Editor's note: Renew is developing and refining an alternative mechanism, which for the moment we call GREEN INVESTMENT, for mobilizing customer dollars to underwrite renewable energy generation. Under our approach, participants in a Green Investment program would actuall acquire an equity interest in their renewable energy investments, and therefore can reap greater value from them as they appreciate in value relative to conventional generation. The next issue of Wisconsin's Renewable Quarterly will contain further discussion on this topic. Guest submissions or editorials are welcome.

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Would you agree to pay a higher rate for electricity if it came from a renewable resource? That was the most frequently asked question at the six public hearings on electric utility deregulation held late last year.

Several U.S. utilities have begun offering a premium rate for renewably generated electricity, an arrangement known as "Green Pricing." As fossil fuel prices remain at historic lows, some clean energy advocates and regulators have turned to Green Pricing as a way of raising capital for renewable projects that doesn't involve regulatory mandates. With self-selecting customers subscribing to a renewable premium, utilities once averse to wind, wood or solar energy can now diversify their fuel mix at no risk to their basic rate structure, so the thinking goes.

Commissioners Neitzel and Eastman posed that question to see if proponents of renewable energy would back up their words with their wallets. In asking these questions, however, the Commissioners neatly deflected attention away from their agency's ongoing failure, when comparing different energy sources, to balance the environmental costs of fossil fuels or the job-creating benefits of renewables. An overwhelming majority of those asked answered in the affirmative. Many of them said that the renewable energy would deliver material benefits to the rural economy and improve the overall health of the state's environment. Some saw it as a question of paying a little more now to avoid paying a lot less down the road. However, a number of renewables supporters expressed discomfort over the choice presented to them. To them the question assumed that the alternative to Green Pricing would be the continuation of half-hearted PSC initiatives which have had no effect to date on breaking the current stalemate over renewables. While expressing lukewarm support for Green Pricing, these speakers cautioned the PSC against prematurely surrendering the option of issuing strong regulatory actions to overcome the obstacles. When the Commissioners said that such an approach wouldn't work, more than one speaker came back with the question: how do you know if you haven't tried?

Significantly, not one self-described clean energy proponent endorsed retail wheeling as a viable solution.

Green Pricing is a clearly superior alternative to retail wheeling. One obvious advantage is that Green Pricing offers clean energy choices to retail customers without necessitating wholesale changes to laws governing the state's electric utilities. The adoption of Green Pricing would not threaten existing protections for ratepayers and the environment, nor would it rupture the utilities' existing franchises. It is simply a market mechanism for mobilizing customer dollars to underwrite investment in renewables, nothing more. Indeed, Green Pricing can co-exist comfortably with robust public interest-oriented regulation, should the latter ever reappear in Wisconsin.

Green Pricing has another point in its favor: it can spur the installation of renewable generation in areas that don't "need" a new power plant any time soon. Even though the utilities predict 2% annual growth in demand for electricity over the next five years, they plan on meeting that increase largely through power purchases as opposed to new plant construction. Because it would not affect rates, Green Pricing can bring renewables on line in 1996, notwithstanding the present surfeit of generating capacity in the Upper Midwest.

It was clear at the hearings that Green Pricing holds a great deal of appeal to the current set of Commissioners. It satisfies their desire to see a variety of service and pricing options made available to consumers. The voluntary nature of Green Pricing spares price-sensitive industrial customers from having to support a renewable energy power plant through their rates. No one loses under this arrangement, or so it would seem.

To the Commissioners, Green Pricing presents the illusion of a pain-free escape from making hard decisions to rectify Wisconsin's growing dependence on fossil fuels. This is undoubtedly Green Pricing's main selling point. The Commission can say it did something to address renewable energy while leaving all of the heavy lifting to the citizens who value clean energy.

Of the questions and concerns surrounding Green Pricing, the most troublesome concerns the size and vitality of the renewables market. It is within the realm of possibility that Green Pricing could unleash a market vigorous enough to support a truly diversified portfolio of resources. Then again the market could prove too weak to support anything beyond a few boutique-scale projects. No one knows for sure. Data from existing Green Pricing programs and public opinion surveys do not shed much light on this question.

Another potentially troubling aspect of a standard Green Pricing program is that the utility retains complete control over resource selection decisions. Costs vary dramatically among renewable resources, ranging from 5.5 - 6 cents per kilowatt-hour for wind generation at a good location to 40 - 45 cents per kilowatt-hour for PV-generated electricity. Furthermore, resource availability is very much a site-specific consideration, even within the same utility's service territory. For example, developing the robust wind resource along the northern Niagara Escarpment may be very appealing to WPS ratepayers in Kewaunee County, but less so to those in Rhinelander or Tomahawk. Conversely, wood-fired electricity may be more attractive in north central Wisconsin, where wood fuel supplies are abundant, than in Kewaunee County.

Should Green Pricing programs be structured to purchase the greatest amount of the lowest-cost renewable resource available (which may be imported from another state) or should they take into account other factors, such as creating jobs at the local level, educating the community, and increasing resource diversity? That is an important question that utilities and subscribers together should confront before resource decisions are made and customer commitments are solicited. There are likely to be pitfalls in store for the utility that makes unilateral decisions about what to acquire and how much without customer input.

Given all of the uncertainties in the electric utility environment, Green Pricing could very well be one of the more effective tools at our disposal for acquiring modest quantities of renewable capacity. As a strategy for achieving true resource diversity over the long haul, however, Green Pricing by itself is not likely going to cut it.