Policies to Support Green Power
There are many ways for state and federal governments
to support wind power and other renewable energy
resources. This is a listing of policies that are
intended to facilitate a robust demand for green
power. For broader policies to support wind power
development, click on Energy Policies.
Mandated State and Federal Government Purchases
An effective way to create demand for green power,
and to get government to lead the way, is by requiring
state and federal government to purchase a minimum
percentage of renewables in their electricity supply.
It can be directed by an executive decision or by
For example, New York's Governor Pataki has issued
an executive order directing state government to
purchase a minimum of 10% of its electricity from
renewable sources by 2005, and 20% by the year 2010.
At the national level, President Clinton issued
Executive Order 13123, which strongly encourages
federal government agencies to purchase renewable
energy but does not set a specific target.
Renewable Energy Funds
Renewable energy funds are created by a small surcharge
on each kilowatt-hour sold. Also called "system
benefits charges" and "public benefits funds," a
renewable energy fund can be used to create renewable
energy support programs, provide incentives to renewable
energy development, and provide incentives for consumer
purchases of green power.
Thirteen states have instituted renewable energy
funds, and use them for a variety of purposes. For
more information on these funds, see www.cleanegroup.org
A few states use their renewable energy funds to
offer incentives for the sale of green power to
consumers. These incentives may be passed on to
green consumers through lower prices for green power.
See Incentives for Purchasing or Selling Green Power.
Although to date these funds have been created only
at the state level, a national renewable energy
fund could also be established. It has been suggested
that these funds could be used to provide matching
grants to states, as a way to encourage more state
governments to established renewable energy funds.
Incentives for Purchasing or Selling Green Power
Renewable energy funds have been used to lower the
cost of green power to consumers, either by subsidizing
the cost of qualifying renewable energy kilowatt-hours,
or by subsidizing the cost of marketing and acquiring
California offers an example of the first type.
The California Energy Commission pays 1.0 cent for
each kilowatt-hour sold. Green power marketers submit
claims to the Commission for qualifying green power
sold, and are required to pass the funds received
on to their customers in the form of a credit.
The Connecticut Clean Energy Fund has used some
of its money to underwrite marketing campaigns by
two green power marketers in that state. And Rhode
Island plans to offer a payment to retail marketers
based on the number of green power customers they
get. This kind of participation helps to reduce
the cost of green power to consumers.
Higher Default Prices (for restructured electricity
One of the most fundamental challenges in creating
green markets is creating competitive standard markets.
In fact, there is no separate "green" market, there
are only markets with different products for sale.
When retail choice is introduced, regulators ensure
that everyone continues to receive electricity.
Consumers who don't choose among suppliers will
be served by a default supplier chosen by the regulators
or specified in restructuring legislation. The price
of this default generation service has been a major
barrier to consumer choice and customer switching
in restructured markets.
For various reasons, the default generation service
price is set lower than a normal retail supplier,
sometimes at or even below the wholesale price.
This does not allow a retail service provider to
compete on price and still recover its marketing
and other costs. When retail marketers are discouraged
from participating in markets, consumers have few
choices, there is little marketing to make consumers
aware of the few choices they do have, and competition
(and green power sales) suffers.
However, state regulators can set default generation
service prices higher, at a level closer to competitive
retail prices. This would give all marketers, including
green power marketers, an opportunity to compete
and make a profit.
Local governments can procure electric power and
related services on behalf of the residents and
businesses in their communities. This can help small
consumers get the benefits of competition. Massachusetts
and Ohio included a provision in their restructuring
legislation that allows communities that aggregate
to automatically include all residents and businesses,
based on a vote of town elected officials. Consumers
who don't want to be part of the aggregation can
"opt out" and make a different choice on their own.
Because the aggregation is a public process and
vote, there is an opportunity to request that green
power be at least one of the offers.
Required Green Power Options (for regulated utility
Many regulated utilities around the United States
offer a green power option to their customers. A
few states have even required their regulated utilities
to offer a voluntary green power choice.
Before the state electricity market in Texas was
restructured, regulators set a standard to be met
by utilities that offered green power, and more
recently Washington and Minnesota have also decided
to require utilities to offer a green alternative.
Oregon has gone a step further by not only requiring
that utilities offer a green option, but also requiring
that other marketers be given an opportunity to
compete to offer the alternative.
