I went to pay my electricity bill the other day on the NStar website and noticed that they are offering customers the option of signing up for green power. While it’s been possible to sign up with a competitive electricity supplier for “Green” power, green power has not been an option for users who have chosen to stay with the incumbent utility. This includes me and the majority of residential electricity users. Retail electricity choice for individual consumers has not taken off as the supporters of electricity deregulation have hoped for. Why that is, is a story for another day.

According to NStar, most people would likely only pay $4 to $7 dollars more for green power than they would for conventional power. $4 to $7 doesn’t seem live very much at all. However, much of this is due to the fact I live in New England. New England is one the highest priced areas for electricity in the country. According to my last bill I pay .11172 per kWh. This translates to 111.72 per MWh in industry standard terms. To put that in perspective, coal generation costs about $30/MWh, and nuclear less than $5/MWh to run once constructed. New England on the margin does not run on coal. Coal and Nuclear plants are few and far between. New England is powered by Natural Gas which even with the newest and most efficient technology costs at least $90 a MWh to run given that natural gas is priced north of $10/mmbtu. Most new electricity generators are natural gas, conceived and developed when natural gas was cheap as cheap could be. People talk about oil all the time, but Natural Gas was once $1-2 per mmbtu at the turn of the century (and I mean 2000). They couldn’t give it away. It was often a byproduct of oil production. Oil may be 4 times more expensive, but natural gas is nearly 10 times more expensive.

If I were to sign up for the the Green Power Plan, I would like be paying 10% more on the cost generation which is about 1/2 of my bill. My electricity bill is about $80 on average a month. Under the Green Power plan, I would likely pay about $85. Five dollars a month does not seem like a lot to pay to increase the demand for green power. Unlike Field of Dreams, “Build it and they Will come.” does not apply to wind or solar generation. The demand needs to be there first either through the actions of environmentally conscience consumers who are willing to pay more, or through regulation. Regulation can take one of two methods. 1) Outright mandates 2) My Preference, Pigovian taxes that price in the true cost of pollution.

Electricity unlike some other products cannot be directly sourced. If that were the case I would have to a dedicated transmission line running directly to the generator I purchas power from. Electricity flows from generation to demand via the path of least resistance, regardless what financial commitment consumers might make. This is not to say that consumer choice does not affect the market, but only via aggregate demand. Signing up for the renewable energy option increases the aggregate demand for green energy and that is best I can hope for.