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Why green-power premiums may fade

Pricier options may become obsolete if government requires utilities to bring more renewables on line.

By G. Jeffrey MacDonaldCorrespondent of The Christian Science Monitor / May 15, 2009

For the past decade, power customers eager to wean the United States off fossil fuels could do something about it: Pay a few extra dollars to bring energy from wind, cow dung, and other renewable sources to the grid.

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Now these pioneers are at risk of getting swallowed up by a stampede of government green-energy programs. At least 29 states have mandated standards requiring utilities to bring more renewable energy on line. Congress is considering federal standards, too. So utilities are wondering if they should keep marketing voluntary programs or if there are better ways to harness the enthusiasm of their cutting-edge customers and, in turn, boost mainstream acceptance of green energy.

"These programs are likely to be reexamined," says Mark Crisson, CEO of the American Public Power Association, an industry group for more than 2,000 publicly owned utilities. "The whole idea here was to take a voluntary approach to promoting the idea of renewables and to raise customer awareness. Once the state and other jurisdictions step in with mandates ... it [raises] the question: Why do you need a voluntary program?"

Green-power programs were never very big. More than 600,000 American customers choose to pay an extra 1.9 cents per kilowatt hour, on average, to fund the green option from approximately 850 utilities, according to the National Renewable Energy Laboratory (NREL) in Golden, Colo. On average, 2 percent of a utility's customers opt for green power when given a choice.

"Ten years ago, market research showed 50 to 70 percent of people would sign up for these programs if they were offered, and we haven't seen anything near that in the marketplace," says Lori Bird, an NREL senior energy analyst.

Currently, the nation's highest participation rate is in Palo Alto, Calif., where more than 1 in every 5 residents pays extra for the green option. They're people such as Diane Allen, a retiree for whom a projected $40,000 expense to install solar panels doesn't make economic sense.

"Voluntary programs are really important just to show that citizens are interested and to keep the pressure on city councils and the state government" to enforce and eventually raise standards for renewables, Ms. Allen says.

In terms of energy sales, however, just 0.5 percent of America's electricity comes from renewable sources supported by voluntary pricing programs. Those results have brought less-than-glowing reviews from utilities, which generally aren't required by law to offer such programs.

These programs "are obsolete," says Barry Moline, executive director of the Florida Municipal Electric Association, which represents 34 utilities. "They're obsolete because they're not effective at getting widespread renewable-energy investment."

Some consumer advocates disagree, pointing to the steady growth in sales and participation in green-power programs since the early part of the decade. Even when the economy went sour in 2008, green-power sales through voluntary programs climbed by about 20 percent over 2007, according to the NREL.