How can clean electrons compete with dirty electrons?
One of the most fundamental challenges facing clean electric power is that, to put it simply, electrons are electrons. Power from a solar thermal plant, once it enters the transmission system, is indistinguishable from coal, nuclear, or natural-gas power. To the end consumer, it’s all just electricity — or rather, it’s all just lights coming on, HVAC systems running, and dishwashers churning. Michael Levi recently put it thusly:
I get zero benefit by choosing to buy energy produced by a wind farm. (It actually costs me more.) My utility doesn’t get any either, unless its regulator lets it pass on the cost, which it won’t absent government policy. There are big social benefits to clean energy, most prominently through reductions in both greenhouse gas and particulate emissions. But neither individuals nor companies have any significant reason to shift to clean energy, even if innovation closes the cost gap considerably.
This is generally taken to mean that the only way for clean power to compete is on price. That’s why enviros are so focused on subsidizing clean power (or unsubsidizing its competitors) and the innovation crowd is so focused on R&D that will lower the cost of clean power.
Is it true, though? Is electricity an entirely fungible product for which only price matters?
I think this is less clear-cut than Levi (and others) make out. I don’t have any grand theories to offer, but I do think it’s worth our time to think about ways that clean power could be differentiated (aside from raw price).
One is brought to mind by the latest report from the Distributed Energy Financial Group. It’s called … are you ready for this? … the Annual Baseline Assessment of Choice in Canada and the United States. ABACCUS (get it?) is a benchmarking tool that ranks states’ electricity service based on quality and consumer choice.
The report finds that in competitive electricity markets, commercial and residential customers are getting access to products and services that aren’t typically available in monopoly markets. These include long-term power contracts, a choice of sources (including clean sources), bulk power purchases, on-site power generation, demand-response and energy-efficiency programs, and smart-grid technology like advanced meters.
It makes sense that competitive markets would drive more innovation and better customer service. That’s what markets do best. Electricity markets in the U.S. have been sheltered from competition for so long — and competition even in quasi-deregulated areas is so circumscribed — that we’ve been conditioned to think of electricity as a pure commodity. It rarely occurs to us to think of electricity services as consumer products that can be better or worse.
Now, it’s true that not all (or even most of) the services being offered in competitive markets intrinsically favor clean energy, but some of them do. For instance, imagine a consumer faced with a choice between dirty energy piped in per usual and an energy services system that included onsite clean generation, smart energy management, onsite storage, etc. It’s not the clean electrons that distinguish the latter, necessarily, but the systemic benefits do include cleanliness.
Another service that favors clean energy is long-term power contracts for commercial customers. After all, dirty energy may be cheaper, but its price is generally volatile (especially natural gas) and/or rising over time (especially coal). Renewable energy may be more expensive up front, but its price is absolutely stable and can be locked in. Predictability and certainty can be just as attractive to commercial consumers as price.
Speaking of markets, it’s worth noting that consumer markets are chock-full of products that outcompete other products despite being indistinguishable on quality. Anyone think Coke is radically better than Pepsi, or Nike shoes are radically better than Reebok? The former succeed over the latter through clever branding and marketing.
Or take another example, which I got from Brian Keane of SmartPower: granite countertops. Anyone who has shopped for a home or apartment lately knows that granite countertops have become a signal of quality and refinement. Anybody know why? Can anyone tell me in what way a granite countertop holds things up better than a linoleum countertop? Or a concrete countertop? Or any other countertop? I doubt it. Yet granite countertops have taken on a kind of totemic quality. They serve a signaling function.
Why couldn’t rooftop solar or other forms of onsite clean energy generation and storage take on the same totemic quality (outside small coastal enclaves, that is)? Why couldn’t they become an object of envy and aspiration in the same way? It’s true that the electrons wouldn’t be any different from coal electrons, but so what? All it would take is a clever marketing campaign. (For hints to what such a campaign would look like, check out Keane’s presentation on rooftop solar from the recent BECC conference: “10 Research Findings that Will Shape Your Solar Outreach” [PDF].)
Anyway, I don’t mean to say that the problem Levi describes isn’t a serious challenge for clean electricity. But I don’t think it’s insuperable.
How about you? How would you help distinguish clean electricity for consumers?
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