Promoting Green Power in Canada - Centre for Human Settlements

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Promoting Green Power in Canada Pollution Probe“The impact of green power marketingon new renewables development hasbeen limited so far.”NREL 2002, p. 5Green Tags Ontario, which asserts that itsmembers could be reimbursed if wholesaleprices rise above the price of wind energy,allowing the cooperative to sell its power at ahigher margin (www.greentagsontario.com).This feature has not been widely used ingreen power marketing; instead, most greenpower products are mixed with conventionalenergy, or a premium has to be paid on topof current prices, so customers have no greenpower advantage if fossil fuel-basedgeneration prices rise in the future. Thisdependence on wholesale prices has meantthat many such programs could not functionwhen prices rose, as earlier pricecommitments to customers could not behonoured. Thus, subscription rates faded asrising prices for wholesale power also droveup green power retail prices.4.1.2 The Limits of Market-DrivenGreen Power DemandA 2001 US report concludes that among the40 million American households with accessto green power, only 350,000, or about 1%,have chosen to buy green power [NREL 2001,p. i]. A rate of between 0.1% and 1% hasbeen found among most European greenpower marketing initiatives [NREL 2002, p.56]. The first Canadian programs in Albertahave also obtained participation rates ofabout 1% [PEM 2002, p. 12]. Several studiesin the US have identified participation ratesof between 4.7% (promotion by mailingonly) and 16% (with telephone surveys)among residential consumers. Overall resultsshow that with a moderately priced greenpower product (corresponding to aboutUS$10 per month) promoted throughtelemarketing, the maximum sign-up rate canbe expected to lie at about 20% 15 [ibid., p.5].Actual sign-up rates for utility green pricingprograms in the US have been 0.8% onaverage, with a maximum of 7.3% inregulated markets. The penetration rate inrestructured markets was slightly higher,with an average of 1.2% (figures for mid-tolate2000). No correlation with the pricepremium for green power was found ($1–$10per month) and the different penetrationrates are ascribed to various factors, such aslimited supply of green power, lack ofawareness among customers and limitedmarketing efforts [p. 6]. The US reportconcludes that a market penetration of 5%can be achieved during the first two to threeyears with a focused marketing effort.Experience in Australia suggests that 15% ofall customers provided with the rightinformation about green power, for examplethrough telemarketing, do sign up —indicating scope for future growth incustomer uptake [AUS 2001].The effect of green power demand on thedeployment of new renewable power sourcesis modest in comparison to developablepotential or to the uptake necessary tocombat climate change. “Customer-drivenmarkets for renewable energy are unlikely toadequately replace the need for morefundamental renewable energy policymeasures if accelerated rates of renewableenergy development are determined to be inthe public interest” [NREL 2001, p. 53].Interestingly, a Renewable Portfolio Standard(RPS) as a policy measure to foster renewablepower found great support among nonresidentialUS-customers surveyed in 2000.Companies found that measures, such as anRPS (highest support), system benefitscharges, pollution taxes, and free consumerchoice, were needed to help develop therenewables market [HOLT 2000, p. 36].It is possible that consumer-driven demandmay, by itself, influence the renewable powermarket; however, the time needed for a greenproduct to penetrate market can be very64
Promoting Green Power in Canada Pollution Probelengthy [WISER 2001, p. 10]. Within the firstfew years of program initiation, a utility canexpect residential market penetration fromas low as 0.1% to perhaps as high as orhigher than 5% [WISER 2000, p. 5]. In theUS, the renewable portion of green powerproducts in deregulated markets ispredominantly served by existing renewablepower facilities, which has been a majorsource of criticism of the green market[WISER 2000, p. 8]. This has, for example,led Australia to demand that green powerproducts offered to retail customers mustcontain 80% of electricity from newrenewable power facilities [NREL 2002, p. 14].The number of customers switching to greenpower does not readily translate intosubstantial support for renewable power. Thisis particularly true in Pennsylvania, where itis estimated that perhaps 60,000 of the80,000 customers choosing green power haveselected a product whose renewable powercontent is 1% or less [p. 10]. The USDepartment of Energy estimates that, as ofJanuary 2002, 650 MW of renewable powercapacity has been installed due to green pricingand green power marketing programs sincetheir inception, with another 440 MW underconstruction or planned [DOE 2002]. Tocompare, the US installed more than 1,700MW of wind turbines in the year 2000 alone.Although green power marketing canpotentially deliver renewable electricity morecheaply than the individual installation of“Consumer demand for green powerwill only have a measurable impact onrenewable energy supply if suchdemand is in addition to any supplysideobligations, such as a renewableportfolio standard.”NREL 2001, p. ix“Customer-driven green powermarkets that are based on higher-costrenewable energy products will onlythrive if a fundamental shift in themoral and ethical character of oursociety comes about; in its stead,collective public policy efforts willnecessarily continue to be the sole ordominant method of achievingenvironmental improvements.”WISER 2001, p. 14distributed systems, it lacks the ability toachieve the same price reductions througheconomies of scale that would result fromregulatory measures, such as a renewableportfolio standard, because green powermarketing tends to result in relatively smallamounts of new capacity deployment. Box 4.1shows that most of the money raised throughgreen power premiums does not benefit theproducers; rather, is needed for marketingefforts. Price appears to significantly influencedemand, as is evidenced by experience in theNetherlands, Germany and Sweden, but it isclearly not the only factor. In Finland,although green power has been offered at adiscount, consumer response has beenmodest due to ineffective marketing efforts[NREL 2002, p. 23]. While the Netherlandshas succeeded in creating consumer demandfor green power that exceeds the currentlyavailable domestic generation capacity, thishas been achieved in a highly artificialenvironment in which taxes have shifted theprice relationship in favour of renewableelectricity, and in which no products otherthan green power are allowed for customerchoice. Unless strong measures are taken to“help” green power markets succeed inCanada, it is unlikely that consumer demandwill create a market pull for renewables thatwill result in a major shift of power sources.65
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