Hard Questions About "Green" Electricity

Most electric utilities have adopted a "green power" option for consumers who want to see more energy produced from renewable sources, as opposed to fossil fuel. Those who choose the option pay a higher price, which the utility collects on behalf of the "green power" provider. Yesterday's New York Times raises some questions about what happens with the money paid for "green power."

Do these programs really cause more renewable energy projects to get built? The government has looked at the question, and says it is difficult to draw an overall conclusion. Its experts say they believe that some green power programs work better than others.

“It’s a tricky issue. It’s not a one-size-fits-all market,” said Lori Bird, a senior analyst at the National Renewable Energy Laboratory in Colorado and co-author of a report in September on green power markets.

At least one major program has come under fire from regulators. Last year, a Florida Power and Light green power program, called Sunshine Energy, was terminated by the state’s Public Service Commission after an audit found that promised solar power facilities were far behind schedule. The program had more than 38,000 customers, and was once the sixth-largest in the country, according to the renewable energy laboratory.

The audit also found that the vast majority of homeowners’ payments went into marketing and administration.

“No reasonable person would have contributed to the Sunshine Energy program had they known that approximately 76.4 percent of the contributions would be spent on marketing and administrative expenses instead of renewable energy,” wrote Nathan Skop, a commissioner on the Florida Public Service Commission, in a note accompanying the termination decision.

Kate Galbraith, Paying Extra for Green Power, and Getting Ads Instead, New York Times, November 17, 2009.

The notion of "voting" with one's dollars to buy a cleaner environment was introduced with the push in the late 1990's for deregulation, as a "market based solution" to environmental problems from high carbon emissions. The notion of voting with ones dollars as a substitute for hard political choices and public action is fundamental to the marketizing ideology. See Thomas Frank, One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy. It made the utilities look like they are environmentally responsive without really forcing changes, and it made it possible for individual consumers to feel like they are doing something to reduce adverse environmental impacts. As indicated in the Times article, the results may be less than anticipated. At the level of individual action, consumers wanting to reduce environmental impacts may be better advised to use less electricity, through conservation or efficiency measures, rather than paying more for virtual "green power" financial derivatives. It is now obvious that broader societal choices regarding carbon emission reduction from all sources need to be made by federal and state legislatures and regulators.

The New York Public Service Commission should require rigorous independent audits of the claimed results of the "green power" programs to see how much additional "green power" is actually being generated with the revenue from the higher prices being paid by consumers, and determine the cost of carbon emissions actually avoided through the "green power" rates.