Purchasing Clean Energy without Getting Burned

Environmentally conscious consumers know that they can “vote with their wallet” by purchasing green goods and services, and by supporting socially conscious businesses. What many don’t know, unfortunately, is how to best choose their options. This is especially true in the clean energy space where a company’s marketing efforts, and the confusion of the marketplace may cause them to make unwise choices.

Presently, there are four ways that are most common for buying clean energy. You can install a solar system on your roof or property, purchase green electricity, purchase Renewable Energy Certificates (RECs), or invest in energy efficiency upgrades (“negawatts”).  Each option comes with its own benefits and costs.  I’ll start by looking at purchasing green electricity.

There are a few pitfalls to avoid when deciding to buy green electricity from a retail electricity supplier. I’ve highlighted a few right here:

Certification and Verification

When you switch to green electricity for your home or business, nothing material will change for you and there’s no physical evidence of your purchase such as a piece of equipment. Sure, you have a contract that promises you green electricity, but that is not enough assurance for many people. One good way to know that you are actually getting the green power you are paying for is by making sure you buy green power that is certified and verified by Green-e. The folks who run Green-e require suppliers to demonstrate that the green energy they are selling matches the green energy they are buying. This is done through a third party audit. I know of no other certification and verification processes that meet the high standards set by Green-e , though they may exist.

Teaser Rates

I heard one clean energy company executive on the radio telling the audience that switching to wind power from them would cost $8-$12 a month. That sounds reasonable until you dig a little deeper and learn that they are offering a three month “teaser” rate. The affordable teaser rate of 9.7 cents/kwh or so expires after three months, at which point the consumer is subject to incredible price spikes through a variable rate. What might those spikes look like? The company’s fixed price deal, which tells you the kind of rate they think they need to make off their customers over the course of a year, ranges from  12-13.5 cents/kwh. That’s the difference between paying $8-$12 a month or $40-$50 a month. When you put it in annual terms, you really get the picture. With the higher rates, you could be facing an electricity bill that is as much as $600 more than you would otherwise pay. That’s for an average home. If you are a bit wealthier than average and have a larger home, chances are your annual bill could hit close to $1,000.

Avoid “teaser” rates at all cost. Despite the pleasant-sounding rationale you may hear from the energy company, it will end up being a bad deal for most of you. Why? Because as an executive at one of these companies told me, they really offer the teaser rate for one reason – they know that 80% of their customers will forget to keep checking their energy rate after three months. That’s right. They have it down to a science. They know that you will sign up thinking that after the teaser is over you’ll just switch elsewhere, but that 80% of you never do.

Dig Deeper

Another aspect of disingenuous marketing you may see is a company that purports to be the little guy fighting the rest of the “big greedy” energy world. Like all deception, there’s probably a grain of truth to it. But do consumers know the fat profit margin these guys are getting for the energy they are selling you? In order to understand this, you have to understand the main components that make up the cost of green energy. Back to that 13.5 cent wind power example. In this case, the green part of that power, the part of that rate that actually goes to the wind farm is likely around 1.5 cents.  Yup, that means you are paying 12 cents/kwh for brown power, which is the exact same power your utility offers at rates as low as 8.5 cents/kwh.  So why such a huge discrepancy? Two words – Profit Margin. The company probably makes in the range of 50%-%70 margin on the product they sell you. I say probably because I’m making an educated guess based on market conditions. I have not seen their books. There are other smaller factors as well, such as cost of capital, but I believe margin makes up the largest chunk of the difference.

Don’t get me wrong, I’m all for profit and the competitive free market. What I think is morally and ethically unjust is sticking your customers with exorbitant rates in order to feed the profit margin needs of your investors all under the guise of being progressive. A company is either a consumer friendly, 100% honest and transparent company that offers the most competitive rates it possibly can or it isn’t. I think in order to be the former, a clean energy company has to choose steady organic growth over VC -backed hyper growth. This means they should not try to make exorbitant profits on the backs of their customers.

Another example of a questionable marketing practice is a company that sells green power among a suite of products, but then works to prevent clean energy laws from passing at the state or federal level. Their green power products are probably legitimate, I’m not questioning that. But if your intention is to “vote with your wallet,” than you may be voting for the wrong candidate. A portion of the dollars you spend with them goes to lobby against the very thing you are trying to promote.

