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GROUPS URGE FEDERAL GOVERNMENT
TO BUY GREEN POWER



In a letter sent to the Clinton Administration, environmental groups urged the White House to direct federal procurement officials to buy green power. The letter — signed by the Natural Resources Defense Council, the Union of Concerned Scientists, the Sierra Club, the Environmental Defense Fund, and the Center for Resource Solutions — stated that federal green power purchases could create an important downpayment on reducing U.S. greenhouse gas emissions. Such action by the federal government could also demonstrate a positive link between electric utility restructuring and efforts to clean the air and reduce the threat of global warming.

The groups emphasized that the new market for renewable energy technologies created by federal green power purchases "would demonstrate leadership that other electricity customers will follow. The resulting new demand will transform new energy markets, help ensure U.S. leadership in a growing high technology industry and promote a host of clean air and greenhouse gas reduction goals."

More than half of the electricity produced in the United States comes from coal, oil and other fossil fuels. Fossil fuels used to produce electricity account for 70% of U.S. sulfur dioxide, 34% of carbon dioxide, 33% of nitrogen oxides, 28% of particulate, and 23% of toxic heavy metal pollution. The Natural Resources Defense Council estimates that as many as 64,000 premature deaths each year result from particulate air pollution.

Electricity produced using green, renewable energy resources such as wind, solar, geothermal, biomass, and hydropower dramatically reduce these environmental and public health impacts. Renewable energy technologies are making significant new contributions in serving global electricity needs, based on recent technological advances and public policy support.

Introduction to Green Power

This section gives the user background information on the concept of green power and the context in which green power fits into the electric power industry marketplace.

Background on Green Power Marketing

The passage of the Public Utility Regulatory Policies Act (PURPA) of 1978 expanded the market for larger, bulk-power-oriented renewable electric projects. This legislation partially addressed the restrictive market power of utilities by requiring utilities to interconnect with and purchase power from certain qualifying facilities (QFs) at a utility's avoided cost, or the cost that the utility would have incurred by generating or otherwise supplying the power itself.

In the early days of PURPA implementation, electricity costs were rising and electricity demand growth was higher than it is today, which led to favorably priced, long-term avoided cost contracts for renewables developers. More recently, low natural gas prices and the increased competition in the wholesale electricity markets initiated by PURPA have lowered generation prices and caused utilities and regulators alike to adopt a very short-term perspective of the electricity market. In this environment, renewables, with their higher front-end investment requirements and longer-term contractual needs, are at a disadvantage. Indeed, annual renewables electric capacity additions have fallen to between 200 MW and 300 MW during the 1990s from a level of more than 1,000 MW during the late 1980s.

Currently, electric utilities are facing increasing competition because of a nationwide movement to deregulate the power supply industry. The promotion of greater competition in electricity markets is premised on the belief that a more competitive market will result in lower market prices than the traditional regulated monopoly industry structure. This will be achieved by giving a greater number of suppliers access to the market. Renewables, with higher front-end costs, will be disadvantaged in this strictly price-based segment of the market.

However, full competition should also provide electricity customers with a greater choice of how their electricity is produced, and this opens a new market for renewables. In the face of this competition, utilities have a growing impetus to strengthen their image with their customers and build customer loyalty. Two important factors in customer loyalty are:

1) Most utility customers want their utilities to pursue environmentally benign options for generating power.

2) Some utility customers are willing to pay extra to receive (or even just to fund) power generated from renewable sources.

Some utilities are now offering customers the option of paying more to receive such environmentally preferable power—a concept known as "green pricing." Green pricing is an evolving utility service that responds to utility customers' preferences for electricity derived from renewable energy sources such as solar, wind, or biomass. Under green pricing, utilities offer customers a voluntary program or service to support electricity generated from renewable energy systems. Customers are asked to pay a rate premium, which is meant to cover the costs that the utility incurs above those paid for electricity from conventional fuels. Utilities are considering green pricing as a way to build customer loyalty, deploy popular renewable technologies, expand business lines and expertise, and improve understanding of customer response to unbundled pricing and services.

The more general concept of marketing green power is usually referred to as "green power marketing." Green power marketing capitalizes on an expressed public preference for cleaner energy options, such as renewables, by giving consumers a market option to purchase renewables-based electricity services. Green marketing has the potential to expand domestic markets for renewable energy technologies by fostering greater availability of renewable electric service options in retail markets and is compatible with ongoing attempts to introduce greater competition into the generation and delivery of electricity.


Center for Resource Solutions Contact: Kirk Brown, (415) 561-2100
The Center for Resource Solutions is a San Francisco-based non-profit organization dedicated to promoting the use of energy efficiency and renewable resources to sustain healthy environments and enhance overall quality of life. Written by: Green Power Network


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