United States

United States

Wind lobby tough on true green power

The American Wind Energy Association's publication of a series of green marketing principles has highlighted the poor ethics of many of the so-called green electricity products now being marketed at premium prices. In California not one green pricing program makes the grade.

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Few green pricing programs or products in the United States would make the grade under the strict and controversial new Green Marketing Principles announced in March by the American Wind Energy Association (AWEA). To meet the guidelines, green electricity sold at a premium price must include power from sources such as wind, solar, biomass and geothermal. These are the emerging renewable resources that AWEA notes are most vulnerable in competitive markets. The guidelines come as the concept of offering consumers the choice of premium priced green power is exploding across America as electricity markets at both the state and national level are steered towards open competition.

Natural gas and hydro power, says AWEA, are more damaging to the environment than truly green products, although they are less harmful than coal, oil and nuclear power. The natural gas and hydro industries are also more established, rather than "emerging." For these reasons, AWEA says natural gas and hydro do not fall within their green power guidelines. This is in contrast to the guidelines of a number of other groups, as well as the state of California, which find small hydro green enough to qualify as a renewable source. It certainly means that the Clear Choice green pricing program in Texas, offered by Central and South West, is not ideal. Launched a year ago, the program uses hydro power to meet the demand of customers who sign up for premium priced green power.

None meet the standard

Most explosive though is AWEA's second principle, that electricity from renewable sources that is already being paid for by rate-payers should not be re-packaged and marketed at a premium to other consumers. In fact, in cases where electricity providers are required by law to buy renewables, those renewables should not be green marketed. Such power plant will operate regardless of green pricing, the aim of which is to stimulate new projects, not add to utility income. The utilities repackaging and re-selling such products also have an unfair advantage in that their green product is already subsidised by ratepayers elsewhere, says AWEA.

According to this principle, it appears that none of the green products on offer in California's state-wide market -- the former service areas of the three private utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric -- will completely meet AWEA's standards. All of them are a mix that includes a proportion of electricity that is already being paid for in a utility's rate-base.

Questionable, too, according to this stricture, are green pricing programs in Wisconsin and Minnesota (box). In Minnesota utility Northern States Power is re-selling wind power -- from plant that it was mandated to build under state law -- to United Power Association, a sizeable generation and transmission co-operative in Elk River whose dozen or so members will sell the wind power in a green pricing program. In Wisconsin, too, there has been trouble over the Energy for Tomorrow green pricing program, with 7000 customers America's largest. Launched by Wisconsin Electric Power, it initially offered customers power from existing biomass and hydro.

Heated in California

In California, the hot issue right now in the emerging green market is whose products are eligible for a boost from the state's $0.015/kWh customer credit, introduced as part of the state's restructuring legislation. It is available to customers who buy non-utility renewables generated within the state from "qualifying facilities." A petition was filed with the state in February by renewables retailers, wholesalers, generators, and environmental groups -- but not including AWEA -- asking that the credit be extended to renewable power from other sources. They say it is the only way that their green products will be noticed in the din of the newly open market place.

But the California Energy Commission (CEC) is so far standing firm, insisting the credit stay linked to qualifying facilities. This is only fair, say consumer groups who support the CEC's decision. One of these, The Utility Reform Network (TURN), comments: "Ratepayers should not be made to subsidise any investment in renewable power resources that are already in a utility's rate base." Renewables that are "repackaged" from plants owned by undivested municipal or private utilities should not be eligible, says TURN's Nettie Hoge.

The parties behind the petition to extend the credit include Enron Wind Corp, SeaWest Energy Corp, PG&E Energy Services, Foresight Energy, Natural Resources Defence Council, The Environmental Defence Fund, Green Mountain Energy Resources, Edison Source and PacifiCorp. Of AWEA's absence, the association's always diplomatic Randy Swisher says: "We support the green marketers, but we are concerned about the cross-subsidisation of rate-based resources. That's not fair competition."

AWEA also warns that supporting a new plant over an existing source is not always beneficial, as it may be that the former is already subsidised and the latter is not. Repowering an existing project may make sense too from an environmental point of view, as it would not require new roads or power lines. In addition, early investors in renewables should not be penalised by assuming their product is inferior.

This principle is in contrast to the Natural Resources Defense Council's method of evaluation, which places a premium on newness. The NRDC considers as "new' any renewable project that first generated electricity on or before September 26, 1996, the date of the enactment of California's restructuring legislation.

AWEA's Green Marketing Principles further state that the make-up of green electricity should be fully disclosed by marketers, along with any information that is necessary to allow on-going product verification by independent parties. Claims that power is not being obtained from undesirable sources should be documented. Prices should also not be excessive. Premiums for green electricity should not be collected in advance (before the plants from which the electricity is to come are up and operating). Green marketers should also support policies and legislation that promote renewable energy on a broader scale.

Such policies are those currently supported by AWEA: extension of the federal wind Production Tax Credit; disclosure requirements for retail electricity suppliers on the fuel source and emissions characteristics of their supply portfolios; and "Renewables Portfolio Standards" obliging the electricity industry to include a minimum amount of renewable energy in its power mix through a flexible system of tradable renewable energy credits.

"If green marketers offer meaningful products, the wind industry and the environment have a lot to gain from consumers exercising their preference for cleaner fuel sources," says Swisher. "But if some products are more hype than substance, the credibility of the market could be damaged before it ever gets going. By adopting this set of principles, AWEA hopes to steer marketers in the right direction." These principles will also help consumers and the media sort through the claims to find the substance, says AWEA. "The fundamental question that consumers and power suppliers alike should ask when considering a given energy product that purports to be green is: will this product actually green the system; will it reduce the overall environmental impact of our system of generating electricity?" Swisher stresses that AWEA hopes to make green marketers aim high with its principles. "Part of our intention is to engage in a dialogue about what the market can be," he says.

Indeed, the principles highlight once again just how complicated is green pricing and selling, especially in an electricity market just starting the painful throes of several years of deregulation. "This entire transition to a competitive market is going to take a lot longer than we had hoped," adds Swisher.

AWEA's principles were released within weeks of the start of construction of a planned 10 MW wind farm in one of the largest green pricing programs in North America. The first 750 kW NEG Micon turbine to supply power to Colorado's WindSource program was installed on January 21, according to Public Service Co of Colorado. So far about 5000 residential customers and 40 businesses and organisations have signed up for WindSource. An additional 5 MW may be added, as Phase II, if there is enough green pricing demand. The remaining 13 turbines for the Ponnequin wind site in Weld County near the Wyoming border are to be installed by about June.

New study

The proliferation of green marketing has also prompted the National Wind Co-ordinating Committee to initiate a two-phase study of the market. It is to be conducted by a team including Ed Holt of Ed Holt & Associates, an expert on green marketing and pricing, and Jan Hamrin of the Center for Resource Solutions, which developed the California's Green-E program under which eligible electricity is awarded a Green-E stamp of approval. To be finished in July, the study will look at how green markets will impact wind development, how wind can be sold in a market for green power, how alliances might be forged between the wind community and other clean technologies, and how, where, when and why wind can successfully supply the demands of green markets.

A new alliance has also just been formed, the "American Renewable Energy Producers' Alliance." Several national trade groups, including AWEA, have joined together to promote a strong renewables policy as part of national restructuring legislation. The group's main priorities are a Renewable Portfolio Standard and net metering and commercialisation programs. In another indication of the confusion about green marketing, a national group of Attorney Generals has started laying out marketing guidelines for green marketing claims.

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