GUEST OPINION
FEBRUARY 1997

"Green Pricing Won't Work"

Deregulation threatens higher priced, previously subsidized solar, wind, energy efficiency and other renewable technologies. Some argue that "green pricing," the marketing of higher priced "green power" to residents and businesses will suffice to bring renewables into the mainstream. Economist Gene Coyle disagrees.


BY EUGENE P. COYLE

Green Pricing aims to fund a public good, cleaner electric power, through charity. "Green Pricing" asks consumers to pay a premium price for electricity that comes from a clean source, e. g. wind or solar power plants. But can it deliver? No.

The belief that accelerated development and deployment of renewable energy is good for the environment is widely shared by the American public, as repeated polls have shown. Policy options to foster clean power include taxes to fund development, federal or state regulations mandating use of renewables in the mix of supply, appeals to the self-interest of energy vendors to avoid carbon taxes that might be imposed on dirty sources, and, of course, local democratic control over the choice of technologies to serve the community. But, at both state and federal levels, effective policies to achieve and accelerate deployment of renewables have been rejected because of the power of oil and coal interests, the utilities, and industrial consumers of electricity.

In despair of implementing taxes or regulations, and recognizing finally that the imperative of the market requires corporate management to choose dirty over clean plants if dirty is more profitable, and perhaps rejecting local control over decision-making, some environmental opinion leaders are touting Green Pricing as the preferred policy option. Turning to charity is the counsel of despair, and must be rejected, for Green Pricing is sure to slow or even stop the development of renewable energy. Green Pricing is bad public policy in many ways: 1. The policy can't achieve its goal. Two-thirds of the market is excluded from participating. Industrial and commercial customers have made clear that they will not donate, asserting that competition requires them to relentlessly keep costs down. Only about one-third of electric energy is used by residential customers and of that third, only a tiny fraction will actually contribute, as shown by utility focus group research. The exclusion of industrial and commercial customers in turn lowers the participation rate of residential because of what we can call the "Perot Effect"; focus group participants have made very clear that "Unless everybody contributes, I won't either." People want fairness and resent paying for a public good unless all pay a fair share. Green pricing can't pass that test. And even assuming a high level of donor participation, Green Pricing can probably impact less than 2 % of electricity sales.

2. Green Pricing teaches that renewables are only for the affluent. Remember the bumper sticker? "Wouldn't it be nice if schools had plenty of money and the Air Force had to hold bake sales?" Clean energy, once tagged as a frill for the rich will be very hard to bring back for substantial funding at the legislative level. Low levels of participation will be used as data. The disinterest in funding renewables through green pricing will be used in legislatures to claim that the public has shown, through the market, that it doesn't want to pay for clean power.

3. Marketing costs for Green Pricing are high. Attracting, keeping, and replacing donors will require an expensive and permanent campaign, like solicitations for other charities, adding substantially to the cost of renewables.

4. The marketing message will be wrong. There is a psychological risk to Green Pricing. Rather than ask consumers to demand effective public policies, the marketing will educate the affluent that, for a few dollars a month, they are taking care of the world's climate and pollution problems. Even if green pricing could deliver significant results, political issues cannot be resolved by a techno-fix. If green pricing sets in concrete the notion that renewables are an expensive luxury for the affluent, then taxes or mandating use of renewables in the mix of supply becomes too expensive to adopt.

5. Donating through green pricing does not give ownership or decision-making control. Public funding of clean power should result in public ownership or at least control over decisions about capacity additions. Green pricing results in passive consumership, not citizenship.

Democratic control over the resource mix, through local control over energy choices, taxes, or regulation is a better ways to proceed, for many reasons. If people are paying for clean power they ought to own it. And if people could own it, they obviously would be more willing to pay for it. This is why public power has an enormous environmental advantage over profit-driven vendors.

The Sacramento Municipal Utility District (SMUD) has been successful in signing up householders to put photovoltaics on the roof, even while charging these customers a premium for the privilege. Green pricing proponents like to generalize from the SMUD experience to assert that people are eager to pay extra for green power, failing to realize that the SMUD customers own the system and are acting on that ownership.

Finally we come to Patricia Hynes' view, of the Institute on Women and Technology, that our goal should be green citizens, not green consumers. Her insight is that "The sum of the parts - thousands of individual green consumers - will not be a whole - an organized, environmentally politicized citizenry - unless environmentalists shift from the shallow notion of green consumer to the substantive notion of green citizen."

Copyright 1997 by the American Local Power News