Business & Money
Investors are asking utilities questions about environmental and social risks. Answers can be a challenge.
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Green Power Takes Off with Choice in Electricty
participation in utility green pricing programs has been quite low-running generally between 1 and 2 percent or less. For the most part, these low response rates can be attributed to the experimental nature of many programs. Many suffer from capacity and subscription limitations, a narrow scope and an inadequate corporate and marketing commitment.
However, the experience in retail access pilots has been much different. %n3%n New Hampshire initiated a statewide pilot program for electric retail access in June 1995, in which about 3 percent of each electric utility's peak load, or a total of about 50 megawatts statewide, was opened to competition. Although market share data has not been made available, a survey of participating customers found that 37 percent were either strongly influenced" or "moderately influenced" by the environmental message or image of their power supplier. %n4%n
Nearby, in Massachusetts, in another experimental program for direct access, Massachusetts Electric Co. opened up to 100 million kilowatt-hours of demand in four cities to competition. Overall 31 percent of residential participants chose an "environmentally sensitive" or "green" service option. %n5%n
And in the most recent retail pilot, 15 percent of Pacific Power customers in Klamath County, Ore., who chose among a portfolio of four services, selected a green power product with 100 percent renewables content at a 10-percent price premium. %n6%n
By mid-June, 18 states had either passed legislation on electric restructuring or had issued regulatory orders by which all customers eventually will be allowed to choose an electric supplier. In California, which initiated full customer choice on March 31, several different companies are offering certified green power services.
Obstacles to Consider
Although customer choice holds promise for encouraging greater development of renewable energy sources, many clean energy supporters argue that there are too many obstacles to the development of a truly competitive market anytime soon.
IS IT REALLY GREEN? It is important to assure consumers that their "green" purchases are actually contributing to a cleaner energy system. However, because the directional flow of electrons cannot be controlled, "green" customers cannot be assured that the power entering their homes actually comes directly from the renewable generators. What matters is that the customer's purchase commitment results in an equivalent amount of clean generation somewhere on the power grid. Also the New Hampshire pilot experience highlighted a number of issues related to advertising and marketing claims.
To help address these issues in California, the independent, nonprofit Center for Resource Solutions, in concert with power marketers and consumer and environmental stakeholders, launched a voluntary certification and verification program for environmentally preferred electricity products. The Green-e logo allows consumers to easily identify products that contain at least 50 percent renewable electricity content. %n7%n
IS IT NEW? The intent of a functioning green power market should be to increase the overall deployment of cleaner energy sources, such as renewables, and thus improve the environmental footprint of the power industry. Utility green pricing programs have resulted in plans for or actual installation of about 35 megawatts of new renewable energy capacity through 1999.
Given their captive market,