Air Date: Week of November 7, 1997

Alternative energy sources like solar, wind and biomass have never had an easy time in the marketplace. Deregulation could mean these technologies will have be even harder to sell. Reese Erlich reports from Sacramento.

Transcript

CURWOOD: Reducing the emissions of greenhouse gases, experts say, means using less fossil fuels and certain other chemicals, and turning instead to alternative power sources. Nuclear emits no greenhouse gases, though many people don't like the waste problem it poses. Perhaps the most environmentally friendly electricity comes from solar, geothermal, wind, and biomass. California has led the nation in the development of such renewable energies. In the state capitol Sacramento, for example, the local utility actively promotes their use. But now California is deregulating electric utilities, and as Reese Erlich reports, green power faces an uncertain future.

(Motors and churning sounds)

ERLICH: Here along the Sacramento River Delta, 80-foot-tall windmills beat the air in the noonday sun. They provide pollution-free electricity to the hot, dry city of Sacramento.

OLMSTEAD: This facility here can accommodate about 1,200 typical Sacramento area homes.

ERLICH: Project manager Paul Olmstead of the Sacramento Municipal Utility District, or SMUD, says these 3-year-old windmills have been a good investment because they provide power during times of peak usage, and thus offset the need for power from conventional generating plants.

OLMSTEAD: This site blows the most, in Sacramento, the most easy energy. That is, it cuts our peak load demands by blowing when most people turn on their air conditioners.

ERLICH: The seeds of this wind farm were sown in the oil crisis of the 1970s, when California regulators required utilities to invest in renewable energy such as wind, biomass, and solar. These new sources were more expensive than other forms of power. But Ralph Cavanagh, an attorney with the Natural Resources Defense Council, says government regulators were willing to ask customers to pay a little more.

CAVANAGH: They believe, and I think they were right, that it was worth making some investment up front in the environmental and economic benefit of a diversified power supply, and in particular a renewable power supply that wasn't subject to the remarkable swings that we see in fossil fuel prices.

ERLICH: Today, though, with plenty of cheap fossil fuel available, the emphasis is on price, not diversity of energy supply. California is now leading the nation towards a deregulated energy market in which electricity customers will choose among various competitors. And in this new environment, many utilities have cut their investment in alternative power. Renewable energy still costs more because the technologies are still developing and they haven't yet reached the economies of scale of conventional sources. Also, most of the social cost of pollution isn't factored into the cost of standard electricity. Electricity generated by Midwestern coal or natural gas-powered plants, for example, costs about 2 cents per kilowatt hour. Wind power averages 5 cents, and photovoltaic solar averages a whopping 16 cents. So, deregulation puts renewables in a bind. They are too expensive to thrive in an unfettered free market, yet the costs won't come down without an expanding market.

(Voice gives directions over loudspeaker)

ERLICH: Here at SMUD's command center in Sacramento, executives think they've figured out how to resolve this Catch-22. They call it "green marketing." SMUD has invested more heavily in renewables than just about any other big utility in the country. Over half its power comes from hydroelectric stations. It has built geothermal, solar, wind, and biomass-generating facilities. So, in a competitive electricity market, the Sacramento utility plans to market itself as a "green energy provider." SMUD General Manager Jan Shorry thinks some consumers will pay 10 to 15% more for green energy.

SHORRY: We have developed new programs to target those consumers and meet their expectations by delivering green products to them. One is a program that will meet the customer's energy needs by offering them 100% renewable power, and they will pay one cent extra a kilowatt hour for that.

ERLICH: SMUD knows there's a market for clean energy. The utility has already installed photovoltaic solar panels on top of the houses of 400 customers who have volunteered to pay $50 more per year.

(Garage door opening)

ERLICH: Janet Wolf-Eshe walks out onto her driveway and proudly shows off her home's solar panels.

(Buzzing sounds)

WOLF-ESHE: And this is also from SMUD, in relationship to the solar panels, the PV panels.

ERLICH: She says buying green power helps the environment much like buying organic food helps maintain a healthy body.

WOLF-ESHE: I feel that if I eat healthy food now, in the long run I am going to be paying out less for health problems. So I see that our need for alternative energy that same way.

ERLICH: But while Ms. Wolf-Eshe and her husband can afford to pay extra, most people feel that they can't. So, the market for green energy may be small. California recognized this problem and provided for continued subsidies for renewables for 4 more years, during the transition to deregulation. But renewable advocates argue that given the hidden subsidies for fossil fuels, incentives to use renewables should remain in place longer, until the technologies become competitive. Gary Gerber is the owner of the Berkeley solar equipment company Sun Light and Power. He remembers the days of direct consumer subsidies for using renewables.

GERBER: When we had the tax credits in the '70s for solar systems, there was a tremendous growth in the industry. And as soon as those credits went away, the industry's all but died.

ERLICH: Free-market advocates strongly disagree with Gerber. They argue that the whole idea of deregulation is to get rid of expensive subsidies. If renewables can't compete, they say, then they should fall by the wayside. Supporters of renewables, however, are pressuring Congress to preserve alternative energy sources, especially in light of President Clinton's recent commitment to reduce greenhouse gas emissions from fossil fuels. Several bills have been introduced in Congress to require all utilities to buy a certain amount of renewable energy. Ralph Cavanagh of the Natural Resources Defense Council.

CAVANAGH: We strongly support that approach. It's market-based. It's designed to minimize the cost of renewable additions while ensuring that the overall renewables base of the country continues to grow.

ERLICH: The bills are likely to be considered next year as part of a national electric utility deregulation package. For Living on Earth, I'm Reese Erlich in Sacramento.