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Green Power Takes Off with Choice in Electricty

Fortnightly Magazine - August 1998

through the default provider.

In the PECO restructuring decision, the Pennsylvania PUC is requiring the competitive default provider to obtain 2 percent of its electricity supply from non-hydro renewables, increasing 0.5 percent per year thereafter. %n11%n And, although still presiding over a regulated market, the Texas PUC is considering a rulemaking that will require electric utilities to offer their customers a green power purchase option. %n12%n

Blair G. Swezey, Ashley H. Houston and Kevin L. Porter are principal policy advisor, staff analyst, and policy analyst, respectively. Information for this article is drawn from the Information Brief on Green Power Marketing, a quarterly publication produced by the National Renewable Energy Laboratory that is available on the Green Power Network, an internet site maintained by NREL for the Office of Utility Technologies of the U.S. Department of Energy. See www.eren.doe.gov/greenpower.

Pricing Programs

For a premium, offers include energy or capacity

requirements, and funding project development.

CONTRIBUTION PROGRAMS. Customers contribute to a utility-managed fund for renewable energy project development. Fund bears no relation to customer's electricity consumption. Utilities use funds to implement small renewable energy projects in their service territories. Projects may or may not supply actual renewable generation for the customers.

CAPACITY-BASED PROGRAMS. Customers purchase a fixed block of their electric capacity requirements from renewables. To date, capacity-based programs have offered photovoltaics exclusively, in rooftop or localized applications.

The capacity premiums can mask a very high effective energy premium (in cents per kWh), compared with energy-based green tariff programs. For example, a capacity charge of $3 per 100 watts, billed by Arizona Public Service Co., is equivalent to an energy-based rate of 21 cents per kWh. Detroit Edison's capacity charge of $7.30 is equivalent to an energy charge of 62 cents per kWh. (Detroit Edison credits back to customers the value of the PV-based generation.)

ENERGY-BASED PROGRAMS. Customers purchase a portion or all of their electric energy requirements from renewable sources, with the total monthly premium based on quantity supplied. Subscriptions offered in energy consumption blocks (e.g., 100 kWh, 250 kWh, 500 kWh, or 1,000 kWh) or as a percentage of total monthly consumption (e.g., 25 percent, 50 percent or 100 percent). This type of program offers renewables that are most competitive with bulk power generation. Premiums generally range from 2-3 cents per kWh; 16 of 19 offering energy-based programs include wind energy.

1 Barbara C. Farhar and Ashley H. Houston, Willingness to Pay for Electricity from Renewable Electricity, National Renewable Energy Laboratory, NREL/TP-460-21216, September 1996. For a copy see http://www.eren.doe.gov/greenpower.

2 U.S. Environmental Protection Agency, National Air Quality and Emissions Trends Report, 1995, EPA-454/R- 96-005, December 1996. For a copy see http://www.epa.gov/oar/ aqtrnd95/report.

3 Some have argued that the retail pilot experience may overstate future customer response to green power offerings because those predisposed toward green purchasing may also be most inclined to participate in the pilots. On the other hand, green power marketers would argue that as the market opens, customers will become better educated about green choices through industry marketing efforts, thus increasing the numbers of customers willing to