Western customers show leadership in green power programs
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NREL ranked Lenox, Iowa, Municipal Utilities' version of Green City Energy, No. 1 in customer participation in the nation. Iowa Association of Municipal Utilities created the adaptable program to help the state's municipal electric utilities increase their use of renewable energy. (Artwork courtesy of IAMU)
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The National Renewable Energy Laboratory recently released its annual ranking of leading utility "green pricing" programs, and several Western customers made appearances in each of the four categories.
More than 500 utilities in 33 states now offer voluntary programs that allow customers to support additional electricity production from renewable resources such as solar and wind. NREL used information from utilities to rank the top 10 green programs in total sales of renewable energy to program participants, total number of customer participants, customer participation rate and the lowest price premium charged for a green pricing service using new renewable resources. "We developed the rankings to provide utilities with benchmarks for evaluating their programs as well as performance targets to aim for," said NREL Principal Policy Advisor Blair Swezey.
Marketing helps established programs grow
The number of utilities offering green power programs and the number of customers buying clean energy has grown steadily since NREL began ranking programs in 2000. The number of kilowatthours sold through green pricing programs in 2003 increased to 1.2 billion, up more than 30 percent from 2002.
In the category of total renewable energy sales, Sacramento Municipal Utility District followed the growth trend, selling 143.2 million kWh of certified green energy in 2003, the third highest sales in the nation. SMUD was the only utility to rank in all four categories. "We've worked really hard to diversify the marketing mix, and it shows in the numbers," said SMUD Greenergy Program Coordinator Jim Burke.
An important factor, Burke believes, is the ongoing evaluation of the Greenergy marketing program. "We've learned that there are lots of reasons people buy green power, and that changes all the time," he said. "So it's worth testing a strategy to see if what worked last year is delivering this year."
Those strategies include billing statements, direct mail, promotions with business partners like Starbucks and the Sacramento Kings basketball team and an inbound contact center where customers calling to establish service can learn about the green energy program. "That has been our lowest-cost, most reliable tool for delivering new subscribers," said Burke.
Los Angeles Department of Water and Power's Green Power for A Green LA program placed sixth on the list with 87.8 million kWh. Both utilities' green power offerings pre-date NREL's rankings and have consistently appeared among the top 10 in one or more categories.
New approach attracts commercial subscribers
The number of customers participating in green power programs is another area that showed significant growth in 2003. LADWP reported 29,677 customers paying premium prices for renewable energy. Only investor-owned Xcel Energy had a greater number of participants at 43,039.
SMUD rose from fifth place to fourth in 2003, adding more than 5,000 customers for a total of 24,542. The 30-percent increase was not unusual for the program over the last few years, said Burke, but the growth in the commercial sector was enormous. "We started the year with 30 commercial subscribers and ended with 344."
He attributed that 1,000-percent jump to a fresh perspective. "There's a perception that business customers never pay more than they have to, so we tend to automatically offer them the lowest-priced package," he said.
That changed when a residential representative who took a temporary position in the commercial contact center thought that business owners would be just as interested in green energy as homeowners. The representative turned out to be right, and others in the commercial division stepped up their promotion of the Greenergy program. "It was a great lesson in how to expand commercial sales," Burke admitted.
Small utilities score big in percentage of participation
Utilities serving large cities naturally tend to dominate in the number of total participants, Swezey noted, so NREL also ranks programs by percentage of customer participation. This category allows smaller utilities to strut their initiative and marketing expertise. "Small co-ops and municipalities often do a better job of communicating with their members or customers," he explained. "They know their audience well and often have the advantage of a greater sense of community."
Lenox, Iowa, Municipal Utilities, with 550 meters and the highest customer participation rate in the nation, certainly makes the case for community. In fall 2003, the town commissioned its own 750-kW wind turbine as a part of the Iowa Association of Municipal Utilities' Green City Energy program to help municipal utilities and cooperatives meet the state's green energy option requirement. In a few months, 11.1 percent of Lenox residents signed up to purchase 100-kW blocks of power from the generator.
General Manager Dave Ferris believed that customer support was as strong for the local project as it was for the principle of renewable energy. "When people look up at that 50-meter turbine spinning, they know what their money is paying for," he added.
Larger than LMU by 27,000 residential and commercial customers, the second-ranking City of Palo Alto Utilities also launched its green pricing program only last year. Since June 2003, 2,200 residential and commercial customers—8 percent—have enrolled in PaloAltoGreen.
