Green-pricing programs, in which customers are asked to voluntarily pay a premium for varying amounts of electricity generated by renewable fuels, are sweeping the country. Green-pricing programs encourage environmentally-oriented people to put their money where their mouth is. They encourage electricity marketers to develop national educational campaigns that promote clean energy. This has indeed occurred. In fact, the largest single reason for residential customers to purchase electricity from an independent supplier is to buy green energy. In California, 90 percent of households that have switched suppliers have voted for green power with their electricity dollars. Companies like Patagonia and Toyota and cities like Santa Monica have voted to purchase electricity that is partially or fully generated by renewable energy.
However, while welcome, green pricing suffers serious limitations.
Green-pricing programs impose a very stiff premium on consumers who want to be responsible, and in the aggregate, generate a relatively small amount of new renewable energy projects. In some cases, consumers are buying power from existing renewable energy facilities. Supporters of green pricing say that this is a short-term effect until the current capacity is soaked up. Others argue it will take a long time before that point is reached.
Greenpricing requires a few customers to pay a substantial premium for relatively little power. A much better way for consumers to increase the supply of renewable energy is to exercise “green citizenship.” If a significant majority of the customers of a given utility vote for green energy, the utility can purchase a larger amount of renewables and spread the costs over its entire customer base. Often 10 times the amount of green electricity can be purchased at a fraction of the cost for an individual household.
Customer-owned utiities (COUs), like the Salem Electric Cooperative, are more likely to enact green citizenship programs because they tend to be more responsive to the preferences of their customers. But where there is utility inaction, or where the electricity landscape is dominated by IOUs, there are policies that states can enact that embrace green citizenship and remove the onus of supporting renewables from the individual ratepayer to the collective base of ratepayers.
More Information
- Green Power Network – Department of Energy web site tracking utility green energy programs
