How Clean Is Green?

Renewable energy in the brave new world of electricity deregulation

This month Californians, for the first time in U.S. history, began to choose their own electricity providers from a range of competing utilities. Dozens of other states are working on laws to similarly restructure their electric industries, and President Clinton has asked Congress to do it nationwide by 2003. What does this mean for consumers—beyond a slew of annoying telemarketing calls during dinner imploring you to change your electric company?

It means that for the first time ever, you will be able to flex your consumer muscle and choose a company based on how it generates its electricity: either by burning fossil fuels, or from renewable energy sources such as solar, wind, biomass, and geothermal power. For the first time ever, consumers can steer the polluting energy industry in greener new directions using the power of their monthly payment. It’s enough to make Al Gore weep tears of joy.

But it’s not quite that easy. Oil, gas, and coal utilities are fighting the transition to renewables, and ‘clean’ power is going to cost substantially more than fossil-fueled electricity. Will consumers be willing to pay a premium to reduce pollution, or will renewables collapse under the weight of price competition in the newly deregulated market?

“The bottom line in terms of what does restructuring mean for renewables,” says Christopher Flavin, director of research at the Worldwatch Institute, “is that it all depends on what type of restructuring—it has the potential to be wonderful, or to be a disaster.”

The Fight for Renewables

Because fossil-fueled electricity has a century’s head start in the market, environmentalists would like to level the playing field with new legislation. Some support a renewable portfolio standard (RPS), where states or the federal government would mandate a certain miniumum amount of renewable energy to be a part of every utility’s energy mix. Rep. Dan Schaefer (R-Colo.), chairman of the House Commerce Subcommittee on Energy and Power, who is leading the utility restructuring movement in Congress, has proposed a minimum renewable content of 2 percent by 2001, growing to 4 percent by 2010.

Consumer groups say that’s not enough to put the fledgling renewables industry on its feet. Charlie Higley, senior policy analyst at Public Citizen, would like to see higher numbers: 5 percent renewable content by 2005 and 10 percent by 2010.

Others, like Worldwatch’s Flavin, prefer a different policy adopted by a handful of European countries: a price guarantee for renewable energy sales. Called the “Electricity Feed Law” in Germany, this type of law requires utilities to take renewables-generated electricity onto their grids and pay premium prices for it. This makes any investment in renewable power generation secure, and it has made Germany’s wind-power market blossom. That’s why, Flavin says, “Europe is beating the pants off us in the renewables industry,” currently claiming 52 percent of the world wind power market, for example, with North America lagging behind at just 40 percent.

The price guarantee has other benefits, says Flavin. It allows the tiniest of producers to get into the renewables game. “One of the advantages of renewables,” he adds, “is they’re by nature decentralized.” If the owner of a skyscraper wants to put solar panels on its roof, but doesn’t use all the electricity, under the price guarantee system he can sell it back to the ‘grid’ at the set price. But under the RPS system, all renewable energy suppliers would have to compete to supply the mandated quota for the grid, resulting in a “cut-throat bidding scheme,” says Flavin. Small and ‘non-utility’ producers, like the skyscraper, would have difficulty staying in the market.

The U.S. already has its own set-price system, the 1978 Public Utility Regulatory Policies Act (PURPA). Aiming to reduce American dependence on foreign oil, PURPA encouraged the creation of small, “independent” energy producers by locking in future prices at which the big utilities must buy the small producers’ energy. As with the German law, utilities have to buy all the energy the independent producers generate. Although PURPA is not a renewables law—independents can produce energy from oil and coal as well—economist Michael Zucchet, formerly with the Department of Energy’s Energy Information Administration, calls it “the single most important factor in the development of a commercial renewable energy market.”

But the large power utilities argue that PURPA has fullfilled its mission and should be repealed, that it costs them—and ultimately consumers—too much money to buy the independents’ power. Congress has obliged them by introducing a number of repeal bills. Spearheading the attack are Sen. Don Nickles (R-Okla.), a member of the Senate Energy and Natural Resources Committee and one of the top recipients of campaign money from the power utilities, and others in Congress who hope to expose renewables to the full fury of price competition with the big fossil fuel utilities. (Most nuclear utilities, with their dinosaurian costs, can’t hope to compete, so when deregulation comes along, the nuclear producers lobby for taxpayer bailouts and continuing operating subsidies. See January/February 1998 Mother Jones article “Look Who’s Buying Nukes Now” by Leslie Weiss).

Even if competition initially takes the wind out of renewables’ mills, there are a few token programs helping them along. The Clinton-Gore commitment to renewables is real, if timid; federal support of research and development of renewable energies and energy efficiency has risen considerably since 1990, to about $800 million for fiscal 1997, overtaking the amount spent on fossil fuels research. The DOE, through its Renewable Energy Production Incentive (REPI) program, will give $3 million to tax-exempt utilities employing renewables in 1998, though project manager Jim Spaeth says that with the number of qualified applicants, DOE could probably give more than three times that amount. And President Clinton, in his latest budget, has proposed tax breaks of up to $2,000 for households that install solar panels.

States, too, are diverting money to renewables: Both California and Massachusetts have instituted small taxes (amounting to about 1 percent of the electricity bill) that will raise $540 million and $45 million, respectively, to support research and development.

