Imagine going to the grocery store one day and noticing that food prices are up to 30 percent higher due to a recently passed government mandate. This mandate forces grocery stores to stock their shelves with a certain percentage of organically grown food, and customers are required to purchase at least 25 percent organic products each time they shop.
No, this isn’t happening in Oregon… at least not any time soon. Currently, shoppers have the choice to purchase organic or non-organic products, and grocery stores have the choice to provide customers with either or both.
The Oregon Renewable Energy Act (Senate Bill 838, signed into law in June 2007) has taken the opposite route and mandated that electric utilities must offer a “product” that consumers have shown they do not want. Renewable power is the “organic” version of electricity generation for the electric utility industry; and Senate Bill 838 imposes a mandate, called the Renewable Portfolio Standard (RPS), on most electric utilities. Large utilities (those with 3 percent or more of the state’s load) are required to use more renewable energy in their electricity generation: 5 percent by 2011 until 2014; 15 percent for 2015 to 2019; 20 percent for 2020 to 2024; and 25 percent by 2025.
Although several utilities already offered this program for many years, SB 838 helped to establish a green-power program that accurately reflects the above market cost of renewable energy generation and allows customers to voluntarily opt into buying 100 percent renewable energy at this premium price. Ironically, these voluntary renewable energy purchases cannot be included in meeting the renewable portfolio standard. This program does however provide a litmus test for whether the market and Oregonians are ready and willing to have more renewable power sources as part of the state’s electricity generation mix. More than 98 percent of Oregonians have said “no.”
Currently wind, solar and geothermal energy cost more per kilowatt-hour (KwH) than fossil fuel power plants or hydroelectric power. The green-power program premium pays for meeting the above-market cost of renewable generation, similar to organic food premiums. The Organic Trade Association estimates that total organic food and beverage sales were $13.8 billion in 2006, and it is estimated that sales of organic foods will increase by 71 percent from 2006 through 2011. Clearly, organic food has become mainstream without restrictive mandates and has done fantastically in the free market, even at a price premium. Consumers value the product and are willing to pay for it.
Renewable energy advocates promote renewable generation to reduce the threat of global warming by offsetting fossil-fuel generation and the greenhouse gas emissions associated with it. Like organic food, green-power program participators value the product and thus are willing to pay a premium for it.
