Electrical power generation accounts for 40% of total annual greenhouse gas emissions (GHG) in the US. Such a high concentration of GHGs is due to our reliance on highly polluting fossil fuels, especially domestic coal. Yet, while the popular press focuses on the recent growth in renewable energy, it still provides only 2% of our total electrical needs today.
Until recently, many arguments have been made for why adoption of clean energy remains slow. Certainty, price ranks as the #1 barrier to broader adoption. Other factors include reliability concerns and lack of education about the technologies.
Interestingly, Palo Alto, California has bucked this trend. Over the course of several years, the municipal utility has partnered with 3Degrees, a utility marketing company, to encourage residents to sign up for its PaloAltoGreen program which provides 100% renewable energy from wind and solar power sources. The results of this program have been astounding, with over 20% of all residents switching to clean energy. Indeed, PaloAltoGreen is now ranked as the #1 green energy program nationwide based on participation.
What does this mean for GHG reduction? Well, it is quite simple: the purchase of 41.5M kWh of renewable energy translates into a reduction of 350,000 tons of carbon dioxide annually.
MG: Who purchases renewable energy in Palo Alto? What is the mix between residential, commercial and governmental entities?
TA: PaloAltoGreen (PAG) is the City of Palo Alto’s 100% renewable energy optional program open to all residential and commercial customers with an active electric service provide by the City of Palo Alto Utilities. The program has about 20% of the customers involved, with residential customers making up on average 95% of the mix and the commercial customers at 5%. Our residential sales account for roughly 60% of the program sales with commercial and governmental making up the rest.
However, starting with July 2008, both the City of Palo Alto (CPA) and the Regional Water Quality Plant (RWQCP) are increasing their commitment to buy renewable energy equal to 30% of their total usage, a ten-fold leap from the previous 3% of total usage purchases. This will increase the percentage of nonresidential customers in the program.
MG: Describe the demographics of your average residential customer that signs up for renewable energy? How do they differ from the average utility customer in Palo Alto? Across the US?
TA: As a general rule, the residential PAG customer is well educated, in a high income household and is environmentally progressive. Most are thinking about their environmental impact and want to do something about it.
One of the primary differences from other green pricing program around the country is that PAG customers generally use less energy per month than our average customer. PAG customers use 400-600 kilowatt hours (kWh) per month compared to the national average of about 888 kWh (according to the DOE). This indicates that our customers may also be trying to reduce their electricity usage through energy efficiency or other measures.
MG: What motivates residents of Palo Alto to switch to renewable energy (e.g., attitude toward the environment, concern for their kids, financial incentives, community empowerment, etc.)? Are their attitudes substantially different than the rest of Americas? If so, in what ways?
TA: There are many motivations leading to program participation. These include being role models for the next generation, “doing the right thing” for the environment, and buying renewables as a logical next step after energy efficiency.
MG: What, if any, is the premium charged for purchasing renewable energy (vs. non-renewable) today? What factors do you attribute to a customer’s willingness to pay such a premium (e.g., level of affluence, attitude regarding the environment, etc)? Do you think renewable energy will be adopted by a majority of customers without eliminating the premium altogether?
TA: Residential and small commercial customers can enroll in PAG for 100% of their monthly electric usage at a premium of 1.5 cents/kWh. Large commercial and industrial customers can buy renewable energy in blocks of 1,000 kWh for $15 per block. This allows them to support renewable energy at a level that makes business sense.
One of the nice things about PAG is that the price doesn’t fluctuate. CPAU hasn’t changed the price for 100% renewable energy in five years and has no plans to do so. The demographics of Palo Alto are also great for marketing renewable energy, as our customers tend to be interested in the environment and can have a level of disposable income that allows a lower barrier to participation.
MG: A 20% adoption rate for renewable energy is impressive. Can this success be replicated across the country? If so, what will it take to do so? If not, what are the obstacles (e.g., low awareness, lack of urgency, difficult process to switch, price premium, etc.)?
TA: With the continuous support of our local elected officials on the City Council, the staff of the City government, the employees of the Utilities Department, and, of course, our great customers, nearly everyone is behind this program. This type of support is vital to the success of a green pricing program in Palo Alto and elsewhere in the country.
Other factors that need to be in-place, or created, include customer awareness of the environment, a history of energy efficiency, an active partnership with the schools and students, and a willingness to lead.
It should be noted that not all the program participants have vast disposable incomes. Participants are both young and old, in the prime of their earning years or on fixed incomes, have children or are childless. All share, however, the same vision of, and desire for, a sustainable future.
MG: What are your primary marketing objectives in the residential and commercial markets? Do you find the need to spend significant time building awareness of either the category or the technology?
TA: CPAU has found that targeted messaging, repetition, clear information about the product and a call to action (“closing the sale”) bring results. If the job is done correctly, then customers are aware.
For those customers that have more questions, we have many ways for them to find answers to any question that they might have.
MG: Is there any skepticism on the part of consumers regarding the (reduced) impact that renewable energy has on the environment?
TA: There are always skeptics, but we focus on educating consumers on the positive aspects of the renewable energy we provide. With the melting of the North Pole ice and the retreating of the Swiss glaciers, featured on the Evening News, skepticism has been reduced or eliminated.
MG: Please describe how you partner with 3Degrees in terms of your marketing efforts. What are the core components of these marketing efforts? What made them so successful?
TA: 3Degrees specializes in marketing renewable energy. They have partnerships with utilities in California and around the country. They are able draw on their experience and accumulated data to provide targeted marketing and program management support.
CPAU brings its knowledge, reputation and trust of the community to this partnership to help sharpen the marketing even more. With their experience and our community awareness, we have created one of the most effective, and successfully marketed, green power programs in the country.