In an innovative move, CPAU contracted with the renewable certificate marketer 3 Phases Energy to assist in designing, developing and marketing the program, and to manage purchases for the utility. The program built participation through community and environmental publications, direct marketing efforts, special events, and one-on-one contact with individual and commercial accounts. Earth Day offered an opportunity for a big enrollment push, as well. "Being present in the community is a critical distinction of our program," said Anthony Enerio, Manager of Utility Marketing Services. "We believe that commitment, along with customer choice and easy enrollment will move us into first place next year," he added.
Utilities give different reasons for green power support
The third and fourth highest participation rates belong to Moorhead, Minn., Public Service and Holy Cross Energy in western Colorado.
Both small utilities offer locally generated renewable energy. Moorhead's Capture the Wind program replaces coal-generated power with clean energy from two 750-kW wind turbines the city commissioned in 2002. The municipal utility has ranked high on NREL's list since 2001, and currently, 5.5 percent of its customers subscribe to Capture the Wind.
Holy Cross buys 5 megawatts from Xcel's Ponnequin Wind Farm to supplement green power blocks from its Local Renewable Energy Pool program. Although the community undoubtedly feels some ownership toward the two locally sited, small hydroelectric units supplying the pool, Marketing Manager David Church thinks the utility's 5.1-percent participation rate has more to do with local culture. "People move here for the quality of life," he said of the mountain communities Holy Cross serves. "Naturally, they are concerned about protecting the environment that is so much part of that."
In eighth place with 4.6 percent participation, SMUD was the only utility that ranked in both total number of customers and in participation rate. With more than 500,000 customers—100 times more meters than Lenox—Greenergy could coast on numbers alone. "But our management and administration has more than just a token interest in renewable energy," Burke insisted. "They deserve a lot of the credit for the program's success."
Low green pricing premium still deciding factor in participation
The fourth category ranks utilities by the lowest premium charged for renewable resources developed specifically for green power programs. "It's a way to measure the development of new sources that customer contributions are funding," explained Swezey.
The national average green pricing premium, according NREL, is 2.82 cents per kWh. "We've seen a slight drop since the ranking started," the policy advisor said.
He attributed the decrease in part to rising natural gas prices. "Greater use of renewable energy can help utilities stabilize electricity rates for their customers. Ultimately, what determines the market is how well renewables compete against conventional energy sources," Swezey added.
In keeping with that assessment, the three Western customers tied for fifth place, with a rate of one cent per kWh, focused on keeping their green price premiums affordable. "Our surveys showed that customers get excited about green power, but they still want a competitive rate," said SMUD Greenergy Program Coordinator Jim Burke. "Our goal is to maintain that rate as long as we can."
SMUD delivers low premiums by carefully managing its green portfolio, which mixes delivered power with green tags. "Long-term contracts have been a big help," Burke observed. "We have a flat-rate agreement with the landfill powerplant that supplies 69 percent of our green power."
Utility-owned renewable energy projects are a small but growing part of SMUD's portfolio. In 1999, the board of directors voted to match 40 cents for each dollar Greenergy subscribers paid to create a fund for developing new renewable sources. The fund has helped the utility purchase three wind turbines and build solar array-covered parking at a Sacramento mall.
Small projects and customer support control renewable energy costs
Self generation is the key to Southern Minnesota Municipal Power Agency's low premium. When SMMPA brought two 950-kW wind turbines online last June, its wholesale price for wind power to its members dropped from $2.90 per 100-kWh block to $1. The effect on the wholesaler's green power program was enormous. "Our subscription rate tripled," recalled Member Support Program Manager Dan Hayes.
Siting the turbines at member utilities helped SMMPA avoid most costs associated with putting renewable energy onto the grid. However, the agency's main interest was in keeping the cost to its customers as low as possible, said Hayes. "It's not a money-making proposition," he explained. "We offer renewable energy for the reasons it should be done."
Roseville Electric, at No. 5 on the NREL list, keeps its green energy affordable with a mix of geothermal energy from established steam fields in northern California and small generation projects. Customers support renewable energy development by donating one cent per kWh used to the RE-New Green Fund. The utility matches all customer contributions dollar for dollar and uses the money to help build clean energy systems in Roseville. A PV array on the rooftop of the Ray Sharp Memorial Fire Station #6 is an example of a project that received funding from the program.
