Green Power Premiums vs. Green Power Purchasing

It's taken some time, but many electric markets now have a "green" option.  These are important programs that are contributing to the building of a renewable electric power generation capacity.  But there are two different types of programs you should know about.

In one type of program, which I'll call "Green Power Premiums", where participants pay a normal electric bill, and then pay an extra premium.  The additional money in theory insures the money is used to build or operate green power generation facilities.  An example is the City of Naperville, Renewable Energy Option.

The other type of program, which I'll call "Green Power Purchasing", participants pay for green power at the rate determined by production costs.

There is a significant long-term difference between the two programs, and if you're a participant in a premium program I would urge you to lobby your electric provider to restructure the program.

The big difference, is in a purchasing program when costs are lower, prices are lower.  These programs offer a first come, first serve lock-in which insures if you're paying more today, and in the future wind becomes cheaper than coal, you'll be paying less.  One example is XCel Energy WindSource in Colorado where participants pay 0.67 cents less per kilowatt hour than other XCel's customers.  Of course they all want to switch, but WindSource only signs up participants equal to their generation capacity, the rest are on a waiting list, until the WindSource program can build more capacity.

That's great for a number of reasons.  For you, it's better.  You're paying more now, why shouldn't you reap whatever rewards it produces?

Also, it's an attractive motivator to other consumers.  You wouldn't mind a few more people contributing to the cause, whatever their reasons?

Lastly, it should give you extra piece of mind that your money isn't being shifted around by the power company to offset expenses they would have spent on green sources anyhow.  For example if a utility was already planning to spend $10 million on wind power, and receives $5 million from premiums, they may only spend $5 million of their money, and the $5 million in premiums, rather than $15 million total.  They can then use that extra $5 million to lower conventional rates, rather than green rates.  In theory, this shouldn't happen, but I'd feel more secure it wasn't if the green program is clearly separated.

There is a third type of program, Renewable Energy Credits, which are essentially contributions directly to green power generating companies.  Personally, I'd rather buy their stock, and help fund generation that way then to contribute directly.

For more information, the U.S. Department of Energy has information on Green Power Markets.

Disclaimer: I'm not a participant in either type of program, because (a) neither is offered in my area, and (b) I live in an apartment building in which the rent includes electricity.  If (a) wasn't true I'd lobby my rental office to do something however.