Renewable technology and energy efficiency have long been supported as mandated, subsidized programs by state and federal government, but have never fully graduated from subsidy status to market viability in the U.S.. And as the federal government and states such as California and Massachusetts move to deregulate their electric industries, renewables and energy efficiency advocates say that green power and energy efficiency are being marginalized. Some local governments are seeking to buy green power on behalf of consumers in their communities, and may be the best hope for sustainable energy in a deregulated environment.
The deregulation models proposed in Massachusetts and passed in California have dubious environmental provisions. Apart from bailing out and effectively refinancing nuclear power plants, both plans lack "portfolio standards," which would require electric service companies to include basic levels of renewable energy and energy efficiency in the power they sell. Perhaps most damaging, both plans restrict the ability of communities to buy power collectively through their local governments, and leave privately owned utilities in charge of distribution services as "default" providers of electric service, entrusting the future of green power to the private sector under a banner of "customer choice."
Green power advocates say that putting "customer choice" above community choice will turn renewables and energy efficiency into niche markets. While "feel good" for-profit customer aggregators like Working Assets promise to create a green power market based on individual choice, industry analysts predict that this privatized approach will attract only a minor percentage of electricity consumption, enriching a few "Green Power" brokers but leaving the bulk of energy consumption to the lowest, dirtiest bidder. "No forms of green marketing, whether simple retail competition or utility-administered programs, will adequately correct market failures or set the electric industry on a sustainable path," said California renewables advocate Nancy Rader in the July Electricity Journal. "To argue that providing individual customer choice is enough to satisfy public objectives is to assume that individual choice is the same as societal choice. The very nature of market failure assures us that this is not the case."
Rader's comments were a response to a 1995 poll by municipally-owned Salem Electric in Oregon, whose customers were asked whether they would be willing to pay higher electricity rates for renewable power. While over 75 percent of the respondents supported paying more for renewables, 28% of those polled preferred to pay collectively as a community, while only 2% preferred the "individual choice" approach. "Since everyone will benefit, everyone should pay" said one customer. "(The community-based approach) would be better since it would spread the cost burden over a larger group therefore each pays a little less of the increase," said another.
Salem Electric Director Steve Weiss told the Wind Energy Weekly that the overwhelming customer response to the poll "convinced the board that our customers want us to make a collective choice to green our system rather than leave it to individual choice where the outcome would be uncertain." The municipal utility's board voted to invest in as much renewable power as possible within a four percent rate cap, which it estimates will allow Salem Electric to obtain 15-20% of its power from renewables. Salem Electric is accepting bids from consultants to assist the utility in acquiring renewables.
The prospects of privately administered energy efficiency, or Demand Side Management ( DSM) will also worsen in a deregulated market, according to Nancy Seidman of the EPA. "DSM programs which reduce sales are the least likely to survive the transition to price-based competition, because of their adverse impacts on a utility's revenue stream." While "individual choice" advocates say that "feel good" power marketers will encourage isolated consumers to invest in energy efficiency, a recent Massachusetts study by the Cape and Islands Self-Reliance says that local governments are the best hope for the future of energy efficiency programs. According to the study, "The New Electric Marketplace, An Opportunity To Build Sustainable Communities," the key to building a strong market for energy efficiency is taking the decision whether to invest in DSM out of the hands of power suppliers or marketers, and giving Americans the market power to decide as communities acting through their local governments.
"Who will still have the incentive to implement DSM programs in a deregulated market? The answer is simple, the people who pay for the electricity," said Matthew Patrick, Executive Director of Cape and Islands Self-Reliance, which conducted the Massachusetts Study. "Local economies have nothing to lose, and everything to gain from energy efficiency." Nebraska economists estimate that 80% of every dollar spent on energy bills leaves the state's economy without generating further economic activity, whereas most of the payments for energy efficiency programs go to people who live and do business in the same community. The U.S. Dept of Energy estimates that a dollar spent on energy efficiency generates 57 cents more in local economic activity than a dollar spent on electricity. "The key to green power is to enable local communities to choose it as communities," said Patrick.
Recognizing these facts, Barnstable County in Massachusetts has developed model power supply- and distribution contracts under community electric franchising, for local governments seeking to bypass their current investor-owned utilitiy, that contain portfolio standards for green power and energy efficiency. "Standardized contracts address power plant pollution decisively by requiring that supplier contracts include clean and renewable energy, and by giving pollution-effected communities the ability to implement more DSM and renewable energy on their own," said Robert O'Leary, Chairman of the Barnstable County Commission.
Developing green communities is a difficult process requiring substantial work. But the value and sustainability of this opportunity is clearly being recognized by environmentalists who are willing to work at the local level. From green community electric franchising in Barnstable County, Massachusetts, to municipally-owned wind power and DSM in Waverly and Osage, Iowa; from wind and solar projects in Sacramento's Municipal Utility District to Emerald Peoples' Utility District's landfill methane project in Oregon, local governments are greening because their interests are local and public. With states like California and some Washington lawmakers moving to limit or even prohibit communities from "interfering" with individual choice, it remains to be seen whether the local, public interest will be enabled or curbed by deregulation.
Copyright (c) 1996 by the American Local Power Project.