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.

According to the Department of Energy's Green Power Network, the highest participation rate for a green pricing program thus far is the Capture the Wind™ program of Moorhead Public Service in Minnesota. The program of MPS, a municipal utility, has been so successful that the utility plans on building a second wind turbine in order to satisfy requests from its customer-owners to enroll in the renewable energy program. More than 7 percent of the utility's 12,500 customers pay a premium of 0.5¢ per kilowatt-hour to get up to a third of their electricity from wind power. (see http://www.mpsutility.com/ for more info).

Green pricing 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. To date only one utility of which we are aware, the customer-owned Salem Electric Cooperative in Oregon, has adopted this strategy.

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.

RULES:

• Green Citizenship - Salem Electric Cooperative
  In late November 1997, without much fanfare, the Salem Electric Cooperative's (SE) Board of Directors unanimously voted to approve a contract to purchase power for their owner/member from wind power. This act of green citizenship would result in Salem Electric getting about 15% of their electricity from wind energy with the increased costs spread between all their owner/members rather than just a few. More...
• Solar Energy Initiative - San Francisco
  In November 2001, voters in San Francisco cast their ballots in favor of becoming a world leader in solar electricity. Seventy-three percent of voters approved of Proposition B to allow San Francisco to issue $100 million in revenue bonds to finance enough renewable energy to supply about 25 percent of the government's needs. If fully implemented San Francisco will become the largest single producer of solar energy in the U.S. More...

Other Resources:

• Seeing the Light: Regaining Control of Our Electricity System
  is the newest book from the New Rules Project by David Morris.
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• Green Power Network