What Is Green Pricing and How Do These Programs Work?
Understand green pricing programs. Learn how you can support renewable energy development through your utility bill.
Green pricing programs allow consumers to support renewable energy development through their utility bills. These optional programs enable individuals and businesses to contribute to a cleaner energy grid. By participating, customers pay a small premium, which helps fund the acquisition or generation of renewable energy. This voluntary contribution expands the use of clean power sources within the overall electricity supply.
Understanding Green Pricing
Green pricing is an optional service offered by electric utilities, allowing customers to pay an additional amount on their electricity bill. This premium supports investment in renewable energy technologies like wind and solar power. It is not about receiving “green electrons” directly into one’s home, as electricity mixes on the grid, but about supporting the development and operation of renewable energy sources within the larger power system.
Customers participate to reduce their environmental impact by supporting renewable energy instead of conventional sources. This contribution helps cover above-market costs utilities incur when acquiring renewable energy resources. The primary aim is to promote a cleaner environment.
The Mechanics of Green Pricing Programs
Green pricing programs channel customer premiums towards acquiring renewable energy or funding new projects. Many programs involve Renewable Energy Certificates (RECs), which are market-based instruments representing the environmental attributes of one megawatt-hour (MWh) of electricity from a renewable source. RECs can be bought and sold separately from the physical electricity, allowing entities to claim renewable generation’s environmental benefits.
When a customer pays a green pricing premium, the utility uses these funds to purchase RECs or invest in new renewable energy facilities. The utility then “retires” these RECs on behalf of the customer, meaning the REC can no longer be traded. This allows the customer to legitimately claim the use of renewable energy and its environmental benefits, ensuring benefits are claimed only once and preventing double-counting. REC costs can fluctuate, historically ranging from $0.50 to over $7 per REC.
Utilities offer and manage these programs, acting as intermediaries between customers and renewable energy sources. They procure renewable energy or RECs from their own projects or external generators. This enables customers to contribute to the growth of renewable energy capacity.
Participating in Green Pricing Programs
Consumers interested in supporting renewable energy through green pricing can find information about available programs through their local utility. Many utilities offer such programs. Checking the utility’s website or contacting customer service are direct ways to inquire about participation.
Enrollment processes are straightforward. Customers can select a percentage of their monthly electricity use to be designated as “green,” or purchase specific blocks of renewable energy. Some programs allow customers to source 100% of their electricity use from green power.
The green pricing charge appears as an additional line item or premium on the regular utility bill. Costs vary, but a typical residential customer might pay an additional premium of $8 to $12 per month to cover their electricity use with renewable energy. Customers can subscribe or unsubscribe from these programs on a month-to-month basis, providing flexibility.