Could Franchise Agreements Help Your City Reach 100% Renewable Energy?

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As of today, 138 cities have formally announced 100% renewable energy goals or targets, while others are actively considering similar goals.

Cities have a wide variety of renewable energy procurement options to help them achieve their goals. One such option available to cities is leveraging an electric franchise agreement to partner with their local utility on new renewable energy projects or programs. Franchise agreements are contracts between municipalities and electric service providers that grant the utility authority to serve customers in the municipality. The agreement also typically structures the utility’s activity in the public right of way and includes a fee remitted back to the municipality. These agreements can be mutually beneficial. Utilities have clarity on what activity is allowed in the public right-of-way, while the city receives revenue into the general fund that can support city services.

Some cities have successfully negotiated clean energy objectives such as energy efficiency, resilience, and renewable energy into their franchise agreements. In other cases, cities have signed separate agreements relating to these objectives in parallel with their franchise agreements. When these agreements are implemented, a city and utility then work together to deliver on a variety of outcomes, including new energy-related projects.

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Illustrative example of a franchise agreement partnership

New National Renewable Energy Laboratory (NREL) research provides the first available analysis of franchise agreements nationwide. The analysis evaluates the extent to which municipalities have the authority to enter franchise agreements, how many have pursued additional energy objectives in or alongside their agreements, and to what effect.

From a dataset of over 3,500 franchise agreements, the authors conclude that cities in 30 states have the opportunity to pursue franchise agreements, while municipalities in 20 states may be prohibited or otherwise precluded from pursuing this option.

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States where municipalities can pursue electric franchise agreements with electric service providers.

In those locations where municipalities can adopt franchise agreements, cities have been partnering with their local utility on new renewable energy projects and programs. A number of cities have successfully incorporated renewable energy into or alongside their agreements, including:

  • Chicago, Illinois
  • Denver, Colorado
  • Sarasota, Florida
  • Minneapolis, Minnesota; and
  • Salt Lake City, Utah

The lessons learned from these case studies and the findings from the nationwide dataset provide municipalities with guidance on what they might expect in franchise discussions, as well as the potential relative impacts and benefits from addressing energy objectives through or in parallel with franchise agreement negotiations.

Planning to be at City Summit in San Antonio later this month? Join NLC and NREL on November 22ndfor the Breakthroughs in Sustainable, Livable Cities: 2020 and Beyond world cafe. We’ll be discussing franchise agreements and more.

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About the Author: Jeff Cook is a member of the Market & Policy Group in the Strategic Energy Analysis Center at NREL.