The green energy industry marketing to individual consumers (“retail energy”) has a problem. Energy Service Companies (ESCOs) have developed a bad reputation for "bait and switch" tactics. Consumers don't know who to trust.
One way to re-establish trust is to change the pricing model to align with consumers.
That is not all. Consumers of retail energy are also confused.
What exactly is an ESCO and how are they different from the utility company? What is a green energy company? How do Tesla tiles differ from regular solar roof tiles? Should they do solar tiles or green energy?
Dr. Chang's Questions
Professors at universities are a tough crowd. They ask a lot of questions. They often have trust issues with the free market.
A few weeks ago, I came across one of those Professors. His name was Dr. Chang. He lived in Rochester, NY. His local utility was Rochester Gas & Electric (RG&E).
Before being willing to speak with me, he asked for a reference from an ex-Professor from Cornell University (one of my alma maters)! Once I did (why I have no idea) he finally confessed his problem.
He was confused. Really confused. Confused about all these renewable energy options being presented to him. How were they different and what were the pros and cons of each?
He had spent a small fortune on getting Tesla solar tiles installed. After all, like many academics, he wanted to replicate the commitment of his university to renewable energy. Despite his investment he wasn’t seeing solar credits on his utility bill.
He was also getting flyers in the mail about green energy companies. It left him perplexed. What did all of these alternatives mean?
Which path would allow him to both save money on his utility bill but also reduce his carbon footprint?
What he needed, he said, was an independent energy consultant. Someone who could help him figure out which of these options made the most sense for him.
Answers for Dr. Chang
I spent a lot of time educating Dr. Chang on his renewable energy alternatives. Perhaps some of the answers will help you.
1) Why wasn't he getting solar credits on his utility bill from his Tesla Tiles?
Before he left, the successful door-to-door salesman didn't explain a few things to Dr. Chang. The key to Tesla tiles is not the tiles. The value add is the battery. The tiles store energy in a battery. Only when the battery is full will his electricity be sold into the grid.
In his case, his consumption of electricity did not exceed the supply of power stored in his Tesla battery. Therefore, there was no surplus to sell into the utility grid.
That is why he was not seeing solar credits on his utility bill.
In addition, there were upfront and monthly fees - with Tesla tiles - which needed to be paid to set him up for selling back into the grid. He never paid those fees. Therefore, it wasn’t physically possible for him to sell power back to the grid – even if he had a surplus.
2) What is a "green energy" company?
These green energy companies leaving flyer in his mailbox are ESCOs. If you want to know what an ESCO is, go here.
A "green energy" company is effectively an ESCO which sources some of their energy - somewhere in the US - from renewable energy sources. For example, many green companies source energy from wind farms in Texas.
3) Which is the best?
It depends. If you want to increase the value of your property, then solar tiles may or may not do this. To the extent these tiles ruin curb appeal they may decrease the value of your property. To the extent they save on electricity costs they may add to the value of the house.
If you live in an apartment or have a roof with too many trees surrounding it, preventing direct sunlight, then you might want to consider a green energy company.
This leaves another problem: how do you find a ethical ESCO that sells you green energy?
Energy Retailers Don't Know How to Price their Product
During my over 20 years’ experience in renewable energy finance, I've always wondered why retail energy is priced the way it is.
In particular, it is not performance based. You get charged on the amount of energy you use – not on the energy you save. If you use 140 kWh (Kilo-Watt Hours) of electricity in a month, you pay for each KwH you use.
The utility doesn't tell you how to reduce the per kWh cost. Nor do they incentivize you to save on utility bills. In fact, if you pay more the utility makes more; if you reduce your utility bill, they make less.
The utility might suggest ways of decreasing your energy usage (e.g. switch to less bright light bulbs) but not how to "optimize" the sources of energy supply (in contrast to the "delivery" charges for electricity which are regulated and fairly constant).
NYS Retail Energy Deregulation Created a New Problem
Deregulation of retail energy in New York State did a great service by adding choice for consumers. It deregulated the “supply” of electricity but kept the delivery of that electricity regulated. You kept your utility and they would continue to bill you.
Despite the benefits of choice, this created a new problem which Dr. Chang fully articulated. How was he to figure out how to minimize the utility bill through the "mix" of choosing the right suppliers of energy?
What he needed was not just an energy consultant to advise him on which alternative to choose; he needed to outsource the decision to an independent third party which made the decision for him.
As of today he is in luck. He can now get exactly what he needs.
Enter the New and Improved Way to Price Energy Consumption
What would make a lot more sense is to align the incentives of the energy seller with the energy buyer (the consumer like you).
A few industries already do this. In the Hedge Fund industry (basically money managers for the rich) the fees paid go up when the performance of the fund goes up; they go down when the performance of the fund goes down.
Why can't energy be priced that way?
That is to say, it makes a lot of sense to pay more when savings are more - while paying less when savings on utility bills are less.
Enter a New Kind of Energy Company
Apparently, I'm not the only one who's wondering why energy is priced the way it is.
There's a new company in town. It is wondering the same thing.
In particular, they act as the energy consultant Dr. Chang was talking about.
They not only help you figure out all the confusing alternatives you face - they make the choice for you. Most importantly, they optimize the mix of energy sources to maximize the savings on your utility bill. You can choose how much of this energy is green energy.
What makes them different is the way they charge for their expertise. They charge a percentage of your savings.
If you don't get savings, they don't get paid.
Their incentives are aligned with yours.
Furthermore, they make life a lot simpler. They read the fine print of the different suppliers for you.
They even make the sign-up process easy. You pick the amount of renewable energy as a percentage of your total utility bill. They provide you with an estimate of your monthly savings before you sign up.
Do you qualify? You need to find out. Send me your name, email and zip code in the green form below.
Lower Utility Bills with Green Energy
Get more information and details on how to apply.
Note: Currently only available to residents with Zip Codes in New York State
sweet, never knew about this. does this apply to a frat house?
Hey, Jake. Thanks for your comments. Yes a frat house qualifies. Any residential unit in the State of New York might qualify based on availability.
Based on the zip code you submitted, unfortunately, you would not qualify at this time because you are in Miami. At present this program is not available in Florida. However, we’ll keep your information on file in case this program eventually becomes available in Florida.
I own a small pizza store. How do I find out if my business qualifies? This sounds more like a plan
It depends. Some utility bills have a code which shows they are commercial. These will probably not qualify. However, others are small enough to qualify even if they are businesses. Suggest you fill out the green box in the post and they will let you know.
Have heard bad things about these fly-by-night energy companies. How do I know I can trust the company you are talking about? Also, what’s all the secrecy about?
You are right. You can’t trust a given ESCO. That’s why you need an independent third party like the one we’ll hook you up with. As for the secrecy, I need to qualify any (e.g. diversification of zip code) potential applicants before sending out more information.
so what’s the company you’re talking about?
There is a limited number of available slots. This is because the program is in testing mode. Therefore I’m not giving out the company name yet because I don’t want to flood them with applications and fill out the slots from one region or one type of household.
Provide me the info on the box in the post, we’ll qualify you, and if it makes sense we’ll send you more information.
sweet, dude. I’m in. how do I join?
Provide the info in the green box (on the post) and you’ll be sent the necessary information.
How much will I save?
It depends. Send in the info we need and you’ll be sent the information they need to determine the savings possible.
Not sure I understand. I live in Rochester. Would this work for me? How do you get the savings? Like what is the way the company gets you savings when other people don’t?
They do it by deploying their commercial level understanding of which supplier of energy (for your electricity) is trustworthy and saves you the most money, while offering the maximum carbon neutrality.