Conclusion

The thing all of these practices have in common is their reliance on uneducated and/or overstretched consumers. It takes a little homework and a little more time to find out the truth behind these marketing efforts. Or it takes the ability to say “no” to certain products that you know are designed to take advantage of your lack of attention (ie. variable rate or “teasers”). Even in this case, I don’t want to paint too broad a stroke here. There are some variable products that are tied to the variability of the utility standard rates. Those are fine because they are actually market responsive, and you know the premium you are paying every month. But this last point just serves to prove once again how much a consumer needs to be educated before venturing into the clean energy field by purchasing green power from a retail electricity supplier.

Cleaning Our Air and Supporting Our Economy

ALA PA LogoChoose PA Wind Logo

Pennsylvanians hear a lot about energy choices, especially when it comes to offers to save money. But perhaps a more important message is getting lost in the marketing noise of the energy world. Pennsylvanians have the option of choosing energy that cleans our air and brings economic development right here in the commonwealth. Through a new campaign called ChoosePAWind, consumers in the PECO territory can sign up for Pennsylvania wind power at affordable rates.

The program is not only promoting local clean, renewable wind power, it seeks to build community support for green initiatives. Participating organizations earn donations to their groups for every enrollment they get. The double benefit of this is the ability to directly support energy sources that clean our air and help the local economy while also galvanizing your own community into action.

At the American Lung Association, we know that there’s a direct link between the pollution coming out of fossil-fueled power plants and lung disease. Decreasing pollution from these power plants means lowering the amount of nitrogen-oxide, sulfur dioxide and particulate matter that we all breathe. Doing this will lower incidents of pre-mature death, asthma, and other chronic conditions related to poor air quality. There are several ways to make this happen, from federal or state legislation, to simple voluntary actions such as switching to wind power. The more people that choose Pennsylvania wind, the better our air will be.

According to the American Wind Energy Association (AWEA), Pennsylvania has 25 wind energy projects, totaling more than 1,300 megawatts of production, ranking us 15th in the nation.  They produce enough energy to power 330,000 Pennsylvania homes. The wind industry has put more than $2.7 billion in capital investment into our state and pays landowners $3.6 million annually in lease payments. The tax dollars from wind contributes to the public coffers, while attracting new manufacturing facilities as well.

Keeping your energy dollars local, cleaning up the air you and your family breathes, working with your community to promote sustainability – these are the key benefits of simply choosing Pennsylvania wind.

Deb Brown

President & CEO

American Lung Association Mid Atlantic

Jim Spencer

EverPower CEO and ChoosePAWind Founder

Why Chestnut Hill United Church is Supporting ChoosePAWind by Joy Bergey

Choose Pennsylvania wind to power your home. What a wonderful idea. It’s no-brainer to me to choose electricity whose generation doesn’t exacerbate climate change, pollute the air and water, or generate nuclear waste that will last for thousands of years and society hasn’t a clue how to store safely (PECO’s “regular” electricity comes largely from fossil fuels and nuclear plants, with these attendant woes).  Choosing wind power that’s “home grown” right here in state also means that you’re helping to create sustainable, well-paid jobs for our fellow Pennsylvanians.

It’s my contention that choosing to use clean electricity in our homes, workplaces, and schools is likely the biggest thing we can do to slow down global warming. Can most of us give up our cars? No. Or afford an electric car powered entirely by solar panels? No again.

To that point of solar panels: The price of solar technology has come way down in recent years, and continues to fall. And yet, a homeowner in Pennsylvania would still have to lay out thousands of dollars up front to put PV panels on her or his roof. (In my case, I’d be willing to do that, but my property is “treed out,” meaning that I’d have to take down several large trees to expose the roof to adequate sun to make the PV panels work. And since I live quite close to the Wissahickon Creek, those large trees of mine are providing other valuable eco-services, like helping to sop up storm water and prevent flooding.)

So, if you don’t have the roof, spare capital, and/or time to investigate, purchase, and install solar panels, do something that’s actually much easier, and every bit as effective: Buy electricity generated by the wind. Buy Pennsylvania wind, specifically. (If you’re reading this, you probably know that “buying local” offers all kinds of benefits, both economically and environmentally. The “buy local” benefits extend to energy as well.)

I’m delighted that the congregation that I’ve belonged to for two decades, Chestnut  Hill United Church (in northwest Philadelphia) is participating in the ChoosePaWind campaign. We’ve already designated that the income from this campaign will be used to further our social justice work. It’s a win-win-wind situation.

A Consumer Protection Issue in Energy for Maryland Regulators to Review

While state regulators in Maryland are reviewing consumer protections in the proceeding known as PC35, they should take a close look at the deceptive marketing practices some suppliers use. The most egregious I’ve seen (IMHO) is a company that sends a mailer that looks like it comes from the utility and it’s giving the consumer an option to switch. I have had several people ask me about this mailing because they didn’t know the utility was doing this. I had to tell them to re-read the letter closely and see that it’s not actually from the utility.

