United States

United States

Price remains a key element for success -- The green power market

The latest reports of green pricing programs in the US find that participation in over 500 programs in 33 states rose by 30% in 2003. Among the conclusions of the study are that long lived programs for sales of green power have greater participation rates, that smaller and public utilities get better results and that customers respond favourably to higher purchase thresholds that offer larger blocks of energy.

The latest reports and rankings of green pricing programs in the United States find that participation in over 500 programs in 33 states rose by 30% in 2003. Among the conclusions of the study by the National Renewable Energy Laboratory's (NREL) are that long lived programs for sales of green power have greater participation rates, that smaller and public utilities get better results and that customers respond favourably to higher purchase thresholds that offer larger blocks of energy.

NREL also finds that price above any other factor is the major contributor to a program's success. Yet scarcely touched on is the fact that seven of the utilities offered fuel price protection to green customers by connecting the price of their product to the rise and fall of natural gas prices. Six of those utilities are on at least one of NREL's four annual top-ten lists for green power programs and four utilities are on the list of utilities with the lowest priced premium for their green product.

Each year NREL publishes four top ten lists of the best in utility green pricing programs. The 2003 lists, based on program performance, rank the leading utilities that excel in renewables sales, number of customers, penetration rate and the price of the product.

NREL's Blair Swezey admits there may be a link between the top performing programs and the way the programs are priced and that has caught NREL's attention, but he is not ready to endorse the theory. The laboratory has a study underway which looks at utilities that offer fixed price green power products or exempt their green power customers from fuel price charges. Each mechanism protects participants from volatile natural gas prices. "With natural gas prices on the rise, greater use of renewable energy can help utilities stabilise electricity rates for their customers," says Swezey.

Regular leaders

Consistently on NREL's lists are Austin Energy, a Texas municipal utility, and Xcel Energy, which offers its Windsource program in Colorado and Minnesota. While the pricing differs at each utility, both in some way recognise the volatility in gas prices. Windsource charges $2.50 for a block of 100 kWh of renewable electricity. The Colorado Public Utilities Commission exempted those green purchases from the fuel cost adjustment and the air quality adjustment, a charge that helps the utility pay for emissions equipment at its power plants. Both are normal charges that are automatically added to every customer's monthly bills, says Xcel's Andy Sulkko. For more than a year gas prices have been so high that the exemption from the fuel cost charge has resulted in a discount for Windsource participants. In March it was worth $0.96, which effectively brings the premium for 100 kilowatt-hours from $2.50 down to $1.54.

That still does not put Xcel on the top ten utility list for fuel costs, although it is close, but Austin Energy, at $0.059/kWh, is right at the top. The municipal utility's GreenChoice program was one of the first in the nation to offer a fixed-cost component as a hedge against the rising costs of natural gas generated resources.

Unlike the Xcel program, the fuel charge on a subscriber's utility bill in Austin is replaced by a GreenChoice charge that is fixed for ten years, a term equal to the life of the utility's contracts with renewable resources. The GreenChoice price changes with each contract Austin Energy signs. Instead of paying a fuel charge, which fluctuates with the price of gas, subscribers pay the flat GreenChoice charge. For several years that charge has been surprisingly close to the fuel charge and with the recent signing of its third renewables contract, for 93 MW, nearly doubling its existing renewables contracts of 101 MW, the charge will be nearly equal.

Both Xcel and Austin Energy also appear on the top ten lists for energy sales and number of customers, while Austin also appears on the price list. Other utilities with green power pricing that accounts for fuel cost fluctuations are Alliant Energy, Eugene Water & Electric Board, Madison Gas & Electric, We Energies and Otter Tail Power. Swezey says these programs score well because green customers benefit from the stability offered by renewable generation, which has no fuel costs.

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