Air Date: Week of May 29, 1998

In California, a giant corporation has taken the opportunity to pay a higher price for cleaner electricity. Jeff Hoffman reports from San Francisco on the unexpected boost to the renewable energy market by the car maker Toyota.

Transcript

CURWOOD: The effort to open the electric utility business to competition has been promoted by many as a way to lower energy costs. And that's created concerns that comparatively expensive renewable and non-polluting energy could be squeezed out of the marketplace by cheap and dirty sources of power. But in California, at least one giant corporation has taken the opportunity to pay a higher price for cleaner electricity. Jeff Hoffman reports on the unexpected boost to the renewable energy market by the car maker, Toyota.

[Heavy machinery screams and grinds]

HOFFMAN: At the busy Toyota port complex in Long Beach, workers rivet, bolt, and put the finishing touches on 250,000 vehicles a year: 4x4's from Japan bound for US dealers, and US-built cars being shipped to Asia. Toyota Motor Sales, USA announced recently that it would completely power the port facility and other buildings in the Los Angeles area with "green" energy. The auto maker's deal with electricity provider Edison Source will add 10% to Toyota's multimillion dollar yearly bill. But Vice President Bob Pitts says it's worth it.

PITTS: Toyota wants to be a company that is an environmentally friendly company, and a good corporate citizen, and we feel very strongly that to be a good corporate citizen, in some cases you have to take the lead, and we feel that in this case, while there is a little bit of a premium for the renewable power source, we feel very strongly that that's the right decision for Toyota.

HOFFMAN: Toyota's move, by far the largest ever corporate purchase of renewable energy, is the equivalent of 5,000 households buying "green" energy each year. Renewable energy advocates were surprised, and elated, by the announcement, coming less than a month after the start of deregulation in California. Some say it will jump-start this nascent "green" market.

KELLY: So to have a company like Toyota Motor Sales step up to the plate like that, I think it is a home run.

HOFFMAN: Steven Kelly is executive director of the newly formed Renewable Energy Marketing Board in Sacramento.

KELLY: There will be lots of additional multi-sized companies doing that, I think, as our effort gets going, and as they become aware of the opportunities in the marketplace.

HOFFMAN: Already, other environmentally sensitive California-based companies are looking seriously at the green power option. Outdoor equipment dealer Patagonia says it's close to a deal to use only renewables. Kinko's, the copy store chain, and wine maker Fetzer Vineyards, say they're also interested in following Toyota's lead. The mix of power in the Toyota deal may include geothermal, solar, wind, biomass, and small hydro, but not electricity generated by environmentally suspect big hydroelectric projects. Through its purchase, Toyota will be helping to cut down on smog and greenhouse gas emissions from fossil fuels, while bolstering its environmental credentials with consumers. Vice President Bob Pitts:

PITTS: Now when I think about environmental cars, we want them to think about Toyota. We've got the RAV-4, the electric vehicle, we've got the hybrid vehicle called the Prius I think this really just ties into what Toyota's trying to do on the product side, recognizing that there are environmental issues, and that we have to take a stand.

HOFFMAN: Still, even Toyota's commitment to green energy is limited. The automaker won't be using renewables to power an energy-intensive manufacturing plant in Southern California. And not a single manufacturer in the high-tech center of Silicon Valley has announced a plan to buy clean energy. Richard Bilas, President of the California Public Utilities Commission, says that in the near term, most firms that do switch electricity providers, likely won't be going green.

BILAS: One of the forces in bringing about restructuring in California was the high price of electricity, which was driving industry out of the State of California. So, at least initially, they're going to be looking for the best deal they can get.

HOFFMAN: According to Kevin Smith, energy policy director at the California Manufacturers Association, if green sellers want to make inroads with businesses, they'll have to convince corporate buyers the cost won't be prohibitive.

SMITH: If renewables are put on a level where they're cost- effective as other forms of generation, then they're going to be very attractive.

HOFFMAN: One way is to bundle green power with energy efficiency measures, such as windows that save on air conditioning, or assembly lines that draw less power. Steady advances in technology are bringing the cost of green power down. Hal Harvey, head of the San Francisco-based Energy Foundation, says that as green energy use grows, economies of scale will make it cost-competitive with conventional energy.

HARVEY: Over time, the cost of renewable energy sources has dropped dramatically. Wind now costs less than a quarter of what it cost 12 years ago. If more companies buy it, it will continue to become cheaper, because the more you learn, and the more factories you build, the less expensive it is to provide green resources.

HOFFMAN: Since deregulation is so new, nobody really knows how big the commercial renewables market could become. Michael Osowski , a Washington, DC-based consultant, surveyed several hundred US businesses, and found that 40% would pay a modest premium. He says that as the rest of the nation deregulates, California will serve as a proving ground.

OSOWSKI: California is said to be where all eyes are looking, and a lot of the companies, especially large national companies that have facilities in many states, are going to put their toe in the water, so to speak, and test out what they want to do, by testing it out in their California facilities.

HOFFMAN: Renewables make up about a tenth of California's energy consumption now. That percentage, already the highest of any state, is bound to rise. But by how much and how fast depends on whether companies, and homeowners, find it easy being green. For Living on Earth, I'm Jeff Hoffman, in San Francisco.