A registry or database that identifies information
about all electricity generated could be a powerful
tool to help support consumer information disclosure
(labels) for electricity sales, renewables portfolio
standards, tradable renewable certificates, and
green power products generally. It would be a database
in which to register information about the characteristics
or attributes of each megawatt-hour of electricity
generated. Such information would include the power
plant name, location, energy resource used to generate
electricity, the date of generation, and various
environmental impacts such as air emissions of sulfur
dioxide, nitrogen oxides, particulate matter, carbon
Texas has established a registry-a market platform
or trading exchange-solely for the purpose of verifying
compliance with its renewable portfolio standard,
but it could be broadened and used for the other
The New England ISO is working with a group of stakeholders
to develop an electricity information registry,
which it is calling a Generation Information System.
This system, when ready, will provide a useful database
for verification of tradable renewable certificates,
compliance with the various state renewables portfolio
standards, and verification of electricity labels
provided to consumers as part of information disclosure.
It is likely that such registries or databases will
be developed regionally, probably consistent with
the geographic reach of power pools, independent
system operators, or electric reliability regions.
It is important that they be able to "talk" to each
other, however. For this reason, it may be desirable
that the federal government eventually develop a
national registry to facilitate trading and tracking
of the electricity attributes across regions, to
prevent double-selling and other consumer abuses.
Emission Reduction Credits
Electric power generation is responsible for a large
portion of the air pollution in this country, yet
present pollution reduction programs do not allow
wind power and other renewables to play an effective
role. Clean air regulations should allow renewable
energy sources to participate in emission reduction
programs and credit trading. These include credits
for avoiding sulfur dioxide, nitrogen oxides, particulate
matter, carbon dioxide, and other pollutants. For
more information, see
Clean Air Act and Renewable Energy: Opportunities,
Barriers, and Options.
If the environmental and health benefits of renewables
are recognized by pollution control programs, the
value of the emission reduction credits created
may be worth approximately one half cent per kWh
in revenues to renewable energy generators. This
would help narrow the cost differential between
fossil and renewable generation, and help make green
power more competitive.
Transmission policies are not often thought of as
green power issues, and it is true that transmission
of bulk power supply is not specific to green power
markets. But transmission access and pricing rules
are critical to the functioning of competitive markets.
They are also critical to market access and cost
for renewable resources that are often remote from
load centers, dependent on intermittent resources
such as wind, sun and water, and sometimes smaller
than transmission operators care to recognize.
Transmission barriers that often need to be addressed
(all do not necessarily apply everywhere) include:
· pancaking of access fees, with multiple charges
incurred when power is transmitted across multiple
control areas within a region;
· distance-based pricing;
· capacity reservation-based transmission tariffs;
· imbalance penalties for generation that was not
available when scheduled (particularly onerous for
intermittent resources); and
· small generators not recognized for dispatch.
For more information on transmission policies, see
AWEA's white paper Fair Transmission Access for
Information Disclosure for Electricity Sales
At least 22 states have adopted legislation or rules
requiring that retail electricity providers inform
customers about essential characteristics of the
electricity product being sold. In some states,
such as Massachusetts, this information is comprehensive,
including unit price, generation mix, emissions
of sulfur dioxide, nitrogen oxides and carbon dioxide,
as well as contract terms. Other states, such as
California, issue only a Power Content Label contrasting
product generation sources with the state average
The purpose of information disclosure is to make
it easier for consumers to understand what they
are getting, to make it easier to compare offers,
and to enable consumers to make choices that reflect
their preferences. While this standardized label
is often thought of as consumer protection, it may
also help encourage choice of cleaner electricity.
Standard labels also may encourage consumers to
participate in choice, because the label lends confidence
that the information is reliable and credible.
While information disclosure has been enacted mostly
as part of state restructuring legislation, a few
states, namely Washington, Colorado and Florida,
have required disclosure even though retail markets
continue to be regulated. Because research shows
that most consumers are misinformed (or don't know)
about their electricity generation sources, this
step will begin to inform them correctly.
Consumer Education about Renewables
For the most part consumers don't understand the
environmental implications of electricity generation
and use. They understand that some sources are cleaner
than others, and they generally prefer wind and
solar energy, but understanding renewable energy
and its benefits, and how to compare environmental
benefits and impacts, is a challenge.
Consumer information disclosure can go only so far.
It informs consumers, but they still need education
about the implications of sulfur dioxide, nitrogen
oxides, or carbon dioxide, as well as about green
power generally and what it means to choose an alternative
Several states have developed public education programs
about renewable energy. For example, California
uses a portion of its renewable energy fund to help
consumers understand green power, the reasons why
a green power choice benefits the environment and
human health, what it means to choose an alternative
supplier, and how to evaluate green power offers.
Many states could do much more.