If a supplier has to rely on deception to acquire customers then it’s not only a moral failing for that company’s leaders to think about, it’s a problem for the whole market. Consumers have a hard time distinguishing between the bad apples who use deceptive tactics like this and those that legitimately market their products. It’s the old ‘a pox on all your houses’ syndrome. I believe electric choice is a good thing and should be encouraged. That’s why I think state regulators need to take another look at the rules for marketing and eliminate the loopholes that allow for these unethical practices. Once they do that, coupled with increased enforcement, they will give consumers the chance to truly review various offers and make an honest choice.

Pennsylvania’s Potential Wind Revival

Last decade, Pennsylvania was a leading player in developing a vibrant wind power industry, with new wind farms and new wind turbine manufacturing plants. Unfortunately, lack of Federal direction and a recent rush to fossil fuels has seemingly pushed wind to the background in the commonwealth. That could all be changing soon with new Carbon regulations from the Feds and a push by activists to re-start the Pennsylvania clean energy economy.

The Environmental Protection Agency’s proposed Carbon rules would make it more difficult to build new coal-fired power plants and could assign many existing plants to the scrapheap of history, where they belong. Wind and solar are in a perfect position to fill the vacuum left by this diminishing power resource. Pennsylvania has a lot to gain. Though it already has more than 700 wind turbines operating, mainly in the middle of the state, that’s just a small piece of what could be built. Indeed, the anti-wind forces see the potential here. They just passed a bill in the Pennsylvania State House to require a year long study on wind power’s impacts on the environment. This, despite the fact that the wind industry already agreed to studies conducted by the Pennsylvania Game Commission, and despite the fact that this same body does not seem interested in passing bills requiring studies of the impacts of fossil fuels on the environment and human health.

Meanwhile, activists in Pennsylvania are hoping for a brighter future. They’ve developed new ideas for policies that would get the clean energy industry back on track. Depending on what happens in the upcoming election, these ideas could be incorporated by new leadership in Harrisburg. To see what a clean energy revival looks like, Pennsylvanians just have to look south, towards their neighbor Maryland, where a strong solar requirement has led to thousands of homes going solar, new green jobs, and national companies moving into the state. Let’s hope there’s some change coming to Pennsylvania, for a cleaner, green future for everyone.

How Can Intelligent Naivety Help the Climate Movement?

Part 3 in my series on how adopting a challenger brand approach can help change the climate movement.

Now that we’ve got a good grasp of the climate brands, we can move on to exploring the first Challenger Credo, Intelligent Naivety.  The concept here is simple – sometimes the more you know about a subject, the less you are able to look at it with discerning eyes. This applies to messaging to non-experts, examining organizational structure, and coming up with the clichéd “outside the box” solutions that sometimes work the best.

Intelligent naivety refers to a person who lacks experience in a given category, but of course is smart and perhaps experienced in other related areas. For example, somebody who is an amazing communicator but doesn’t know anything about the energy industry could bring intelligent naivety to the industry and figure out a new way to motivate people to switch to clean energy. Some notable examples of people whose intelligent naivety revolutionized categories are Richard Branson, going from selling rock albums to starting an airline business, and Jeff Bezos, going from managing a hedge fund to starting Amazon as an on-line book seller.

In the climate movement, we could dearly benefit from some new perspectives. Many of us have been immersed in the field for more than a dozen years, with some leaders in environmental NGO’s harking back to the original Kyoto Protocol negotiations in the 90’s. Yet our “consumers,” the audience we want to reach has not had even close to the day-in, day-out exposure that we’ve had. So, yeah, how do we communicate to them in a way that makes sense?

As pointed out in Eating the Big Fish,  approaching a category with intelligent naivety allows one to step back and ask what they call the “upstream” questions that those of us immersed in the area have forgotten to keep asking. Basic questions like, ‘why does our movement have to be about this, and not about that,” and “why do we lead with this frame and not another frame?” I’m talking about the type of questions that go at the very beginning of our work, before we had all these NGO’s and other interest groups. A key approach for one with intelligent naivety is to skip over the part where we ask the public how they feel about the category (‘what’s your view on climate change?’) and go to the fundamental question – how can we change the relationship we have with the public as it currently stands?

