Green Power Retail Marketing in California

Green Power Retail Marketing in California
August 25, 1997

Dr. John Schaefer, a good friend and professional colleague of mine, has long experience in the utility industry and in renewable energy in particular. Some of you may know him from his time at EPRI.

As you know, January 1, 1998 will mark the opening of the California retail market, and John has established a new company, Clean Power Works (CPW), to be an “Energy Service Provider”, marketing “green” electric power.

The note attached below was prepared by John, who is interested in collaboration with and consulting for utilities elsewhere. I thought CPW and John could provide a useful window into the workings of the green power market as it is evolving in California. CPW might conceivably offer a foothold in green power and an opportunity for a learning experience (not unlike the education U.S. utilities are getting in the UK, though obviously on a vastly smaller scale).

Feel free to contact CPW directly.

(Note: I have no business relationship with CPW nor has any been discussed, though the possibility at some point in the future is not precluded. EB)

Clean Power Works at a Glance

Clean Power Works (CPW) is initiating a program to sell pollution-free, renewable (wind, solar, geothermal, hydro, biomass and biogas) electricity to customers who are willing to pay a few cents extra per kilowatt-hour. Residential electricity sales in California are approximately $7 billion, and CPW intends to capture $36 million of this market by 2003. Greater penetration is possible if supplies expand rapidly enough.

Selling renewable electricity is a new business because until now electricity customers have had no choice; electricity has always been supplied by conventional electric utilities operating as regulated monopolies. As of 1998, restructuring in California and soon in other states will offer customers the opportunity to choose their preferred electricity supplier, in the same way that telephone customers now choose long distance telephone service. Electricity will be delivered physically through the existing grid, for which the distributing utility will charge its cost of service. For CPW’s expected market in California, monthly electric bills will be 10 to 20 dollars higher than they would be with polluting sources.

When offered an informed choice, evidence shows that many customers will switch away from polluting sources. For more than ten years, customers have shown in survey after survey that a majority prefers and is willing to pay extra for electricity that does not pollute. This fraction ranges as high as 70 per cent, depending on which survey and where it was taken. In successful small scale green pricing programs, three utilities (Detroit Edison, SMUD and Traverse City) with programs like CPW’s have had more willing buyers than the utilities had capacity to serve them.

CPW will contract with the most economic of the renewable electricity sources, add a margin to cover costs and profits, and sell electricity aggressively to customer segments with a known interest in environmental issues.

Clean Power Works has immediate access to tens of thousands of such customers who have already demonstrated by their buying habits their preference for environmentally friendly sources. Beginning with those customers and intense sales efforts in areas where response is expected to be most positive, CPW expects to attain a strong market position by the end of 1998.

The tumultuous 1997 deregulation experience in California demonstrates that lessons must be learned by participating but that they need not be costly or risky. CPW has concluded that the pollution-free or “green” market can be more effectively and profitably served in cooperation with utilities than in competition with them. As a result, Clean Power Works seeks both consulting opportunities and collaboration with utilities in other states, where deregulation lessons can be applied with less risk.

CPW was incorporated as a California C corporation in 1997. Its founders are:
— John Schaefer, a Ph. D. engineer with 20 years experience
in utilities and renewable energy R&D; and
— David Katz, founder of Alternative Energy Engineering, one of
California’s largest suppliers of renewable energy products.

P. O. Box 1225, Santa Cruz, California, 95061 . 408-471-9337 fax: 408-471 9336.

Web site at

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