The Green Power Hustle:|
"Clean" Energy's Dirty Little Secret
By Jon Entine (copyright October 1998)
Early last summer, a torpid air mass settled like a blanket over the
nation, touching off fierce thunderstorms and knocking out some
transmission stations. It sparked an unprecedented power surge and sent
the price of electricity on the newly-deregulated wholesale market from
$30 a megawatt hour to as much as $7,000. Power marketers, including a
number of so-called green power providers, scrambled for electrons
wherever they could get them - primarily from nuclear and coal
This jolt of free market reality has scrambled the conventional wisdom
of deregulation's most fervent backers -- a coalition of odd political
bedfellows including rightwing Republicans such as Tom Bliley of
Virginia and environmental lobbyists such as the Environmental Defense
Fund (EDF), the Natural Resources Defense Council (NRDC), and the
Conservation Law Foundation. They contend that deregulation of the $230
billion electricity market would bring lower prices and cleaner power
from windmills, solar panels and dams. Renewable energy, which does not
include large hydro projects, currently accounts for a paltry 2 percent
of US electricity.
In March, California became the first state to open its market, exposing
the best and worst of what deregulation offers. Everyone still gets
electricity delivered over local lines. But the rest of the
process -- energy generation, marketing, and billing -- is up for grabs.
The EDF and NRDC backed the California plan in exchange for $2 billion
in new investments for energy efficiency, renewable energy, and
low-income energy services. But the deal came with a pound of flesh.
Established utilities get to charge customers expenses already
accumulated for their "stranded" costs -- some $28 billion invested in
failed nuclear plants or outdated fossil fuel facilities. The utilities
say that's only fair since much of the outlays were mandated by the
state. Yes, customers get a 10 percent rate cut, but the stranded cost
payments reflected in their bill more than offset any savings.
Not surprisingly, marketers are scrambling for a piece of the huge
deregulation pie. One company proposes to sell Christian-to-Christian.
Another had an pyramid scheme before being shut down. Green marketers -
there are several in California-sell premium-priced electricity by
promising renewable energy.
"This is an opportunity to cast that vote [for clean energy] without any
lifestyle change," boasted Kevin Hartley, vice-president of Green
Mountain Energy Resources (GMER), to Reuters and the Pittsburgh
Post-Gazette. "It can be done from your couch. Reduction of eco-guilt.
That's really what we're selling." (GMER refused to be interviewed or
supply background for this article.)
Green Mountain charges a whopping 19 percent premium for its "greenest"
offering in California while ballyhooing its plan to build new wind
turbines -- but only if enough people signed up. They didn't. Most
consumers are now being shuttled to a less "green" option which is
mostly repackaged existing renewable resources and system electricity
but no new wind or solar power.
"Just to repackage what's already being generated does not pass a
credible environmental test," says Bill Magavern of Public Citizen's
Critical Mass Energy Project. "They shouldn't be calling it 'green'
because it's not. They're saying 'we're selling the natural gas
electrons.' But there are no tags on electrons."
What eco-conscious consumers are buying will not displace dirtier
plants. And for the most part, for every slice of high-priced "green"
electricity, an identically "browner" slice goes to the rest of a
region's customers who buy on price. That's ominous news for the
environment. The Department of Energy predicts that deregulation will
result in a flood of cheap coal and a 34 percent increase in carbon
dioxide emissions by the year 2020. Deregulation could well result in a
double whammy - less renewable energy and a sharp increase in global
Controversy has dogged other deregulation pilot projects. Green
Mountain, majority owned by the Wyly family, known for its support of
rightwing politicians and causes, entices customers with Kenny Loggins'
CD's. Others offer bird feeders and tree saplings. In pilot projects in
New England, Working Assets, known for its long distance telephone and
credit card services, gave away Ben & Jerry's ice cream while touting
its commitment to 100 percent renewable energy" and "non-polluting power
from...solar or wind generators."
It later admitted that it offered no wind, no solar, and almost no
renewable energy. It sold a mix of natural gas and system energy,
including nuclear, large-scale hydro, and coal, purchased from New
England Energy Systems. Green Mountain pitched its green mix but drew
heavily on massive water dam projects, including Hydro-Quebec, which
environmental groups have sharply criticized for destroying thousands of
acres of Native American lands.
"They were basically reselling contracts that have been designated for
hydroelectric facilities," writes MIT economist Paul Joskow about the
New England pilots. "That has no short-run effect whatsoever on the
dispatch of generation in the area and no positive effect on the
environment in the short run."
Working Assets, which has since struck up a marketing partnership in
California with its former arch-enemy, GMER, later explained that the
New England pilots were hastily conceived. "Time constraints limited our
ability to incorporate more renewable sources and work more closely with
environmental groups in optimizing our strategy," wrote Laura Scher, CEP
of Working Assets, after she was criticized by energy activists. "We
have learned a great deal from the experience and look forward to
improving in all aspects."
The mounting hidden costs of deregulation have led to another unlikely
alliance, this time in opposition to the stranded cost bailout. Ralph
Nader's Public Citizen and libertarian free-marketers such as Citizens
for a Sound Economy have banded together to force a November vote in
California to revamp the entire deal.
"It's the people saying they don't want to bail the private utilities
out for their multibillion-dollar mistakes, fumes consumer activist
Harvey Rosenfield who has spearheaded the campaign. "If we're going to
have deregulation, we're going to have deregulation for everybody."
Both the NRDC and EDF oppose the citizen initiatives. They are gambling
that there are hordes of consumers willing to pay premium prices for
renewable energy. Their longshot hope is that power generators, sometime
in the distant future, will conclude that it might be profitable to
invest in developing new renewable energy generation. So far, it's been
a bad bet. Less than 10,000 customers - out of 11 million - have signed
up for green options in the first few months in California.
The real winners in all this are the new middlemen, power marketers,
preaching the easy way out of our environmental crisis. "Thanks to
electric utility deregulation," reads a Green Mountain flyer, "you don't
have to sign petitions, march in rallies or call Congress to help make
our planet cleaner and healthier. About the easiest thing you can do is
change your electric company."
Hear that couch potatoes? No need to hold utilities accountable for
wasteful investments and years of environmental degradation. Just lay
back, crank the air conditioner, and let the future take care of itself.