Green Choice fails in Austin

posted at 6:45 pm on July 13, 2009 by Ed Morrissey
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At the turn of the century, Austin positioned itself to be the “green energy” capital of the world by creating a program that would allow utility consumers to choose their energy source.  Called GreenChoice, Austin Energy bought electricity from wind farms as a means to allow their customers the option of supporting alternative energy and to promote development of other green resources.  Nine years later, no one’s buying — because the wind farms are far more expensive and less able to keep up with demand:

For the past decade, Austin’s ambition to become the world’s clean-energy capital has been best exemplified by one effort: GreenChoice, a program that sells electricity generated entirely from renewable sources such as wind.

Now the nationally renowned program is struggling to find buyers — the latest allotment is 99 percent unsold after seven months on the market — and Austin Energy is looking for ways to bring down the rising costs. …

Although it generally cost a little more than standard electricity, a GreenChoice contract guaranteed a price would not change for a decade. Because of that promise, there were times when coal, oil and natural gas prices spiked and made them more expensive than GreenChoice.

“Customers got a 10-year fixed cost — that’s why it sold out,” Clark said. “It was designed to be a value proposition to customers, instead of just asking them to pay more to be environmentally friendly.”

But lately, customers haven’t been sold on that proposition.

While previous offerings took about half a year to sell out, the current one has attracted only 104 homes and five businesses — leaving about 99 percent of its power unpurchased, according to Austin Energy.

The reason is that GreenChoice prices have risen more than fivefold since the program started. GreenChoice now would add about $58 a month to the electricity bill of an average home.

Part of the problem, GreenChoice execs say, is the lack of transmission capacity from West Texas to Austin.  The state plans to spend over $6 billion adding capacity to the transmission, which Austin Energy says will lower the price to the consumer, although they admit, not dramatically.  They also fail to mention that the same people who will pay more for wind-generating electricity also have to pay the $6 billion bill, along with the rest of Texas.

Why did wind power become more expensive?  The increase in demand from those ten-year, fixed-price contracts outstripped the wind farms’ ability to produce electricity.  The imbalance caused prices to hike, as well as an increase in materials for the windmills themselves, and wind farm production already costs more than traditional electricity.  Now that the contracts are about to expire, GreenChoice has to recalculate the prices to cover the cost increases — and pass them along to the consumers.  Not surprisingly, in a recession, the consumers — primarily businesses — don’t want to incur additional expenses.

The best part about GreenChoice was its voluntary nature.  Austin Energy gave its consumers a choice between traditional and alternative energy sources, and the market has delivered its verdict.  If Barack Obama’s cap-and-trade scheme passes Congress, those choices will no longer be voluntary, and the costs of energy will “skyrocket” in a similar manner.

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