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The Greening of Utility Customers

A survey finds that consumers would support higher costs of “clean coal” and alternative fuels.

Fortnightly Magazine - September 2007

Climate-change concerns and escalating energy costs have caused many states to introduce voluntary or mandatory programs to support “renewable” or “alternative” energy frequently along with consumer efficiency and conservation measures. Most renewable energy sources have costs exceeding the current production costs of conventional fossil-fuel generation or nuclear power as calculated for utility ratemaking purposes. This means that, absent conservation or efficiency measures, consumers’ bills will increase if the switch is made to renewable energy supply.

How willing are consumers to accept such increases? To answer that question Deloitte surveyed residential consumers a few months ago on the subject. Consumer acceptance of mandatory renewable purchases in spite of an expected price increase in electricity would be critical to continuation or expansion of state programs and such acceptance also would support Senate and House proposals for federally mandated renewable portfolio supply (RPS) programs.

Before the question of price increase acceptance could be asked, we screened the respondents for those consumers who were aware of the terms “renewable” or “alternative” energy. Surprisingly, 70 percent of consumers responded that they were familiar with the terms. Additional questions found that those consumers most frequently identified “renewable” as being associated with solar, followed by wind, ethanol, and hydro. When asked about the public benefits of the use of alternative energy sources, the respondents overwhelmingly said: the environment (86 percent); U.S. energy security (80 percent); and new job creation (76 percent). These consumers also would have no problem with alternative energy facilities within “sight of home,” with 83 percent accepting wind farms and 86 percent accepting solar panels.

More than three quarters of the consumers surveyed believe that alternative energy brought benefits, and a slight majority, 54 percent, would pay an additional 5 percent on their electric bills. This leaves another 42 percent not willing to pay an additional 5 percent on their electricity bills to support government-mandated alternative-energy purchases.

The survey also found that 62 percent would be willing to pay higher rates to support “clean-coal” technologies compared with the slightly smaller number (54 percent) who would be willing to pay more for “alternative energy.”

The survey shows that 30 percent of consumers were not able to identify the terms “renewable” or “alternative” energy. It will be interesting to see if this percentage decreases over the next few years as the states and congress continue to grapple with the issues of greenhouse gases and climate change. There is no doubt that consumer education programs undertaken by advocacy groups, utilities operating under regulatory supervised programs, and “clean” energy marketers will increase awareness of renewable