For the Retail Buyer, Signing up for Renewable Energy Offers Both Rewards and Pitfalls
The California energy disaster has left the once-vigorous electricity deregulation process in shambles. According to the U.S. Energy Department, by last spring 17 states had actively restructured their electric utilities, six had delayed already approved plans and 26 had decided against deregulation.
As Salon magazine reports, the turmoil over deregulation forced many "green power" companies, including Go-Green and TenderLand Power in California, into receivership. The idea is certainly sound: Once they acquire customers, green power companies promise to buy wind, solar or methane power from suppliers and add it to the grid, thus offsetting the nuclear- or coal-generated electricity that would otherwise be used.
When environmentalists look at deregulation, the possibility of green power is commonly the only bright spot. Most side with Public Citizen, which declares, "What deregulation really means is that large corporations will get a bigger piece of the pie, resulting in major losses for the environment and consumers."
An Uncertain Market
The bankruptcies have left retail and corporate customers unsure whether they can count on green power suppliers. And there’s a lot of confusion about pricing, which for the most part remains significantly higher than conventional energy. Green energy prices not only differ by state or region, but also by provider and program. The pricing methodology is complex, with the local availability of renewable energy supplies one huge variable.
Dan Lieberman, program price manager of the Center for Resource Solutions (CRS), a nonprofit green energy accreditation organization, says consumers need to look at the green power provider’s disclosure statement to see the mix of renewable sources, and to get at least a general idea of how prices will be determined.
"Wind power is typically one of the less-expensive renewables," says Lieberman. "In places like the Pacific Northwest, Texas and the Midwest it’s very affordable." Though initial capital costs for wind power are higher than for natural gas, prices are generally stable, since wind energy production isn’t tied to the same variables that control the fossil fuel market.
Conventional energy costs between five and seven cents per kilowatt-hour (kWh). Nationally, wind power prices average a very affordable four cents per kWh, and that’s before the 1.5-cent federal wind power generation tax credit. The other less-expensive and less-intermittent renewables, which average three cents per kWh, are geothermal, some types of biomass and small, low-impact hydroelectric facilities.
Lieberman says energy from solar photovoltaic (PV) cells is typically the most expensive because the capital investment is so high. "Take it from someone who owns his own PV system," he says. "My initial cost was $9,000, and that’s fairly inexpensive for PV cells. My energy costs are still 20 cents to 25 cents per kWh."
Many energy providers say they have to charge more for renewables to offset the risk and expense of researching and developing new markets. "Providers say it is more expensive energy to produce, and it’s definitely true that wind and solar power have very small government subsidies compared to coal and nuclear power energy," says Isaac Elancavae of the Michigan Environmental Council. An added problem is that in some energy markets, like New England"s, renewable prices are determined simply by applying a cost premium to fluctuating fossil fuel prices.
Energy policy experts disagree on the future pricing trends for renewables. But if history is any indicator, prices can only go down. Wind and solar power prices have dropped 80 to 90 percent since the 1970s, but that hasn’t yet led to widespread adoption. According to Elancavae, until renewables are priced nationally in the same cost mix as conventional energy sources, green energy will never really take its place in the national market.
The College Try
Renewable energy marketers are also looking beyond residential customers. The Connecticut Energy Cooperative signed a deal last year with Connecticut College, making it the first university to commit itself to 100 percent renewable Green-e electricity (certified by the CRS). "The students needed to do something," says Sara Zisa, co-president of the school’s Renewable Energy Club. Connecticut’s Wesleyan University buys green power for its athletic center.
Bob Maddox, marketing director of the Connecticut co-op, urges power buyers to look beyond the bottom-line and subtract the costs of avoided pollution. "People are buying green energy for the common good," he says.
ARVIN DONNER is a freelance writer in Columbus, OH.