[BETA] Fortnightly

Green Pricing Premium: Less than it Seems

I disagree with the idea that green-pricing programs with the lowest premiums prove the most popular with residential utility customers, as suggested by the article, "Green Pricing: The Bigger Picture" (Byrnes et al., August 1996, p. 18). And, to the extent that that notion comes from information presented about the SolarCurrents program at Detroit Edison (DE), which I manage, I offer some points in rebuttal.

First, the number of participants may prove misleading. SolarCurrents operates a limited pilot program, offering only 28.4 kilowatts (Kw) of solar-electric service capacity (see table in article, p. 20). Marketed in 100-watt units, this program can serve a maximum of 284 customers, but only if each customer buys the minimum allotment (em at an average monthly increase of $6.59. In our case, the program became fully subscribed with only 195 customers, because a significant number exceeded their minimum capacity allotments and purchased between 200 and 700 watts. While the article attributed the low number of participants to lack of interest, the number actually reflected the greater willingness of our customers to accept the premium price and buy more than a minimum quantity of service. Currently, 70 DE customers have signed contracts (for 9.5 Kw) awaiting the construction of our next solar electric generating plant; more than 500 others have requested contracts since April.

Second, the total paid-in premium may not fairly portray the unit cost. Figure 2, "Average Monthly Premiums," which compared premiums paid or contributed by each "customer," gave an erroneous impression (see p. 19). In some of the programs listed, the customers contribute to a fund but do not receive credit for the energy produced by the renewable generating facilities. Other programs ask customers to contribute a predetermined amount. DE's SolarCurrents program offers customers the opportunity to subscribe for as much service as they choose. Thus, the actual average monthly premium "charged" would be $6.59, but our customers' "chosen" average monthly premium is $9.89. Again, the higher cost shows our customers' desire to purchase a large amount of green-priced energy.

At DE we have marketed SolarCurrents through direct mail to only 80,000 of our 1.83 million residential customers. To date, 265 customers have signed contracts to purchase solar electric service. As in most other green-pricing programs, the percentage of participants falls below projections. The signed contracts represent about 0.3 percent of the customers contacted. As the program matures and expands, we expect the subscription rate to gain momentum.

Our market research indicates that customers will pay between $10 to $20 more per month for solar electric service (em as much as an 18-percent increase in their monthly bills. In fact, SolarCurrents customers are choosing to pay as much as $50 more per month (em increasing their annual electric bills by up to 130 percent. In terms of "willingness to pay," our findings far exceed market projections.

SolarCurrents proves that green pricing has potential even at today's cost. At the cost DE charges per kilowatt-hour, a SolarCurrents program could be taken to the southern or southwestern United States (where