The Juice

Palo Alto’s Electric Supply Is 100 Percent Carbon-Neutral

Can other cities follow its example?

Palo Alto still aspires to evolve from carbon-neutral to carbon-free.

Courtesy of Pedro Xing/Wikimedia Commons

Palo Alto, California, is perhaps the most fabulous, smug, high-level-of-being municipality in America. For the combination of the populace’s level of fitness, favorable climate, and the concentration of wealth, achievement, high home values, and the bien pensant, only Boulder, Colorado, and Santa Monica, California, can really give the university town a run for its money. Here’s something that makes Palo Alto just a little more fabulous, smug, and high-level-of-being: The town of 65,000 boasts that, since last year, it is officially the first city in America whose electricity supply is 100 percent carbon-neutral.

This is a great achievement, showing that reducing emissions and maintaining a superlative 21st-century lifestyle are not incompatible. Nobody in Palo Alto is wearing a hair shirt. (Fleeces, yes. Hair shirts, no.) But it’s also important to be realistic about Palo Alto’s experience. There’s a big difference between “carbon-neutral” and “carbon-free.” And Palo Alto has been able to achieve carbon neutrality in large part because it has a set of assets and attributes that most other cities lack.

For starters, Palo Alto is the only town in California that runs its own utility. Its electricity isn’t provided by PG&E, the for-profit, shareholder-owned behemoth that serves much of Northern California. Rather, since around 1900, when Stanford University professors Charles “Daddy” Marx and Charles B. Wing hatched a plan to have the town deliver services, electricity—along with gas, water, and sewage services—has been provided by a department of the city government. (The service area doesn’t include Stanford.)

Municipal ownership partially explains the aggressive push for carbon neutrality. Like every other utility in California, the Palo Alto utilities department is under a state mandate to get 33 percent of its power from renewable sources by 2020. But the Palo Alto City Council in March 2013 decided that the utility should become entirely carbon-neutral as soon as possible. It even created a not-very-good rap video to explain why: “to avoid a future mega ghoulish/say no way to fossil foolish.”

By the time the decision was made, the utility was already most of the way to carbon neutrality. If you want to get polluting sources of electricity out of your generating portfolio, it helps to have a lot of hydroelectric power: It’s cheap and it’s less intermittent than the wind and the sun. Ontario was able to kick coal out of its portfolio in large measure because it can rely on Niagara Falls to produce lots of electricity. Palo Alto has long owned 25 percent of a huge hydroelectric generating facility in Calaveras County, near Yosemite. Combined with other contracts from hydroelectric producers, “about half of our energy in an average year comes from hydro,” says Jim Stack, energy procurement and portfolio manager at City of Palo Alto Utilities. In 2013, as the town’s power content label shows, about 40 percent of electricity used in Palo Alto came from hydroelectric sources.

It also helped that the forward-looking townspeople of Palo Alto have been planting solar panels on their homes and businesses—some 663 customers have a combined 5.65 megawatts of solar-generating capacity on their buildings. That accounts for a couple percentage points of the city’s 180-megawatt peak load. In addition, Stack notes, “we’ve been pushing efficiency measures for a long time to reduce our load.” Over the past several years, the peak load (or the most electricity required at any point) has fallen by between 2 and 3 percent.

To build out its carbon-neutral portfolio, the town struck deals to purchase the output of wind projects including the High Winds and Shiloh wind farms in Solano County, which provided about 12 percent of the town’s electricity in 2013. Another 8 percent came from biomass and plants that burn gas from landfills (which generates carbon but is considered “renewable” because the gas is released by decomposing garbage).

Combined, the hydro, wind, and biomass/biowaste account for about 60 percent of Palo Alto’s electricity use. That’s impressive but still leaves a big shortfall. In 2013, 39 percent of the town’s electricity came from a category it calls “unspecified power”—essentially electricity that Palo Alto buys in the wholesale market. These electrons most likely come from plants that burn coal or natural gas.

To neutralize the environmental impact of this electricity, Palo Alto engages in a bit of financial engineering. In California, entities that operate renewable energy facilities receive renewable energy certificates, or RECs, which they can sell. “For each megawatt of unspecified brown-market purchase we make, we buy one REC,” Stack says. And because renewable energy is booming in California, RECs are cheap—about $1.20 per megawatt hour. Stack said Palo Alto’s utilities divisions, which had revenues of about $100 million last year, spent a little more than $400,000 on RECs to offset its purchase of electricity derived from fossil fuels.

The town’s experience should clear up the misconceptions that renewable, carbon-neutral, or carbon-free energy is prohibitively expensive, or that it causes utilities to incur costs that must be passed on to consumers. In fact, electricity in Palo Alto is cheap. Stack says the typical residential customer pays an average of 13 cents per kilowatt-hour for electricity. That’s about 23 percent below the state’s average electricity price of nearly 17 cents per kilowatt-hour, according to the Energy Information Administration. (Here are the town’s residential rates.)

Palo Alto still aspires to evolve from carbon-neutral to carbon-free. It has made a series of deals to purchase the output of solar farms that are under construction and will be up and running in 2015 and 2016. “The solar stuff in progress will account for 30 percent of our supply when it is on line,” Stack says.

Of course, Palo Alto will never kick carbon entirely, and Stack says he doesn’t even like to use the term “carbon-free.” The output of Palo Alto’s hydroelectric projects falls significantly in the fall and winter, and rises in the spring and summer when the snow melts. “We’re planning on still bringing in electricity from other sources—probably gas plants—during portions of the year,” he says.

“Currently-carbon-netural-and-almost-entirely-carbon-free-in-the-near-future” doesn’t quite have the same ring as “carbon-free.” But the environmental impact is roughly the same.