A Tough Sell on the Green Power Circuit

A Tough Sell on the Green Power Circuit

Rating the success of green power marketing -- utilities and third parties selling electricity produced from large-scale renewable sources, usually wind farms -- has always been a glass half-full/glass half-empty kind of dilemma. The production and purchasing of green power has grown significantly over the past several years, and success stories abound -- many in surprising places. But with overall market penetration rates hovering around 1%, this important trend has a very long way to go.

Failure or success? It depends very much on what size of glass you’re looking at.

At the Eighth National Green Power Marketing Conference in Chicago earlier this month, an impressive list of producers, marketers, and purchasers received leadership awards given jointly by the EPA, DOE, and the non-profit Center for Resource Solutions. One that stood out as unexpected is Dyess Air Force Base near Abilene, Tex., home of the Air Combat Command’s 7th Bomb Wing. The nation’s largest single-site buyer of 100% green power, Dyess has contracted to buy 80 million kilowatt-hours of renewable power a year from TXU Energy. Even better, Dyess’s leadership helped inspire eight other Air Force bases around the country to buy green.

The 18 other energy purchasers honored ranged from giants like Johnson & Johnson and Toyota to small businesses like Hayward (Calif.) Lumber and Austin Grill, a Washington, D.C.-based chain of Tex-Mex restaurants that’s 100% powered by wind energy from turbines in West Virginia (and, in the interest of full disclosure, is owned by my brother).

On the seller side, hopeful signs can be found at companies like fast-growing Green Mountain Energy, with more than half a million green power customers in seven states; or at utilities like Austin Energy, which sold 28.7 megawatts of green power last year to lead all U.S. utilities.

Yet for the vast majority of U.S. consumers and businesses, green power remains a tough sell. The huge marketing challenge is the “P Word” -- the premium that energy users must nearly always pay for green power over the regular juice generated by the usual suspects of coal, nuclear, natural gas, and large-scale hydro. The median green power premium is 2.5 cents per kilowatt-hour, according to the National Renewable Energy Laboratory, and some utilities slap a monthly customer service charge on top of that, often to cover the costs of marketing the green power option in the first place.

The good news is that the number of consumers willing to pay extra for “doing the right thing” is on the rise. The emergence and growth of a demographic categorized by marketers as LOHAS -- Lifestyles of Health and Sustainability -- has helped spur sizable growth in categories like organic foods, eco-tourism, green building materials, and socially responsible investing. In turn, more companies in those industries, or any companies cultivating a green image to appeal to those very same LOHASers, are touting their own green power purchases as a marketing advantage. Two leadership award winners, Clif Bar and Silk soymilk producer White Wave, are good examples.

Many green power marketers point to the growth of organic foods and green materials as a hopeful sign, as well they should. But electricity is different. Unless you install your own PV cells or small-scale wind turbine and get your meter to run backwards, it’s hard to make a sensory connection to the life enhancements caused by green power. Organic foods taste better and improve your health, but green power has to appeal to a more distant emotional motivation: paying more, for an invisible commodity, to make the world a better place. As Green Mountain Energy senior vice president of marketing John Savage admits, “We are fundamentally trying to change consumer behavior.” And, I would add, the fundamental laws of the commodity marketplace.

That’s a very difficult long-term strategy for expanding beyond a niche market. Instead, more of the green power battle needs to be fought on the pricing front. And there is some good news here. Austin Energy (most notably) and other utilities have begun to offer fixed-rate, long-term contracts for green power. For a small premium, the buyer locks in a rate that, with some exceptions, is protected against the vagaries of changes in fuel prices. Like most Texas utilities, Austin Energy last June hit its ratepayers with a pass-along fuel charge caused by a doubling of natural gas prices and the continued outage of a nuke plant. But customers who are 100% subscribed to the utility’s GreenChoice option don’t have to pay the charge.

Green power as an economically attractive option? That’s the holy grail. Green power marketing has made great strides and is sure to make more, but will often run up against that hard wall of reality called the bottom line. A spike in natural gas prices might be the best boost that green power marketing could ever get.

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Clint Wilder is contributing editor at Clean Edge.