"Green Price Stability", a new article written by researchers at the National Renewable Energy Lab and Applied Materials, discusses various pricing models and strategies relating to voluntary green power markets. The writers argue that the pricing strategies adopted by the utilities can be used to encourage adoption of voluntary green power even with a premium price tag.
For example, they suggest that the relatively low variable costs associated with renewable energy provide an opportunity to offer fixed pricing. Fixed price power at a small premium may be more attractive to certain firms once they consider the risk of future traditional power price increases or the costs associated with hedging that risk.
The article also discusses certain surcharges (such as riders to pay for air pollution scrubbers at a coal plant) that are typically added to the bills of utility customers. The decisions by utilities whether to allocate these across all customers (traditional and green) or to exempt certain customers from these surcharges can make these offers more or less attractive.
While the specific examples will be interesting, especially for large energy buyers and utility companies, a broader lesson may be taken... Decisions about how to allocate costs to green initiatives and price the resulting products and services can dramatically influence the attractiveness.
Hat Tip: New York Times
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