What Is Renewable Energy Charge On My Bill?
What is a renewable energy charge?
The renewable energy charge is an additional fee that appears on utility bills to support the development and use of renewable energy sources like solar, wind, and hydro power. Utilities include this charge to comply with state laws and regulations that require them to invest in renewable energy projects. The funds from the renewable energy charge help pay for programs that incentivize renewable energy production and offset costs associated with connecting renewable sources to the electric grid.
According to the Explanation of General Billing Terms from National Grid, the renewable energy charge covers “the cost of programs required by state law that provide support for the development of renewable energy.” Rather than paying for the renewable power directly, the charge helps fund state renewable energy programs and developers to expand the renewable energy market.
The revenue from renewable energy charges is used in various ways depending on the state. Some of the programs and initiatives supported through this charge include: rebates and tax credits for residential renewable energy installations, grants and incentives for renewable energy developers, funding research and development into renewable technologies, and covering above-market costs for utilities to purchase renewable power.
Types of renewable energy supported
Renewable energy comes from natural sources that are continuously replenished. There are several major types of renewable energy used today:
Solar
Solar power harnesses energy from the sun to generate electricity and provide lighting, heating and cooling. Solar technologies include photovoltaics (solar panels), concentrating solar power and passive solar building design. https://www.nationalgrid.com/stories/energy-explained/what-are-different-types-renewable-energy
Wind
Wind power uses air flow through wind turbines to mechanically power generators for electricity. Wind farms consist of many individual wind turbines spread over a large area. Wind power is one of the fastest growing renewable energy technologies globally.
Geothermal
Geothermal energy taps into the natural heat within the earth to provide sustainable energy for electricity generation and direct heating/cooling applications. Technologies range from geothermal heat pumps to conventional geothermal power plants.
Biomass
Bioenergy uses organic matter like plants, wood and waste as fuel for energy. Common examples of biomass include wood chips, corn ethanol, and landfill gas. Biomass can be used to produce electricity, transportation fuels, and heat for homes and buildings.
Hydroelectric
Hydropower generates electricity from flowing water, often using dammed rivers or waterfalls to power turbines. It’s one of the oldest and largest sources of renewable power globally. https://www.un.org/en/climatechange/what-is-renewable-energy
Why utilities have renewable charges
Many utilities now have renewable energy charges because of state mandates that require them to increase the amount of electricity they generate from renewable sources like solar and wind. According to the EPA, over half of U.S. states have renewable portfolio standards that legally obligate utilities to procure a certain percentage of their electricity from renewable sources by a target date [1]. For example, California requires utilities to source 33% of their electricity from renewables by 2020 and 60% by 2030.
These mandates force utilities to invest in building and procuring renewable energy. To help fund this transition, many utilities charge an additional renewable energy fee on customer bills. This charge covers the extra costs of developing renewable projects compared to fossil fuel power plants. According to Better Buildings, renewable energy can require higher upfront capital costs for utilities compared to conventional sources [2]. The renewable charge allows utilities to recover these investments over time from ratepayers.
Many utilities are also choosing to increase renewable generation as part of their own clean energy transition plans. They recognize renewable energy is becoming more cost-competitive with traditional sources. In some cases, renewables like wind and solar can provide lower cost electricity than coal and natural gas [3]. Adding more renewables allows utilities to lower long-term fuel costs and avoid potential carbon regulations. The renewable charge helps fund this proactive transition while maintaining reliable service.
Who pays the renewable charge
The renewable energy charge is typically paid by all customers of an electric utility or supplier that offers green power options. Unlike some voluntary green power programs which customers opt into, the renewable charge is applied universally to all customers in a utility’s service territory.
The charge is generally shown as a separate line item on customers’ electric bills. It is usually calculated based on the amount of electricity used, with customers paying a certain number of cents per kilowatt-hour. So the more electricity a customer uses, the higher their renewable charge will be.
For example, a utility’s renewable charge might be 0.5¢/kWh. A customer using 500 kWh of electricity would pay an extra $2.50 that month to support renewable energy development (500 kWh * $0.005/kWh = $2.50). So all customers contribute to renewables proportional to their electricity consumption.
According to the EPA, the average U.S. household pays around $5 per month for their utility’s green power program (Source). However, the exact cost impact varies significantly by location and individual usage levels.
Cost impact of the renewable energy charge
The renewable energy charge typically adds a small percentage to a customer’s overall electricity bill. According to the EPA, participating in a 100% green power program through a utility costs the average household $5 to $20 extra per month[1].
The charge is usually around 1-5% of the total bill. For example, if the total monthly bill is $100, the renewable energy charge portion could be $1-5. The exact amount varies by location and utility provider. Some utilities bake it into the overall rate, while others list it as a separate line item[2].
