Power of choice.

Author:Dunn, Seth
Position:Consumers' freedom to choose electricity sources and green power marketing
 
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Millions of people will soon be able to influence where their electricity comes from. Will "green power marketing" brighten their hopes for a cleaner energy future - or merely repackage the existing mix?

In a part of the world where the official motto is "live free or die," a newfound freedom to choose the source of one's electricity has proven complicated. Last year, New Hampshire became the first area in the United States to allow some of its residents to select their electricity suppliers - rather than requiring them to buy from the local monopoly, as is the prevailing practice elsewhere. But the 17,000 households enrolled in the pilot retail electricity program soon found themselves being courted by about 15 would-be suppliers through a bewildering array of direct mail, telephone-marketing solicitations, and print and television advertising.

Most of the pitches appealed to consumers' interest in the environment. Suppliers mailed blue spruce seedlings to prospective customers, gave away bird feeders, and promised to donate proceeds to local environmental groups. Often, however, their claims that they would supply environmentally-benign electricity were questionable. One company marketed as "green" the hydropower from Hydro-Quebec, a Canadian utility whose giant dams have flooded much of Quebec's Cree tribal lands. Other power presented as "clean" was only relatively clean - electricity produced by nuclear energy, or natural gas advertised as "not nuclear, not coal, not HydroQuebec." Not for sale was what many customers might have sought: electricity from wind and solar power projects, which would reduce reliance on environmentally damaging coal and nuclear power plants.

Not surprisingly, many people participating in the program felt confused and overwhelmed by these solicitations. Followup surveys showed they were frustrated by their inability to make meaningful comparisons among the various offers. "They're all pandering to the environment. There's so much image, but little information," complained one beleaguered customer.

The New Hampshire experiment embodies both the promise and the pitfalls of what has come to be known as "green power marketing." As electric power industries move from monopoly structures to competitive markets, customers will have the opportunity to buy their electricity from less environmentally damaging sources. In the United States and other countries undergoing or about to begin restructuring, surveys have consistently revealed a strong public preference for renewable energy - and a willingness to pay a premium for electricity derived from those sources.

But this promise will not be realized without appropriate oversight by government agencies or industry monitors. As the New Hampshire experience demonstrated, in the absence of standards, companies will define "green" electricity differently; some may simply sell existing generation sources at a premium price.

Governments are slowly catching up with these green power brokers, and have begun to establish groundrules for the new markets. Some environmental advocates, accustomed to forcing monopoly utilities to build or buy power from renewable sources, are reluctant to surrender their "command and control" approach to electricity reform. Others, however, are working closely with the governments to channel the coming competition toward cleaner power.

The end of an era of monopoly power and heavy governmental regulation of electricity markets holds enormous environmental implications. Worldwide, power generation produces more pollution than any other single activity. In the United States, electric power generation accounts for two-thirds of the country's emissions of sulfur dioxide (the chief contributor to acid rain); nearly one-third of nitrogen oxide emissions; 36 percent of the carbon dioxide (the main greenhouse gas); and the vast majority of the country's high-level radioactive waste. Clearly, the health of millions of people and the natural environment are at stake as governments decide how to reshape the new power markets - and as people, for the first time, face critical choices about their electricity.

RESTRUCTURING REDUX

In its early days during the late nineteenth century, the electric power industry was composed of small, competitive companies - just as Thomas Edison, one of the first electric power entrepreneurs, had envisioned. But in subsequent years the industry's rapid growth led to consolidation and the emergence, by the 1920s, of many of the large, vertically integrated regional monopolies still prevalent. Most of these are privately owned and government regulated, although in some nations - including France and China - the government owns the power monopolies outright.

Today, the global power industry is a roughly $900 billion a year business - larger than airlines and telecommunications. And as these and other industries were during the 1980s, it is poised for dramatic change. In industrial countries, a driving force in the movement to restructure has been...

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