Green Power Takes Off with Choice in Electricty

Fortnightly Magazine - August 1998

FOR THE FIRST TIME IN DECADES, A GROWING NUMBER of consumers are able to choose who supplies their electric power and, perhaps more importantly, where that power comes from. Evidence is mounting that this ability to exercise choice may give a long-needed shot in the arm to the deployment of renewable energy technologies.

National polls consistently reveal that between 40 and 70 percent of those sampled say they would pay a premium for environmental protection or for renewable energy, and utility company surveys reinforce those findings. %n1%n Utilities, affiliates and independent power marketers have all begun to act on this widespread public support, offering environmentally preferred power products and services through various "green power" offerings.

The source of power is important because the electric power industry is a leading contributor to the nation's air quality problems. According to the U.S. Environmental Protection Agency, electricity generation is responsible for 66 percent of sulfur dioxide, 29 percent of nitrogen oxide, 36 percent of man-made carbon dioxide and 21 percent of mercury emissions. %n2%n

Whether green power marketing will add substantially to existing renewable capacity levels, in the absence of policy actions, remains uncertain. So far, states with pilot programs or mandated direct access for electricity supply have seen a marked increase in green power marketing, with multiple services and product offerings coming both from utilities and competitive retail power suppliers.

Nevertheless, many supporters of clean energy argue that too many obstacles stand in the way of a truly functioning, competitive retail electricity market. The new market rules being crafted by state legislators and regulators will dictate the pace and success of green power marketing, as will the ability of those customers who choose to remain with their incumbent providers to have access to green power options.

Green Power Programs: Pricing vs. Product

Green power programs can be distinguished in one sense by the difference between pricing options and product marketing.

More than 30 utilities have either implemented or announced plans to offer a "green pricing" option to their customers. Green pricing refers to an optional utility service that allows customers to support a greater level of utility company investment in renewable energy technologies. Participating customers pay a premium on their electric bill to cover the incremental cost of the additional renewable energy. Green pricing programs come in three basic types. (See sidebar, "Pricing Programs.") Many utilities are offering green pricing to build customer loyalty and expand business lines and expertise in advance of electric market competition. Tables 1 through 3 summarize the different green pricing programs now being offered by utility companies.

Compare green pricing with the more general concept of "green power marketing." The latter describes the ability of customers to purchase green power in a competitive market, one in which multiple service offerings and suppliers exist, many of whose sole business purpose will be selling cleaner power. Retail access pilot programs have provided direct market evidence that many electricity consumers, when given real, competitive market choices, do value and will pay more to purchase electricity from more environmentally beneficial energy sources.