For-profit energy efficiency programs are coming. Duke Energy proposes to align the interests of shareholders and retail customers within an expanded least-cost approach. Convincing regulators...
Green Power Marketing
participating residential customers and 3 percent of participating businesses selected green power options.
While these results look encouraging, it must be remembered that most consumers did not switch suppliers. In Massachusetts, for example, the residential program is only 60 percent subscribed, and 96.5 percent of all eligible consumers have stayed with their existing supplier. In other words, only about 1 percent (31 percent 3 3.5 percent = 1.1 percent) of eligible residents selected a green power product in Massachusetts. These findings suggest that while suppliers can use environmental claims to capture part of the residential market, a large fraction of customers are likely to stay with their existing supplier, at least initially.
Moreover, it is important to note that green products in both Massachusetts and New Hampshire have not always involved renewables. In New Hampshire, which set few restrictions on supplier participation, green offerings have ranged from bird feeders, to tree seedlings, to a no-nuclear, no-coal, no-Hydro-Quebec portfolio. Massachusetts has taken a more controlled approach, selecting six companies to offer several specific products. Even so, green offerings have not always benefitted renewable power generators, particulary non-hydro generators.
California will provide the first real opportunity to test the appeal of green power marketing in a competitive context. With retail access set to begin in January, several energy service providers are planning to offer renewable energy products, including Green Mountain Energy Resources, Enron, Edison Source, and PG&E Energy Services. Others, including Foresight Energy and PacifiCorp, will target the wholesale market for renewables.
Add Private Benefits
Only the "greenest" of consumers will contribute to green power programs for purely altruistic reasons. One way marketers can attract more customers is by adding personal, private value to the environmental benefits green power products already provide.
Green marketers may want to begin by emphasizing that a green product is a premium offering, not a social program. Green products should also be as tangible as possible so that customers have a better sense of what their money is buying. Here are some ways to make green power products tangible:
Charge a premium rate for renewably generated electricity rather than asking for donations.
Offer renewable electricity in blocks (i.e., individuals can purchase 25 percent, 50 percent, 75 percent, or 100 percent of their electricity from renewables).
Sell project shares (i.e., kW) rather than energy output (i.e., kWh).
Offer rooftop or community-based photovoltaic systems or local wind projects, as the Sacramento Municipal Utility District and others have done to good effect.
More generally, bundling private goods (the benefits of which only paying individuals enjoy) with public goods can greatly reduce incentives to free-ride. Though these private goods should not substitute for the primary green product, they can supply an important source of additional value to the customer. Some green power marketers have already used this approach, and have offered:
price stability on the renewables component of electricity purchases;
stickers, decals and other promotional and/or informational material;
membership kits that include discounts on environmentally friendly products;
matched donations to local environmental projects;
tree seedlings and bird feeders;
energy-efficient products and