2. In some circumstances, the physical result of a consumer's purchase of a green product would be the extended operation of fossil fuel power plants and greater pollution.
" This could occur when out-of-state utility-controlled renewable resources are being resold but are already operating at full capacity. The result could be the extended operation of other, more polluting resources to generate additional power for export to California.
" This situation could result, for example, from Green Mountain Energy Resources' purchase of renewable power from PacifiCorp. At worst, the purchase could result in more Northwest coal-fired generation, perhaps from the Centralia power plant the dirtiest power plant in the West.
3. The resale of utility-controlled resources to green consumers cannot make a difference in the West because the supply of these resources greatly exceeds any realistic projection of green demand.
" If every residential consumer in 11 Western states had the choice of purchasing renewable electricity, 18% of those consumers would have to purchase a 100% renewable product (excluding large hydropower) in order to "use up" the existing amount of renewable power that is controlled by utilities and being paid for by their captive ratepayers. Only then would demand foster new supplies of renewable power. Since most green pricing or green marketing programs in the country have response rates of only 1% to 2%, the resale of utility power is unlikely to increase the supply of renewables.
4. Only one small green marketer (San Jose-based cleen 'n green energy) purchases power exclusively from renewable energy producers that are not owned or under contract to a utility and that would otherwise receive only the market rate for their power.
" California consumers have no way of distinguishing between renewable energy that is merely resold utility renewables and renewables that are at risk in the market. Fuel source labels required by California law will not differentiate between the two, nor does the private "Green-e" certification program recognize this critical difference among power products. In fact, two products offered by cleen 'n green energy the only ones that clearly do not merely resell utility-controlled renewables are not endorsed by the Green-e program because the company has chosen not to pay the Green-e certification fee.
5. Most of the premiums charged for green power are spent on marketing and advertising costs, not on renewable energy content.
" Of the average $10/month extra that consumers are paying for green products, some $7.50-$9.50 is estimated to be needed for marketing and overhead costs, not for renewable energy content.
6. Largely because of high retail marketing costs, public subsidies are required to support green marketing.
" $75.6 million in direct subsidies will support green marketing efforts in California through 2001. At the request of green marketers and over the objection of the California Energy Commission, Senator Byron Sher sponsored legislation to extend subsidies of 1.5¢/kWh to support the retail sale of low-quality green products that merely resell low-cost utility-controlled renewables.
" The success of green-marketed products containing some percentage of new renewable energy may also be dependent upon public policy. Green-marketed new renewable power is likely to come from new projects that will be supported by a California Energy Commission production incentive of about 1.2¢/kWh, paid from California's system benefits charge.
" The combination of available public support payments for renewable power and green marketing in California can amount to 3¢/kWh. (Together with green-customer premiums, total "above-market" payments supporting green-marketed renewable energy products can amount to 6.4¢/kWh.)
" Without California's support of existing and new renewable energy projects, as well as subsidies paid specifically to support green marketing- all of which are scheduled to end in 2001, the green market may not be viable.
7. Some green marketers sell products on the basis of promised future content from new renewable energy projects. Others lead consumers to believe that their products currently contain power from new renewables when they do not. Both charge extra now for promised electricity, which invites abuse of consumers.
" Charging now for a product to be delivered in the future invites abuse of consumers because green marketers may go bankrupt or otherwise exit the new and risky electricity market before promises are met.
" Consumers will pay up to a whopping 31% premium over market electricity prices for Edison Source's EarthSource 2000 product, which promises 10% new content. But Edison Source does not specify when or from where that new content will be delivered and reserves the right to change its policies without prior notice.
" Customers of Green Mountain Energy Resources' "Wind for the Future" product are promised 10% new wind content by November 1999. Though GMER has announced that construction of two new wind turbines is underway, it simultaneously changed the terms of this product by promising a new wind turbine (limit: 3) for each group of 4,000 customers instead of each group of 3,000 customers as promised during its first year of marketing.
8. Green product claims cannot be properly verified without a region-wide tracking system, which does not yet exist.
" In the absence of a comprehensive, multi-state fuel source tracking system, California's "verification" system will rely in part on marketers' unverified attestations. Presumably, the verification process is needed because retailers' claims will not always be truthful. Private verification efforts, such as Green-e, are even less able to verify claims.
9. False or misleading green product claims are common.
" Claims that consumers are benefitting the environment by purchasing resold, utility-controlled renewable power that would have been generated regardless of the resale are clearly misleading.
" Edison Source claims, for example, that "By purchasing EarthSource energy, you will help reduce pollution by decreasing California's reliance on fossil fuels." This is clearly not the case if Edison Source purchases its renewables from utility resource portfolios, as the company has indicated it may.
" Most consumers reading the Sacramento Municipal Utility District's (SMUD's) claim that its green power "will replace predominantly non-green power that we otherwise would have bought" will get the false impression that their purchase will result in the overall system becoming cleaner, which it will not.
" Most green marketers falsely inform consumers or give consumers the impression that their products currently contain solar and wind power when they do not.
10. Green marketing is unlikely to reverse the current decline in renewable energy production and significantly diversify electric system resources.
" Renewable energy production is in decline. In California, renewable energy production has fallen from 12% in 1994 to under 11% today.
" Currently planned investments in fossil fuel plants for the competitive market dwarf planned investments in renewables. The ratio of planned fossil-fuel capacity to renewable energy capacity nationwide is about 118:1. This is a stark indication that investors do not perceive renewable energy projects to be lucrative in competitive markets, despite potential green markets. Most new gas plants will be profitable at 3¢/kWh or less (as long as gas prices stay low), whereas most renewable energy projects require 4¢/kWh or more.
" Green marketing may prove to be a successful tool for marketers and provide modest benefits to renewable energy industries, but it is unlikely to increase significantly the 2% market share that renewable energy sources (other than large hydropower) now hold in the United States:
" Green marketing efforts are aimed primarily at the residential sector, so two-thirds of electricity sales are largely unaffected.
" Even very optimistic green marketing projections would not significantly increase the total supply of renewables: Assuming that: every residential consumer across the country has the immediate ability to choose a 100% renewable energy product (where large hydropower is not part of that product) and the consumer subscription rate is 3.4% matching the highest rate ever achieved by a green electricity marketing program, the green market would support the equivalent of about 1% of the U.S. energy supply only half the market that renewables (other than large hydropower) control now.
11. Most green marketers are affiliated with polluting companies and are not advocates of renewable energy policy.
" Many of the green marketers soliciting California environmentalists are part of larger corporate families making multi-billion-dollar investments in non-renewable and environmentally destructive energy projects or are otherwise affiliated with such companies.
" Green Mountain Energy Resources' customers contribute to the profits of PacifiCorp's utility shareholders, whose latest investment attempt was to acquireThe Energy Group, the parent company of Peabody Coal, the world's largest private coal producer.
" Most green marketers are not advocates of strong renewable energy policies. Indeed, Southern California Edison, the corporate sibling of green-marketer Edison Source, is attempting to limit severely the applicability of the federal wind energy production tax credit.
12. To suggest that green marketing is an answer to the lack of market penetration of renewables is to ignore the market imperfections that have hindered renewables in the first place.
" Electricity markets are full of what economists call "market failures" from the environmental damage caused by the production of electricity from fossil fuels, which is not reflected in electricity prices, to the high transaction costs associated with green marketing. Therefore, it is unreasonable to expect green marketing to obviate the need for public policies to promote renewable energy.
