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United States

Utilities look to green pricing

Green pricing may be an idea whose time has come. Interest in paying more for clean power is surging in the United States as utility budgets are cut, as competition and deregulation of the electricity market increase, and as the population continues to express deep interest in the environment. It appears that green pricing is now being considered or already available at about 20 utilities throughout the country.

Such programmes allow utilities to test, without much risk, the appeal of renewables, as well as their own ability to survive commercially in a tougher market place. And regardless of the advantages and disadvantages of green pricing systems, they currently may be the only game in town in America for wind energy. As one long-time wind advocate commented recently, "There's just not much else happening."

Green pricing means people are willing to pay more for clean, renewable power and are not put off by environmental "free-loaders" who do not participate. In a free market solution, customers pay directly for clean energy, rather than the financial backing coming from a utility or the government.

There are concerns, though, that it places wind in a "green ghetto" that suggests the technology needs special treatment and overemphasises its up-front cost. And green pricing means only the better-off can afford to buy clean energy -- considered by many to be a universal right and not for the privileged few. It also means the wind industry must rely upon the utility marketing what it has to offer, although utilities have traditionally not been known for responsiveness. Higher costs are associated, too, with the billing system a utility must establish to enable green pricing to work.

Four utility green pricing programmes so far exist in the US, although one is about to be phased out until a full version of the pricing system can be adopted.

¥ Portland General Electric (PGE) in the Northwest is considering a version of green pricing, either whereby customers pay a surcharge monthly, or where they pay a higher price per kWh. The utility does already have a 'penny jar' programme that allows customers to round up their monthly bill to pay for wind power, putting the extra pennies in a "glass jar." This idea, though, is being dropped unless it can be offered with full green pricing sometime in the future (see box).

¥ A second utility, Public Service Co (PSC) of Colorado, has found that as many as 10% of customers might be willing to underwrite a special mixed renewables project through voluntary monthly surcharges if the programme is explained to them. Already some 6000 participate in a test version, at an average monthly pledge of about $2.00.

¥ Sacramento Public Utility District (SMUD) in California already has a green programme under way -- so called "photovoltaic pioneers" pay a 15% premium or about $6 monthly over ten years to have a 4 kW PV grid attached to their roof. Municipal income subsidises the full cost of the plan, which has 300 participants. A respectable 2% of the customer base expressed interest.

¥ And in Michigan, some 263 electricity consumers have agreed to pay a premium for wind power supplied by a Vestas V-44, 600 kW turbine, which Traverse City Power and Light (TCPL) has just selected for the project. Residential volunteers will pay an extra $0.0158 cents/kWh for three years -- or about $7.50 extra monthly -- while commercial volunteers will pay the same premium for ten years. The stand-alone turbine may be installed as soon as November. Some $50,000 in funding has come from the state Public Service Commission and $0.015 cents/kWh hour may come from the US Department of Energy.

Other utilities are also considering green pricing as a method of saving money. Bonneville Power Administration (BPA), a federal agency based in Portland, Oregon, may adopt a green plan so it can continue supporting the two wind projects planned in the region, says a senior official. Facing tougher competition, the utility is having to tighten its budget and these projects look vulnerable. BPA has already asked the project developers to lower the installed cost of their wind plants -- one by Kenetech in Carbon County, Wyoming and a project in Washington state by CARES, a consortium of northwest public utility districts using Advanced Wind Turbines from FloWind. The federal utility's financing for the projects has been uncertain since it began substantial cost-cutting this spring. BPA officials, however, do expect them to proceed.

Market tests have also been conducted by a few utilities -- and tend to indicate interest as long as the extra cost is less than $15 monthly. Wisconsin Public Service Corp found that almost 9% of those contacted signed up for a programme costing about $1.88 monthly for a 1.2 MW solar construction project, according to direct mail and a phone survey. A far lower level of those contacted by the same utility just via direct mail offered to participate, according to Public Utilities Fortnightly magazine.

Experts say green pricing could expand demand for renewables. It measures customer support as well as the technologies -- and allows insight into what utility insiders call "unbundling" or separating out electric services to appeal to niche or specialised markets. The single most accurate predictor of those interested in green pricing is previous interest in environmental issues, such as membership in a green group or financial contributions, said Public Utilities Fortnightly in its August issue.

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