Lori Bird

1
Utility Green Pricing Programs Program Design
and Consumer Response
Lori Bird Senior Energy Analyst National
Renewable Energy Lab lori_bird_at_nrel.gov
Growing Green Power Demand Conference, February
20, 2002 Denver, Colorado
2
Program Design

• Energy-based programs
• Block products (100-kWh blocks)
• Percent of use products
• Fixed-cost offering (LADWP, SMUD)
• Contribution programs
• Capacity-based
• Multiple products can appeal to different market
  segments

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Average Monthly Expenditure
Average monthly expenditure for all programs
5.60
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Participants in Green Pricing Programs

• More than 210,000 customers participate in green
  pricing programs
• Vast majority participate in energy-based programs

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Participants in Top 10 Utility Programs

• LADWP is market leader
• Some keys to success
• Teaming with community groups, schools, the city,
  low-income groups
• Low cost? Customers initially received compact
  fluorescents

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Participation Rates by Program Type
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What is Achievable?

• Top programs have participation rates ranging
  from 3-7
• A number of programs are or have been fully
  subscribed
• Netherlands has achieved 9 penetration
• 10 or higher with effective marketing?

8
Utility Green Power Sales

• Average sales 11 million kWh per year
• About 1/3 of sales are to non-residential
  customers
• This fraction is growing
• Marketing emphasis on residential customers

500 million kWh sold annually
9
Business Customer Motivations

• Source National Wind Coordinating Committee,
  Understanding Non-Residential Demand for Green
  Power

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Is Price Important?

• No correlation between participation rate and
  price
• However, consumers care about price
• Worldwide, most customers purchase products with
  modest premiums
• Lowest US premiums from 1/kWh to 1.5 /kWh
• Median 2.5/kWh

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Factors Affecting Price Premiums

• Renewable energy technology utilized
• Quality of the renewable energy resource
• Size of the project(s)
• Availability of subsidies or incentives
• Inclusion of administrative and marketing costs
• The utility's avoided cost of energy
• Amount of renewables already in the utility mix

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Minimizing Price Premiums

• Blend high-cost and lower-cost resources
• Leverage grants and subsidies
• Minimize marketing and administrative costs
  applied to program
• Construct larger or joint projects
• Consider green certificates
• Exempt customers from fossil fuel cost increases

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Impact of Fuel Cost Exemptions

• Green power costs are stable over time, while
  fossil fuel costs (i.e., natural gas) may vary
  significantly
• Nearly 10 utilities exempt green power customers
  from fuel cost charges
• EWEB reduced price premium by about 60 (from
  3.09 /kWh to 1.32 /kWh)
• Some Austin Energy customers actually saved money
  by switching to green power

14
Supply Options Certificates

• Growing number of utilities supplying green
  pricing programs with green certificates (tags)
• Examples Puget Sound, Clark Public Utilities,
  Snohomish
• Advantage certificate transactions may lower
  costs and eliminate wheeling charges
• Disadvantage may be more difficult to
  explain/market to customers
• Resource location may be key consideration
• Waverly Light Power and LADWP market
  certificates outside of their service territories

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Installed Renewable Capacity Top 10 Programs

• Wide variation in amount of capacity installed
• Top two programs represent more than 50 of
  capacity installed

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Renewables Installed and Planned to Serve Green
Pricing Customers
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The Bottom Line Installing Renewable Capacity

• Total of 220 MW installed to date
• Plus, some programs purchase power
• Another 100 MW planned
• Upward trend should continue because many
  programs are still evolving