Keeping It Clean
A surprising 20% of customers are voluntarily paying more for “green” electricity in half a dozen pilot projects around the nation, according to a study funded by 40 major public utilities.
The findings--the first real-world evidence that sizable numbers of customers will pay extra for power from so-called clean sources such as solar or wind--have significant implications for the rapidly deregulating electricity market in California and elsewhere.
It shows that when given a choice, a “significant segment of consumers” will pay premiums of up to 10% for environmentally clean energy, said executives at Xenergy, the Burlington, Mass.-based consulting firm that surveyed about 25,000 customers in Massachusetts, New Hampshire, New York, Ohio and Illinois.
This improves the chances that such energy can legitimately compete with more traditional sources, such as natural gas and coal. The widespread assumption among power companies and policymakers has been that alternative energy sources will continue to need taxpayer subsidies to reduce their prices to market levels.
The survey found that a large share of residential consumers--but a much smaller percentage of businesses--respond well to “green” marketing, whether the green refers to the source of the power or the agenda of the provider. For example, some marketers did well selling natural gas but promising to donate a portion of profits to environmental causes.
“Saving the planet is worth a little extra money. If we can do anything for the environment, I think we should do it,” said Maureen Tilly, a registered nurse and resident of Lynn, Mass., who chose green energy at a cost of more than 5% over the lowest-priced alternative in her pilot program.
There is no way to assure that a customer who opts for it will get green electricity transmitted to his home or office, any more than an ATM customer can withdraw the same $20 bills he deposits. But the demand created by that consumer will cause green energy to be produced and delivered over the power grid, displacing power generated by dirtier sources.
Among issues to be decided is what constitutes green. Should green energy be defined only as that generated by “renewable” sources such as solar, wind and geothermal, or as anything less damaging to the atmosphere than coal or fuel oil? Should nuclear power be counted, since it has a benign effect on the atmosphere, or left off the green menu because of its hazardous waste?
However those questions are answered, green energy will be heavily marketed when California’s free market opens Jan. 1.
The Xenergy survey is bound to be closely studied by utilities and the many power marketers expected to flood the state in coming months. Since July 1, when the state Public Utilities Commission began accepting applications, 31 companies have registered as power marketers.
Some have names such as Green Mountain Energy, Working Assets Green Power and Renew Power. But those wanting to market themselves as green will have to be certified as such by the California Energy Commission.
“If you don’t have price, you need to market to people based on something else, and it appears from these studies that a significant number of residential customers respond to green energy,” said V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies in Sacramento.
To be sure, said Xenergy Vice President Richard Barnes, consumers’ most important considerations in buying energy are overwhelmingly price and “locality,” referring to the loyalty customers show utilities.
William H. Golove, a researcher at Lawrence Berkeley National Laboratory in Livermore, is pessimistic that green power will be truly competitive. Besides, he said, it will take years to find out--”until after the state’s subsidies die out.”
Golove was referring to the $540 million that California will disburse over a four-year period starting Jan. 1 to green power producers and consumers to give the alternative-energy industry a soft landing in the cold realities of the free market.
Green power marketers and environmental interest groups predictably are more optimistic. Foresight Energy, an Oakland-based firm that is designing wholesale green products for resale to power marketers, said the California market may surprise with its strength.
“In fact, we’re afraid that consumer demand in the state may be ahead of green energy supply,” said Eric Miller, Foresight’s chief executive.
Utilities such as Southern California Edison and Pacific Gas & Electric, both preparing green power products to offer to customers after Jan. 1, disagree on how big the market will be. Edison doubts that more than 5% of customers will pay extra for clean power, but PG&E; is more sanguine.
“We think the percentages of people voting for green energy could go even higher” than the Xenergy finding of 20%, said Allan Schurr, product general manager for mass markets at PG&E; Energy Services.
Ironically, Edison generates more than 14% of its power from renewable sources, principally geothermal, but is prohibited from marketing it as green. Last year’s electricity deregulation bill forces big utilities to sell all the power they generate into the statewide Power Exchange, the common pool from which most energy will be bought and sold.
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Cleaning Power
Although the amount of power generated by clean sources is only a fraction of the amount generated by coal, the use of clean power has increased since 1989 and is expected to continue to grow into the next century. Kilowatt-hours of power generated by these sources since 1989, in billions:
SOLAR
1996: 0.9
WIND
1996: 3.5
HYDROELECTRIC
1996: 16.7
GEOTHERMAL
1996: 11.0
Note: A kilowatt-hour would power a color TV for five hours. Figures for 1996 are estimates.
Source: Energy Information Administration
Researched by JENNIFER OLDHAM / Los Angeles Times
