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December 20, 2004

Wholesale v. Retail

A number of western Washington electric utilities offer a "green power" program that lets consumers pay a little extra to fund eco-friendly generating projects, such as wind farms, here in the Northwest.  And last month's Con.Web (a publication of the Northwest Energy Efficiency Alliance) had some good news about green power enrollments:  a new advertising and marketing campaign exceeded expectations, signing up  4,300 new customers, versus a hoped-for target of 3,000.

This is obviously good news.  But it's also sobering:  even after several years in which the option has been offered, and a successful marketing campaign that cost a third of a million dollars and featured TV advertising and free gourmet coffee as an incentive, a total of only 13,000 households in the Puget Sound region have signed up for green power.  That represents about one percent of the customer base of the three utilities that participated in the marketing campaign (Puget Sound Energy, Tacoma Power, and Snohomish County PUD) -- about as much as their customer base grows in a year.

In the long run, marketing green power to consumers certainly helps.  And even though it's expensive, the marketing efforts probably pay for themselves many times over--satisfied customers are likely to stay with the program, generating revenue for green power year after year. 

But I do wonder whether, in the perfect world, it would have been more effective to devote that money to marketing (ie., lobbying for) a renewable energy standard for state utilities.  Changing the rules under which power utilities operate would likely have a far more immediate and dramatic effect than signing up another third of a percentage point of people into a green power program. So this seems like yet another instance in which wholesale (i.e., one big change that affects the actions of a handful of utilities) is cheaper than retail (i.e., a bunch of little changes to consumer behavior).

Obviously, the utilities themselves may not be willing or able to put their money into lobbying.  But since, ultimately, it's the green power customers themselves who pay for the marketing, it seems to me that they'd collectively do more to promote renewable energy by contributing to an organization that's working to pass a broader utility reform.

Anybody have any opinions on this?

Posted by ClarkWD | Permalink


First of all, I want to recommend an incredibly useful book on marketing in this area:

Fostering sustainable behavior : an introduction to community-based social marketing -- by McKenzie-Mohr, Doug

Secondly, it's always interesting to me how quickly people forget that the medium is the message: "green" marketing typically relies upon the same wasteful marketing infrastructure as any other campaign and uses the same "persuasive" techniques to get people out of cars, for instance, as are used to get them into them.

And lastly, I tend to agree that pursuing green power is an industry concern. The person on the street is not likely to feel empowered enough to direct the industry. I don't tell Amazon where to get their cardboard or UPS to buy bio-diesel trucks, though I may well have concerns in those areas.

Besides, you have to ask why green power should be singled out as a special case that has to pay for itself. Certainly the nuclear experiment was not based on inexpensive initial investment projections.

Governmental and intra-industry regulation are existing feedback loops and are perfectly useful in communicating aggregate social response. The unintended consequence of this marketing campaign is really to marginalize green power resources as something that people who are more well off are interested in.

Posted by: Michael Baker | Dec 21, 2004 11:57:38 AM