So for most households, the renewable energy charge represents a relatively minor addition to the overall electricity expenses. But the extra cost helps support cleaner energy sources like wind and solar.
Environmental benefits
According to the UN https://www.un.org/en/climatechange/raising-ambition/renewable-energy, one of the biggest benefits of renewable energy is reduced emissions. Renewable sources like wind and solar emit little to no greenhouse gases compared to fossil fuels. This helps mitigate climate change and reduce air pollution. The EPA also notes renewable energy results in cleaner energy and air quality by avoiding emissions from coal and natural gas power plants. Widespread adoption of renewables can significantly cut emissions from the electricity sector.
The EPA https://www.epa.gov/statelocalenergy/local-renewable-energy-benefits-and-resources adds that renewable energy improves public health by reducing emissions of sulfur dioxide, nitrogen oxides, and mercury, which cause asthma and respiratory illnesses. The transition to cleaner renewable sources provides environmental and public health benefits.
Criticisms and controversies
One criticism of renewable energy charges is that they can lead to higher costs for consumers. The addition of the charge to monthly utility bills increases the overall price customers pay for electricity. According to a 2019 article, the growth of renewable energy is paradoxically coinciding with rising retail electricity prices in some areas. Supporters counter that the investments will pay off long-term as renewables get cheaper.
Another concern is that the charges subsidize the renewable energy industry. The fees collected from customers help fund the development of solar, wind, and other renewable projects. Without the extra revenue provided by these charges, there would be reduced incentives for companies to build renewable generators. Critics argue the industry should stand on its own without ratepayer subsidies. However, subsidies have historically benefited fossil fuel producers as well.
Future outlook
The future of renewable energy and associated charges looks bright. According to the IEA’s Renewable Energy Market Update, renewable energy capacity is forecasted to grow globally by over 60% between 2020 and 2026. This is driven by continued cost declines and strong policy support. Even with recent increases, costs remain competitive with fossil fuels.
As more renewable energy comes online, charges to support it may increase in the short term. However, in the long run, growth in renewables can help limit the need for new fossil fuel power plants. Over time, the costs supported by renewable charges today may lead to lower overall electric rates.
Some changes to renewable support policies are likely. For example, as costs decline, subsidies may be reduced. There may also be shifts from upfront incentives to market-based mechanisms. But broadly, government and utilities are expected to continue backing renewable energy development.
Ways to Manage the Renewable Energy Charge
There are a few ways for electricity customers to manage the costs associated with renewable energy charges on their utility bills.
Energy Efficiency
One of the best ways to reduce the impact of the renewable charge is to improve your home or business’s energy efficiency. By using less electricity overall, you can reduce the portion of your bill that goes towards renewables. Strategies like weatherizing your building, upgrading to LED lighting, installing a programmable thermostat, and replacing old appliances with Energy Star models can all help curb energy usage and minimize renewable charges. The less total electricity you consume, the lower your bill will be.
Compare Supplier Plans
In deregulated electricity markets where customers can choose their power provider, comparing different supplier plans can potentially reduce renewable charges. Some suppliers may offer lower renewable energy rates or charge a flat monthly fee instead of a per kWh rate. By shopping around, you may be able to find a competitive supplier that can reduce the renewable portion of your electricity costs. However, make sure to evaluate the total bill amount and not just focus on the renewable charge when comparing plans.
Frequently asked questions
Many utility customers have common questions about renewable energy charges on their bill. Here are answers to some of the most frequently asked questions:
What is the renewable energy charge for?
The renewable energy charge helps support the development of renewable energy sources like solar and wind. It allows the utility to recover costs associated with procuring renewable energy and building renewable generation facilities. According to the U.S. Department of Energy, these charges help expand access to renewable energy nationwide (1).
Who has to pay the renewable charge?
The renewable charge is typically mandatory for all customers in a utility’s service territory. This helps spread out the costs more evenly so renewable energy programs can be equitably funded by all ratepayers. Exceptions may apply for some industrial customers who purchase energy directly from competitive suppliers.
How much is the renewable charge?
The renewable charge amount can vary significantly by utility and region. According to the Solar Energy Industries Association, the average residential renewable energy charge is around $5 per month, but it can range from $0.50 to $20 based on your location and utility (2).
Will my bill keep going up because of it?
While renewable charges may increase in the short term as more renewable capacity is added, they are expected to stabilize over time. Once renewable power production reaches targeted levels, the renewable charge should level off and act as more of a maintenance fee. Some utilities have also built in caps on how much the renewable charge can increase annually.