Of course, the big utilities can play the money game, too: They’re spending tens of millions each year on Washington lobbying, and pouring millions more directly into congressional campaign coffers to try to swing deregulation their way: away from renewables.

Will You Pay More for Cleaner Power?

Right now renewables make up only 11 percent of total electricity generated in the U.S., if you believe the DOE; but that figure includes gigantic hydropower projects that have drowned hundreds of miles of wild rivers. Strip out hydro, and renewables generate just 1 percent of the nation’s electricity. Even in California, the nation’s leader, renewables have only 11 percent of the pie (California defines hydropower projects as renewable if they generate 30 megawatts or less per year). With such a small slice of the market, renewable power is still more expensive than fossil power, so environmentalists are placing most of their hopes in the public’s willingness to pay a little more for cleaner energy.

A multitude of surveys by utilities and power marketers have shown that nearly 80 percent of consumers say they are willing to pay more for renewable power—but when it comes to shelling out the dough, consumers do not always follow through. In 1993, the power utility Public Service Co. of Colorado conducted an in-depth survey of its customers’ willingness to pay more for renewable electricity, and found that while about 75 percent requested a registration card agreeing to pay $2 more per month, only 10 percent of respondents actually sent the cards back.

In California, several companies already are marketing new green power plans to customers, including Edison Source, PG&E Energy Services, Green Mountain Energy Resources, Sacramento Municipal Utilities District (SMUD), and Enron Corp., the natural-gas giant which bought Zond Corp., a wind power company, and has partnered with Amoco in Solarex, a solar power company.

But don’t get too excited yet: Most of the power will not be coming from solar cells and wind farms any time soon. SMUD’s energy is 100 percent geothermal; they offer an option that would invest customers’ money in future solar construction. Green Mountain, a Vermont-based power reseller, offers small hydropower, biomass, and geothermal. They also have a wind-power plan, but again, it’s contingent on sufficient consumer interest: They’ll pay to build a new wind turbine for every 3,000 customers that join the program. PG&E Energy Services, for an additional 20 percent above the cost of conventional electricity, offers 100 percent renewable electricity, 25 percent of which will come from newly created sources, with the rest from existing wind, hydro, biomass, and geothermal sources.

How Clean is Green?

With green power selling at a premium—7-22 percent more per kilowatt-hour—and attracting green-conscious consumers, the deregulated utilities and power marketers are tempted to paint their conventional electricity green. During a pilot program in New Hampshire one company touted natural gas as “not nuclear, not coal, not Hydro-Quebec.” True enough, but natural gas is also not renewable, and burning it releases carbon dioxide into the atmosphere, the prime cause of global warming.

Kirk Brown, policy director of the San Francisco-based Center for Resource Solutions (CRS), emphasizes the need to keep the public from becoming cynical once they’re deluged with specious promises of green energy content. “This is about credibility—the most important thing is that people get what they pay for.”

To prevent companies from capitalizing on deceptive marketing, CRS has come up with a label for energy that contains at least 50 percent renewable content: the Green-e logo. An eleven-member board monitors and evaluates companies and their power offerings; in accord with the California definition, small hydropower sources that generate 30 megawatts or less annually are considered renewable.

Still, the system is far from perfect. Energy providers still can’t promise exactly where their power will come from; until the juice is flowing, they just won’t know. For example, PG&E Energy Services’s Clean Choice 100 plan, which NRDC has recommended and CRS has certified Green-e, leaves out the percentage breakdown of the 25 percent new renewables; it could be 99 percent small hydropower and 1 percent solar, though the company says that mix would be unlikely. Consumers who wish to invest their electricity dollars in solar and wind technology should not be lulled into a false sense of security when they see “100 percent renewable,” but should rest assured that providers’ claims will be verified—eventually.

Rob Sargent, energy program director for Massachusetts PIRG, likes the Green-e concept but raised concerns about the Green-e standards, saying that “50 percent renewable isn’t bad” but by including hydropower at all, “there’s the concern that you’re just repackaging stuff that was there anyway.” He is currently working with Green-e to tighten the approval criteria for New England.

However restructuring plays out, renewables have little to lose. Competition will begin to shift the responsibility for deciding energy policy away from legislators and regulators, and put it at least partially in the laps of consumers. And restructuring will give clean power providers an opportunity to educate consumers about their energy options—because for the first time, they have options.

Lew Milford, director of the Clean Energy Group in Vermont and former director of Boston’s Conservation Law Foundation, is fervently optimistic about the future: “We’re seeing a drive to lower-risk, less capital-intensive technology—and that means renewable technology. The economics [of a competitive market] are such that nobody’s going to build big dirty coal plants anymore because the risk is too great. Restructuring provides the best opportunity for the emergence of green power that we’ve seen in this century.”

Wondering where your energy comes from? If you live in California or Massachusetts your electric bill should soon contain a breakdown, something like: “40% Hydropower, 15% Solar, 45% Coal.” To help make sense of your energy options, the Natural Resources Defense Council recommends several energy plans from different providers in California as “environmentally preferable,” and explains how green groups are developing stringent criteria for choosing the best ones. If that’s not enough detail for you, the Environmental Defense Fund maintains an electricity content calculator on its Web site that will you not only where your energy comes from but also your choices’ annual contribution of pollution.