural gas, 31% nuclear, 12% coal, and a smattering of renewables. Wind, at 1.5%, is the largest category of renewable generation. Solar’s contribution is negligible.
Biddlecom spent some time describing how energy markets work in the regional grid operated by PJM, a non-profit industry association. Pennsylvania is part of PJM. As demand increases, so does that price users must pay generators. These price changes and transactions are handled in an auction that PJM runs continuously on a minute-by-minute basis. At any given time, the generator offering the lowest bid wins the right to sell power into the grid. This is the market in which Calpine Energy Solutions operates, on behalf of its clients including KCC.
How sustainable electricity fits in. About half of the states, including Pennsylvania, have a “renewable portfolio standard” (RPS). This is a requirement for generators to have a certain amount of renewable generation by a certain date. PA’s requirement was 18% by 2021 (including 8% solar and wind). Given the stats above, Pennsylvania obviously fell far short of even that modest goal. Our neighboring states are all well ahead of us in terms of requiring, and actually obtaining, renewable electricity.
As for the US as a whole, its target under the Paris agreement is to get its carbon production down to 50-52% of 2005 levels by 2030. Given the incentives under the Inflation Reduction Act (IRA), that may be achievable, or nearly so. Biddlecom showed an analysis by the Rhodium Group that indicated a reduction of 32-43% by 2030, thanks to the IRA.
Compensating for fossil fuel use. Even if we generate some of our own solar electricity, and buy electricity that has some renewable content, KCC will still be burning some fossil fuels (particularly natural gas) and buying some non-renewable grid electricity for many years to come. Biddlecom finished his talk by touching very briefly on the ways we might compensate for that. He didn’t have time to explain the ideas he mentioned, so I have expanded on his comments slightly in the paragraphs below.
Renewable Energy Credits (RECs) can be purchased as a byproduct of a scheme that rewards those who generate electricity renewably. To a very limited extent, this can compensate for burning fossil fuels. “Carbon offsets” from activities such as tree planting (or saving trees that would otherwise be cut) can help compensate for activities that add CO2 to the atmosphere. But the carbon-offset market is immature and subject to dubious claims and outright scams. A much more credible approach is to purchase metered amounts of electricity derived from specific renewable generation projects. If those projects are geographically nearby, the argument is even stronger.
And of course, the ultimate solution to avoiding the need to compensate for fossil fuels is to convert all your fuel-burning activities to electrical ones and to generate the electricity you need renewably on site, using solar panels and batteries. That would avoid the whole issue of compensation for fossil fuels, but that is in the distant future for KCC—if it ever happens.
For now, KCC does not use any of these compensation mechanisms, and KCC does not require Calpine Energy Solutions to procure any particular proportion of renewably-generated power, which means that the electricity we buy probably generates a lot of CO2. We don’t know. One consequence of this is that we can’t really tell what the “carbon footprint” of our electricity is. Perhaps this can be a point to be discussed in our next three-year electricity contract.
On the Kendal Journey 