The Outlook for Green Power Markets in the United States

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The Outlook for Green Power Markets in the United
States

• Blair Swezey
• Principal Policy Advisor
• National Renewable Energy Laboratory
• Golden, Colorado

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Definitions

• Green Power
• No legal definition.
• Accepted definition an electricity product with
  a high fraction of renewable energy content
  most products are, in fact, 100 renewable
  energy.
• Green Power Marketing
• The act of selling green power, generally used to
  describe competitive marketing (retail and
  wholesale).
• Green Pricing
• Green power programs or tariffs offered by
  utilities.
• Renewable Energy Certificates
• Separation of the renewable energy attributes
  from the physical electricity product.

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Origins of Green Power Marketing

• Utility Green Pricing Programs
• Allow utility customers to voluntarily fund
  renewable energy projects that are not cost
  effective under integrated resource planning.
• Electricity Restructuring
• Retail competition will bring alternative
  suppliers and product choices to electricity
  consumers.
• Some marketers will want to differentiate their
  products based on environmental attributes.
• More utilities will offer green pricing to
  prepare for competition or because of the threat
  of competition.

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Growth in Utility Green Pricing Programs
As of September 2002
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Significant Amounts of New Renewables are Being
Supported by Green Power Demand
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Study Purpose

• Introduction of customer choice in domestic
  electricity markets provides a new but untested
  approach to increasing renewable energy
  development.
• Quantify the potential size and impact of the
  green power market.

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Study Approach

• Review green power market research and marketing
  experience.
• Identify variables that will help determine
  market size and the rate of market development.
• Examine the experiences of other industries that
  have undergone deregulation or that sell
  products with a high degree of environmental or
  health-related content.
• Develop a model to forecast green power market
  growth based on incorporated assumptions.

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Green Power Forecast

• 10-year forecast of U.S. green power demand
• High growth scenario
• restructuring proceeds with little delay
• market rules conducive to competition (switching)
• consumer acceptance of green power is high
• green power premium continues to decline
• Low growth scenario
• introduction of customer choice is delayed
• market rules deter competition, switching
• consumer acceptance of green power grows slowly
• green power premium remains at current levels
• Both scenarios are plausible

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Forecast Inputs

• State level forecast of residential loads to 2020
• Pace of restructuring, by state
• Green power market access, by state
• Separate assumptions for regulated and
  restructured markets
• Residential green power market penetration
• Non-residential demand as percent of residential
  demand
• Green power product quality
• total renewable
• new renewable
• Start with known conditions

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Case Studies of Other Green Industries

• Other green products
• bottled water
• organic food
• socially responsible investing
• sustainable forestry products
• contributions to environmental organizations
• recycling
• compact fluorescents

• Newly restructured markets
• long distance telephone service
• natural gas

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ResultsRenewable Energy Capacity Supported by
Green Power Demand
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Key Sensitivities

• Pace of Restructuring and Green Power Access
• Green Power Product Content
• Green Power Penetration Rates

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Sensitivity Scenarios
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Key Market Determining Factors

• Customers must have widespread access to
  aggressively marketed green power products,
  whether in restructured or regulated markets.
• Currently, only 40 have access from their retail
  provider
• The leading utility programs have achieved
  participation rates of 3 to 5, but more than
  half are at lt1.
• Widespread customer education is needed on the
  merits of exercising green product choice.
• Green power premiums must be reduced.
• Innovation in green power products and marketing
  strategies would likely increase the pace of
  market development.

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Key Market Determining Factors (Cont.)

• Public policy measures can directly or indirectly
  assist the market
• Direct measures
• Green pricing requirements
• Customer incentives for green power purchases
• Grants to green power marketers and aggregators
• Education and marketing campaigns
• Indirect measures
• Tax incentives and grants that reduce the cost of
  renewable energy generation

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Emerging Opportunities Identified

• Customer Aggregation
• Large Customer Demand
• Renewable Energy Certificates

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Green Power Market Status - 2002

• Green power marketing expanded to 5 new states
• IL, MD, NY, TX, VA (and DC)
• 13 utilities announced or implemented new green
  pricing programs
• some driven by state legislative requirements
• About a dozen companies are active in the
  renewable energy certificates market.
• Nearly 400,000 customers are now purchasing green
  power with customer retail access at about 40
  nationwide.

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Growth in Utility Green Pricing Programs
As of September 2002
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Emerging Market Trends

• The green power market is expanding beyond
  individual utility service territories and state
  market borders through the creation, trading, and
  sale of renewable energy certificates.
• The Center for Resource Solutions has established
  certification criteria for tradable renewable
  energy certificates (TRCs) through its
  Green-e program.
• Increasing use of marketing/business partnerships
• Oregon IOUs (w/Green Mountain Energy)
• NiMo and NYSEG teaming with green power marketers
• Community Energy (w/Exelon)
• Green Mountain Energy/APPA
• SMUD/Starbucks/Jamba Juice

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Non-Residential Purchases

• Increased purchases by non-residential customers
• Examples
• Businesses (Toyota, Kinkos, etc.)
• State and municipal government purchases
• MD (initially 6, increased to 20)
• NJ (12)
• NY (10 by 2005, 20 by 2010)
• PA (5)
• Chicago 48 local agencies (20 80 MW by 2005)
• Seattle (5 175 MW by 2004)
• Federal agencies
• Colleges and universities
• 84 corporations and institutions have joined the
  Green Power Partnership, representing gt530,000
  MWh (60 aMW) per year.
• Non-residential purchases account for nearly 1/3
  of total utility green power sales among
  utilities.

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The AAA of Green Power Marketing

• Access
• Competitive markets
• Utility programs
• Renewable energy certificates
• Appeal
• Is it a good product?
• What other values are attached?
• Awareness
• Even the best products will not be purchased if
  consumers are not aware of them.

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The Green Power Network is a nationally
recognized Internet source for green power data
and analysis. Information is available on green
power markets, utility green pricing programs,
and renewable energy certificate providers. Links
are provided to green power providers, product
offerings, and relevant analysis products.
http//www.eere.energy.gov/greenpower