The State of Pennsylvania Doubles its Purchase of Renewable Energy

The commonwealth of Pennsylvania recently reached an agreement with Community Energy Inc. to double its purchase of renewable energy from 10% of its total consumption, to 20%. The commonwealth will increase its annual purchase of renewable energy from 100,000 megawatt hours to 200,000. According to the Department of Environmental Protection's (DEP) press release:

"The contract calls for electricity that is generated 40 percent from wind power and 60 percent from hydroelectric sources. Both produce electricity with zero emissions of air pollution. The 200,000 megawatt hours of renewable energy represent avoided emissions of 951 tons of sulfur dioxide, 271 tons of nitrogen oxide and 123,410 tons of carbon dioxide. Sulfur dioxide and nitrogen oxide contribute to acid rain, fine particulate pollution and regional haze, and nitrogen oxide is also a key component of smog. Carbon dioxide is one of the most potent greenhouse gases."

According to a post gazette article on the issue, though the purchase of renewable energy will be doubled, the commonwealth's electricity bill is expected to increase less than 1%, from 70 million to 70.5 million. The state will be purchasing the additional energy at a premium rate of .34 cents per kilowatt hour. The deal will make PA the largest state purchaser of renewable energy in the nation. The deal should also move it from 12th on the EPA's list of Top 25 Green Power Partners, to 5th.

Two important lessons can be learned from the commonwealth's new deal. First, increasing its purchase of renewable energy by 10% does not break its budget, as PA's elecricity bill will increase by only 1%. Second, as one of the largest consumers of electricity in Pennsylvania, the state government used its status to bargain the price of the electricity down to only a .34 cent per kilowatt hour premium over traditional electricity. This stands in stark contrast to the 2.5 cents premium per kilowatt hour currently charged to PA residential customers. Using its status as a bulk power consumer allowed the state government to purchase renewable energy at an 86% discount over what residential customers pay. As one of the largest consumers of energy in western PA, the University of Pittsburgh would also be in an excellent position to negotiate a favorable deal. A 50% discount over what residential customers pay would reduce the additional amount needed to purchase 100% renewable energy from $2.25 million to $1.125 million. Purchasing 10% renewable electricty would cost the university only an additional $112,500 annually.