September 1, 2004
GreenHomeNYC Feature Article
by Dan Harris
“Green Power” is delightful phrase, full of promise and hope for the future — as if we will plug our appliances into a smiling oak tree with a rainbow glistening in the background. The reality of purchasing Green Power, meaning electricity generated solely from renewable sources, is significantly less glamorous than this vision but a new revolution is fast approaching for energy consumers. Energy marketers are waking up to the fact that a majority of electrical customers, up to 75% in some surveys, are willing to pay a little extra money on their monthly bill to ensure that their electricity is generated by renewable sources. Currently in New York City the options for purchasing Green Power are few and legislators are still mulling over the rules to define the market but soon a bevy of new options will be available to consumers. Among the few programs that are available now there are two different types, Green Power purchased through an electricity reseller, and Green Power/Wind Power Certificates purchased from a Green Power marketing company.
Green Power is a stepchild of energy deregulation of which there has been much news especially after what happened in California in the summer of 2000. It is necessary to understand deregulation to fully understand the nature of Green Power, but first lets look at the options that do exist for retail customers in the New York City area to buy Green Power and Green Power/Wind Power Certificates.
Option 1: Purchasing Green Power for residential customers of Consolidated Edison in New York City
Only one company is available at the current time. A subsidiary of Consolidated Edison, called Consolidated Edison Solutions, is offering electricity produced by renewable energy sources. Service is available by contacting ConEd Solutions at 1-888-320-8991. In return for a higher price per kWh they will guarantee to purchase electricity from these renewable sources in the amount that is used on your meter.
The electricity supplied is 50% wind power and 50% run-of-the-river hydroelectric power. Run-of-the-river (ROTR) hydro means a hydroelectric project that does not interfere significantly with the flow of the river. This does not mean that you are directly using electricity from these sources because all electricity is drawn from a general pool of electricity called “the grid”. It really means that Con Ed Solutions will guarantee to pay the company that owns the wind farm or ROTR project for electricity in the amount of your usage.
I called Consolidated Edison Solutions at the number above and they offered to switch me to their residential Green Power plan for 11.3 cents per kWh, compared to the rate on my current bill of 9.8 cents per kWh. The new rate would be reflected in the next meter reading and billing cycle. The cost of distribution is added by the utility, Con Ed, to this new base electricity price. Under this arrangement I calculated that my bill for this month would change from $56.14 to $61.05. This amount would be charged in two bills that would arrive monthly in the same envelope. Con Ed would present one bill for distribution charges of the electricity, as well as gas usage like a normal Con Ed energy bill, and contained in the same envelope would be another bill from Con Ed Solutions for the supply of the electricity.
More information is available at conedsolutions.com
Option 2: Purchasing Green Power/Wind Power Certificates for residential customers of Consolidated Edison in New York City
A Green Power or Wind Power Certificate is a product offered by a Green Power marketing company. The purpose is to direct funds towards new development of renewable energy generation sources. In this case you are not actually purchasing electrical service. What you are doing is voluntarily paying a premium on your electrical usage that will go to companies that own and develop renewable energy projects in your state. Essentially you are sending a donation to these companies, though the certificate marketer will call it “purchasing the environmental benefit of the electrical generation”. Did you get that? Apparently there are two things created when renewable electrical energy is generated, one is the actual electricity, and the other is the environmental benefit of displacing another form of non-renewable electricity. The marketer touts the certificate as a purchase of this environmental benefit. This is a definition that is necessary to define the nature of the product.
Consequently there is no limit to the amount of green certificates that one can buy (buying enough to cover your monthly electricity usage is simply a guideline). There are three companies with products in New York State at the current time though only two, Community Energy Inc., communityenergy.biz, and Sterling Planet, sterlingplanet.com, offer certificates for customers of Consolidated Edison. Community Energy Inc. offered me three blocks of 100 kWh for a premium of $7.50 per month. (I based this on my usage this month of 296 kWh). Sterling Planet offered me the option of three premiums based on a percentage of my average electrical bill, 20%, 15%, and 10%. (Again using my current bill of $56.14 my premium options are $11.23, $8.42, $5.61).
This premium is paid to the energy certificate company as a monthly bill, separate from the utility bill. At the current time certificates are not in any way involved with Con Ed. In the future these companies will have direct partnerships with Con Ed so that the premium would just show up on your monthly utility bill. The utility Niagara Mohawk in upstate New York has a partnership with all three Green Power marketers in the state.
The definition of Green Power is electricity produced solely by renewable sources that can include any combination of wind, biomass, hydroelectric (both conventional and Run-of-the-river), geothermal, etc. All electricity sources including Green Power sources supply electricity to a grid system that supplies consumers in its coverage region. In order to understand why green power can now be purchased directly it is necessary to understand the deregulation of the electricity market.
Traditionally, a regulated utility, such as Con Ed, or in upstate New York, Mohawk Energy, generated most of the electricity and distributed it by the grid system to consumers at prices that were regulated by the state. Though these two are the largest utilities in New York there are actually 47 separate utilities operating in the state. Since the passage of the Energy Policy Act in 1992 twenty-four states and the District of Columbia have either enacted legislation or issued a regulatory order to implement retail power deregulation. These states have deregulated the electricity supply market and permit new companies to build electrical generation facilities and market their power directly to consumers. The price of electricity is then allowed to fluctuate with the influence of supply and demand. Some of these new companies may not even have electrical generation facilities but may buy and sell power on speculation in a new market similar to a commodities market. This new company is called an ESCO and there are approximately 22 active ESCOs in New York State.
In a deregulated market the same grid system is used to distribute the electricity and the original utility companies still govern that distribution as well as the upkeep of infrastructure and customer service. Electricity that is purchased from an ESCO is still subject to a distribution charge by the original utility company though in many cases the monthly cost of electricity can be reduced for a consumer by using an ESCO that tailors a specific fixed-price contract for that consumer. In this way ESCOs have “products” or contracted electricity that a residential or commercial customer may purchase for a set price.
Green Power can be marketed to consumers in the same manner by an ESCO as simply another product. In the example above Con Ed Solutions is legally an ESCO though it is a subsidiary of Con Ed, the utility. Con Ed Solutions has other products besides Green Power that it uses to generate revenue by taking advantage of supply and demand price disparities in the deregulated electricity market.
The deregulation of the market is less important to Green Power certificate marketers since the purchase of certificates does not represent an electrical service contract. Though deregulation facilitates the ability of Green Power certificate marketers and the utilities to work together.
There is an opportunity for residents of New York City to assume responsibility for the source of their electricity. When you purchase the products described above you are actively encouraging the construction of new renewable energy sources. More and more wind farms, tidal projects, photovoltaic projects, and a host of others are being planned at the current time and this development should be supported by consumers who care about the energy future of New York and can pay a little extra on their monthly bill. Renewable energy sources face difficulty breaking into a deregulated market due to high startup costs compared to well-established traditional polluting sources and so financial encouragement by a concerned public goes a long way to support the increased costs. Most importantly it sends a message to financiers and government that you are concerned and want change.
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