Energy Sector

                                                                                                                                                                                                                                                                                                     Last Updated: March, 2017

Some states have legislation or rules mandating that utilities offer “green pricing” options to retail customers (residential, commercial, industrial). In addition, a growing number of utilities are opting to offer programs in states without legislation. At present, 13 states have a mandatory green pricing program offered by utilities to their customers.

While each program is unique, green pricing programs allow customers to pay a premium on their electric bill to have some or all of their power provided by renewable sources, such as wind, solar, low-impact hydro, biomass, landfill gas, and geothermal. Utilities charge participating customers a prescribed cost per kWh of green energy purchased. Most utility green pricing premiums are in the range of 1¢ -2¢  per kWh. Generally, this cost covers any above-market costs of purchasing clean, renewable energy sources.

There are three common types of green pricing programs.

1.     Consumer purchases are used to directly increase renewable energy production and usage within the customers’ local utility power grid. Additional fees aid in development of power generated by the local utility itself.

2.     Electricity from renewable sources is not necessarily delivered directly to the customers who pay for it. The utility issues a Renewable Energy Certificate (REC) which certifies that renewable energy has been generated (sometimes from another state or region entirely separate from the consumer) in an amount equal to the customer’s purchase. Each REC represents 1000 kWh. The customer may claim use of renewable energy, even if the local utility does not directly offer such options.

3.     The utility establishes a fund where consumer opt-in revenues are used to build and develop greater renewable energy systems directly operated by the local utility. The return on these consumer payments may not be immediate, but the money eventually helps utilities increase the share of green energy in their energy mix.

Some utilities also design green pricing programs in conjunction with existing state energy policies. For example, utilities can interact with a state that has a renewable portfolio standard (RPS) by simply creating additional demand for renewable electricity, or it can be an alternative to the RPS for certain utilities.