Feb. 4, 2016

By Mark Golden

Following the recommendation of four Stanford students, East Palo Alto’s City Council on Feb. 2 took the final step in joining Peninsula Clean Energy, which will supply San Mateo County residents and businesses with cleaner electricity at likely lower rates than that from investor-owned utility PG&E.

The graduate students worked with East Palo Alto staff to evaluate the possible benefits and risks of joining the non-profit Peninsula Clean Energy. They presented their analysis and a recommendation in favor of joining to the City Council in December. The work was part of a Stanford course, the Energy Transformation CollaborativeAbout $7 million a year in electricity supply is at stake.

“I think we were inclined to join, but it wasn’t certain. There were many doubts, questions and valid concerns,” said East Palo Alto City Manager Carlos Martinez. “The students clarified many of those questions and assessed multiple risks of joining. This work facilitated the City Council’s decision to join.”

Andy Karsner, left, with some of the students in the course Energy  Transformation Collaborative, fall 2015. Clockwise from upper left: Tha Zin, Perry Simmons, Ryan Coakly, Ina Quimosing, Mia Bernardino and Laurel Mills. PHOTO: Mark Shwartz

The course last fall had four student teams work with East Palo Alto to address major challenges in sustainable energy, water, transportation and housing. With about a fifth of its 29,000 residents living below the poverty line, East Palo Alto faces more challenges with fewer resources than most towns in Silicon Valley. Peninsula Clean Energy promises electricity produced more renewably and at slightly lower cost than that from PG&E, but the upstart cannot guarantee lower prices for years to come. That concerned East Palo Alto staff.

“We think that the risk of electricity costs rising is very, very small,” said Martinez. “I don’t know yet what the balance of lower prices and increased renewables will be, but we are confident that whatever they propose at the beginning will be lower. Otherwise, we have the option of bowing out.”

Tight deadline, high stakes

The four first-year graduate students on the class’s energy team—all studying civil and environmental engineering—faced a tight deadline. Cities in San Mateo County must join Peninsula Clean Energy by Feb. 29 to become founding members, which offers some advantages. By California law, cities must take several steps to join. And first the students had to convince East Palo Alto staff to take them seriously, gather and assess much information, and make a recommendation to city administrators and the City Council.

“We realized pretty quickly that Peninsula Clean Energy is going to happen,” said one of the students, Perry Simmons, who had just arrived from Raleigh, N.C. to start a master’s degree program when the course began. “Founding members get a seat on the board of directors. East Palo Alto faced the opportunity from implementation to prioritize rate savings on behalf of low-income customers and to advocate for solar power projects to be built in East Palo Alto.”

“But the city staff didn’t really have the time to examine the risks and benefits, which are complex,” Simmons said. “They have so much to deal with every day to just make the city run. My eyes were opened throughout, and we all came to really care about the community.”

East Palo Alto managers were skeptical that Peninsula Clean Energy could beat PG&E on price for the next 10 to 15 years, given the utility’s decades of experience managing risks. Today’s low prices for natural gas, which is used to generate a lot of electricity, make risk management seem easy.

“I was impressed that these engineers heard and addressed our financial and policy concerns,” said Brenda Olwin, the city’s finance director. “They were creative about contacting industry experts to gather energy policy information that I wasn’t aware of although I had some familiarity with (these organizations) from a previous job.”

The students stayed behind after the fall term ended to make their presentation to the City Council. Perry and fellow students Lauren Shwisberg, Terra Weeks and Tha Zin, as well as teaching assistant Rob Best, continue to work with East Palo Alto on implementing other clean energy recommendations as volunteers.

A growing movement

“A new era has begun,” said Andy Karsner, who taught the class with Stefan Heck. “American citizens and communities are exercising their right to produce and procure their own electricity. And increasingly they’re choosing a smaller carbon footprint without giving up comfort, affordability or reliability.”

“This is eroding the position of government protected investor-owned utilities,” said Karsner, former U.S. assistant secretary for energy efficiency and renewable energy. “Monopolies don't innovate, but Californians do. East Palo Alto is empowering its residents with greater community self-reliance, and significant economic and environmental benefits."

Marin County started the first of what are known as “community choice aggregators” in California in 2010. Sonoma County followed suit in 2013, and the City of Lancaster in southern California did so in 2014. About 20 California counties are establishing community choice aggregators or studying the possibility.

Utilities still transmit the power and bill customers, but the non-profit aggregators must manage the market risks of volatile energy prices. Customers can opt out and continue with the investor-owned utility. About 10 percent have done so.

“Ultimately, Peninsula Clean Energy will have to put a strong management team together to manage the risks,” said Simmons. “But I think the local nature of these organizations is a good motivator. The customers are your neighbors.”

Customers of existing community aggregators save a few dollars a month on electricity that is at least 50 percent renewably sourced, compared with PG&E’s 27 percent in 2014. Aggregators and PG&E both offer 100 percent renewably sourced electricity at premium rates. All California utilities must ramp up to 50 renewable power by 2030.

Peninsula Clean Energy plans to follow the same model, though it could offer consumers a third option: the lowest possible rates with electricity that meets the state’s minimal requirement for renewable energy. It plans to start delivering electricity in August. Other founding members include Atherton, Half Moon Bay, Menlo Park, San Mateo and San Mateo County, which is leading and funding the initial work. Seven other cities are on the verge of joining. (Palo Alto has its own municipal utility, and Stanford—like many large organizations—buys and produces energy for itself.)

Daniel Arvizu, consulting professor and former director of the National Renewable Energy Laboratory, is teaching the Energy Transformation Collaborative this winter and spring terms. The course is supported by philanthropic sponsors, the Stanford President’s Fund, the School of Earth, Energy & Environmental Sciences, and the Precourt Institute for Energy.