A specific example might help clarify this vital point. A few years back, if you had done market research, including focus groups and polls with the public about what they want in dish soap, you’d probably almost only hear about more effective products, maybe at a lower cost, and maybe with less chemicals. In other words, better benefits to fit the typical “problem-solution” marketing approach. This is what I mean when I talk about asking the public about a category. In Eating the Big Fish, however, the author relates the story of method.  Eric Ryan, the company’s founder, found a way to change the public’s relationship with the category by asking more of a “why not” kind of question. His question in essence was, why couldn’t a household cleaning product attract the millions of homeowners who care deeply about their home’s appearance and style? The result, of course, was a line of products put in exquisitely designed containers that look good sitting on the counter in your re-designed kitchen. The main point is that Ryan couldn’t have poll-tested or focus grouped his product into existence because consumers wouldn’t have even articulated a need for a product like method had he done so.

What’s our equivalent in the climate movement? What questions could be right below the surface that the public can’t articulate just yet? The answers to these questions could change the very nature of the public’s relationship with the climate movement.

 

Three Things Holding Back Energy Efficiency in the U.S.

Energy efficiency, or “ee” for those in the know, is the best investment we as consumers and we as a nation can make to reduce energy use, reduce dependence on fossil fuels, lower greenhouse gas emissions, and make a decent return on our money. So why does it always seem to play second fiddle to solar or wind power?  While I may not be able to offer a specific answer to the question, I would like to bring up three ideas to ponder, which may help us go in the direction of finding an answer.

 

  1. The Prius Effect – Energy efficiency is the Honda Civic hybrid while solar is the Prius. Many of us remember when the first hybrids hit the roads not too long ago. Both Honda and Toyota thought they had winning models. For Honda, they simply took the already popular Civic and inserted a hybrid engine with very few bells and whistles. It seems clear they were betting on the popularity of the brand to carry over into the hybrid category, which would in turn make people feel very comfortable switching to a new-fangled technology. The hybrid Civic and the standard Civic looked almost exactly alike.  Makes sense from a marketing point of view, where you are essentially adding features and benefits to an existing popular product. Toyota, on the other hand, created an entirely new brand, the Prius, with a distinct look and with some nifty new bells and whistles. Their bet seemed to be that the deeper green consumer who would be the initial target customer would like to have something that acts as a public billboard for hybrid cars. They were right. As we all know, the Prius went on to become the best-selling hybrid car by a big margin. Toyota made a very wise decision. Likewise in energy. People who buy solar are exhibiting some of the same motivations that the Prius consumer shows. They want a billboard advertising clean energy to the rest of the neighborhood. Energy efficiency, unfortunately, acts a lot like the hybrid Honda Civic – your house looks pretty much exactly the same, but just performs better. Changing this outcome will have a huge impact on the popularity of energy efficiency.

 

  1. The Name Game – I have yet to see a name that captures the sex appeal of energy efficiency. Let’s face it, the word “efficiency” is boring and brings up connotations of engineering, not exactly a marketing buzzword. Other names people have tried – “smart energy,” “negawatts,” “home performance” and others. I don’t think there’s a single name out there that captures the value proposition of energy efficiency.  It seems like a hard sale to get consumers to buy “less” even though it’s good for them. “Fuel efficient” cars did not sell well for years, but “hybrids” do a lot better. There has to be a term that connotes the many benefits of energy efficiency – from having MORE money in your pocket, to producing MORE energy with less effort and less resources, to making your home or business MORE energy independent.

 

  1. Skewed Rules – Our current system is set up to give you almost no incentive to change your energy use, at least as far as efficiency goes. Imagine if you purchased airline tickets and they were the same price no matter when you went on your trip, whether high season or low season, a red-eye flight or daytime. Now imagine booking a hotel room at an island resort and the price is the same no matter if you book in the middle of the big vacation season or during the dead of winter when the beaches are empty? Both cases seem weird to modern consumers because we understand that during the peak times of use, airlines or hotels will charge more. It’s the simple law of supply and demand. Yet the very same rules apply to energy use and we are stuck in a “pay one price” model that no longer works.  You can run your dishwasher in the middle of the hottest summer day or you can run it on a moderate spring evening and you’d pay the same price for the electricity you use to power the machine. It’s pretty clear to grid operators and power plant owners when the most expensive time to consumer power is and when the cheapest time is. Yet these costs are not shown to consumers, who then make choices based on incorrect information. Updating the rules that govern our electricity markets is a necessary step to really spark a major energy efficiency revolution in this country.

 

These three ideas are merely the start of a longer conversation about how to bring energy efficiency to scale. It will take many of us, pooling our brain power to come up with solutions to the challenges these issues raise. I look forward to being part of this important journey.