Some utility's programs work better than others
The solicitations have been flooding people's mailboxes lately: pay a bit more on your electricity bill for 100 percent clean wind power. Or, the fliers say, buy "green power certificates" to offset your global warming emissions.
Close to a million electricity customers have signed up for such payments voluntarily, and the amount of electricity sold in this way has nearly tripled since 2005, amid rising concern about climate change and energy security. But the participants are in a distinct minority, with a sign-up rate of only about 2 percent in programs run by utilities.
The low sign-up rate raises a question: If large majorities of Americans favor increased government support for clean energy, as polls suggest, why are so many people reluctant to back such programs when it comes to paying extra themselves?
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One reason might be that they think the added expense is too high. Solar and wind power generally cost more than power generated with fossil fuels. While many people support alternative energy in principle, they personally might not want to spend hundreds of dollars more for electricity, especially in the current economic environment.
But in the back of some people's minds, there might be another issue: Do these programs really cause more renewable energy projects to get built? The government has looked at the question and says it is difficult to draw an overall conclusion. Its experts say they believe that some green power programs work better than others.
"It's a tricky issue. It's not a one-size-fits-all market," said Lori Bird, a senior analyst at the National Renewable Energy Laboratory in Colorado and co-author of a report in September on green power markets.
At least one major program has come under fire from regulators. Last year, a Florida Power and Light green power program, called Sunshine Energy, was terminated by the state's Public Service Commission after an audit found that promised solar power facilities were far behind schedule. The program had more than 38,000 customers and was once the sixth-largest in the country, according to the renewable energy laboratory.
The audit also found that the vast majority of homeowners' payments went into marketing and administration.
"No reasonable person would have contributed to the Sunshine Energy program had they known that approximately 76.4 percent of the contributions would be spent on marketing and administrative expenses instead of renewable energy," wrote Nathan Skop, a commissioner on the Florida Public Service Commission, in a note accompanying the termination decision.
Eric Silagy, the vice president of development for Florida Power and Light, said the program had exceeded its renewable energy objectives. "Yes, we spent money on educating the customers, but I don't know how you do it otherwise," he said.
Overall, according to the national laboratory report, a median of 19 percent of the money that utilities are raising in these voluntary programs goes into promotion and marketing, with the numbers for smaller utilities often being much higher.
About a quarter of the country's utilities offer green power programs, and the way they are structured varies. In practice, no big utility delivers 100 percent renewable power to any customer, because electricity from all sources - coal plants, wind farms, solar panels - is mingled in the same wires. The utilities are essentially collecting extra money that they promise to use to support the development of renewable energy, a pitch that some customers find persuasive.
"It's about what's good for the planet," said Mark Renfrow, a Dallas homeowner who this summer began paying an extra $26 or so a month to his electric company, Direct Energy, for 100 percent wind power.
Typically, the extra payments reach the operators of wind or solar farms through the buying and selling of renewable energy certificates. Many wind and solar farms offer such certificates, which are meant to attach a cash value to the environmental benefits associated with renewable power.
For example, the green power arm of a utility like Con Edison, of New York, might sell green power to its customers, then buy certificates for that amount of power on the open market. Green power advocates argue that such payments help new facilities get built, though they acknowledge that other factors, like bank financing, might play more important roles.
Paul Copleman, a spokesman for Iberdrola Renewables, a major developer, called the system of voluntary payments "an essential component of wind farm financing," although he said that no particular Iberdrola project had been built just to supply the voluntary demand.
"We don't set out early in the development process determined to build a project to supply the voluntary market specifically," Copleman said. "But its presence provides flexibility and helps improve project economics."
Rob Harmon, the chief innovation officer for the Bonneville Environmental Foundation, a nonprofit Oregon group that directs voluntary payments toward solar and wind farms, said that projects he worked with typically increased their revenue by about 17 percent through voluntary payments. That amount, he says, can bump up profit margins enough to make the difference in whether a project should go forward. "This market is working, it's thriving, it's good, and it should be embraced," Harmon said.
But some advocates for electricity consumers argue that the payments make little difference. Matthew Freedman, a staff lawyer with the Utility Reform Network, a ratepayer advocacy group in California, said the short-term nature of voluntary green power commitments meant they were often meaningless on long-term projects like new wind or solar farms.
"There is very little evidence to suggest that customer subscriptions have resulted in any new additions of renewable power," Freedman said.
The utility for the city of Palo Alto, Calif., has the largest percentage of enrollments in the country, with 21 percent of customers participating, according to the government laboratory study.
But for many other groups, even green-minded ones, the higher price of clean electricity has caused soul-searching and hesitation. Early this year, the city government of Durango, Colo., stopped buying renewable power from its utility, saving $45,000 a year. The clean electricity had cost 40 percent extra, and the city manager, Ron LeBlanc, was irked that part of the payment went into putting solar panels on a school in a different city.
"Paying more and then investing in a community 16 miles away was offensive to a lot of us," he said, adding that Durango was exploring other options to develop clean energy locally.
In Texas, Austin Energy sells the most green power of any utility in the country, buying electricity from wind farms in west Texas. But its customers' appetite for renewable power has shrunk with higher prices.
Earlier this year, it managed to sell only 1 percent of a batch of wind power it offered to customers - no doubt because the program would have added $58 a month to the average home electric bill. That was far more than in previous years, resulting from a combination of factors, like congestion of transmission lines in Texas.
The utility has since slashed the prices, and Roger Duncan, its general manager, said that Austin Energy might change its program so that its green power costs for future projects are spread to all customers - not just the few who voluntarily pay extra.
"If we're going to transition to renewable energy," Duncan said, "you can't depend on a small percent of the customer base to do this."