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Pricing Programs Spur Growth of Renewable Energy Technologies

The full report, including "Top Ten Lists" of utilities, is available in PDF Format (PDF 1.81 MB), (Download Acrobat Reader)

Golden, Colo., September 25, 2001 - A new study by the U.S. Department of Energy's (DOE) National Renewable Energy Laboratory (NREL) identifies key factors for ensuring the success of "green pricing" programs and ranks programs nationwide for their relative effectiveness.

Currently offered by more than 85 utilities in 29 states, green pricing gives consumers an option to help support additional electrical production from renewable resources such as solar and wind.

The study found that the design and marketing of the "green power" product is a critical element of success. Other key factors include whether the program creates "personal value" for customers and the extent to which a utility partners with the community and other outside groups to publicize the program.

"Green pricing has given utilities and their customers a powerful new tool to foster environmentally friendly energy production," said NREL Energy Analyst Blair Swezey, who co-wrote the study with NREL Energy Analyst Lori Bird. "Our work here lays out the ways these programs connect best with their customers, and shows which are achieving the most in terms of adding new renewable power to the grid."

Ranked by the amount of new energy produced, the green pricing program of the Los Angeles Department of Water and Power (LADWP) was found to be first in the nation, followed by Austin (Texas) Energy and Public Service Company of Colorado.

Ranked by customer participation rates, the top four are Moorhead (Minn.) Public Service, LADWP, Holy Cross Energy (Colo.), and Madison (Wisc.) Gas and Electric. (See attached tables for additional rankings).

The study cited several ways utilities have provided "personal value" to green pricing customers. Those benefits include tax deductibility of the extra charges, personal recognition in program newsletters and advertisements, instilling civic and community pride and price protection from fuel price increases.

Pricing should be tied directly to the investment promised for new projects, the study found. "Customers want to know that the dollars they are contributing result in additional and meaningful renewable energy development," it concluded.

To date, 282 megawatts of renewable energy capacity has been installed or is planned as a result of green pricing programs - enough to meet all the power needs of 110,000 homes.

Successful implementation of a green pricing program not only demands continuing marketing efforts to build awareness, but also requires ease of participation and, longer term, a commitment to expanding the program to meet customer demand.

Marketing efforts highlighted by the study include the "Green LA" community event sponsorships underwritten by the LADWP and Public Service Company of Colorado's cooperative ads and initiatives with a Denver television station.

While residential customers generally are the focus, a green pricing program's ability to attract business customers could determine its ultimate impact. Some programs have drawn as much as half of their support from businesses; overall, the study found that about a quarter of the total power sold through green power programs is to non-residential customers.

The study also suggests that by carefully analyzing the motivations and preferences of potential participants, utilities can target specific green pricing programs to appeal to wide segments of their customer base.

According to Swezey, the importance of green pricing for providing consumers with environmentally beneficial choices in electricity is increasing as a result of market issues that have slowed the drive for full utility deregulation in some states. The NREL study provides utilities and other interested parties with a list of "best practices" to achieve success gleaned from detailed knowledge of green pricing experience to date.

The study was conducted by NREL's Energy Analysis Office and funded by DOE's Office of Power Technologies.

NREL is a national laboratory managed by Midwest Research Institute, Battelle and Bechtel. In addition to its work in energy analysis, the lab is a leading center for research into solar wind energy, plant- and waste-derived fuels and chemicals, energy-efficient buildings, advanced vehicle design, geothermal energy and hydrogen fuel cells.

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