discussion forum 2004 appa national conference june 19 – 23, 2004 seattle, washington issues for...
TRANSCRIPT
Discussion Forum
2004 APPA National ConferenceJune 19 – 23, 2004Seattle, Washington
Issues for Green Power ProgramsDesigningMarketing and Pricing
2004 APPA National Conference
Overview Southern Minnesota Municipal Power Agency – SMMPA
Joint Action Agency – 18 member municipal utilities.
530 MW summer peaking utility. Own 41% of Sherco 3.
Partner with Xcel Energy. 884 MW coal facility. Newest and most
environmentally sensitive plant in the MAPP Region.
Distributed gas. gas/oil and steam units in member communities.
2004 APPA National Conference
OverviewSouthern Minnesota Municipal Power Agency – SMMPA
Green Pricing Resources Strategy of building
interconnected to member systems where possible.
2 - 950kW NEG Micon turbines 3 – 1.65MW NEG Micon/Vestas
turbines to come online in 2004. 1 – 1.65MW NEG Micon/Vestas
turbine to come online in 2005.
2004 APPA National Conference
OverviewSMMPA Wind Power Program
Program Launched December 2000. Based on power purchase
agreement (PPA). Purchase total output of 1 NEG
Micon 900 kW turbine. Wholesale premium of 2.9¢
/kWh ($2.90/ 100kWh block). 2016 blocks available. Sold out in approximately 6
weeks.
2004 APPA National Conference
OverviewSMMPA Wind Power - Today
No PPA – We own our turbines. New build and own strategy coupled
with State and Federal incentives provided new opportunities. Tied with three other utilities for the
lowest wind power premium in the country at 1¢ per kWh – among 500 utility programs.
As of 6/1/04, 6,500 100kWh blocks of wind power subscribed.
Fill in with “green tags” between projects. – ONLY USE OF TAGS.
2004 APPA National Conference
Why Green Pricing? The Time is Right.
Customer interest (Strong Cultural Shift?) By 1999 member utility customers asking for renewable
energy.
Energy legislation Minnesota (2001)
Renewable Energy Objective (REO) not a portfolio standard but at “Good Faith” target.
Required all retail utilities to offer customers a Green Pricing product annually.
Federal Continued pressure for Renewable Portfolio Standards.
Decreasing cost of Renewables -particularly wind.Utilities see new potential to hedge natural gas prices and regulatory pressure on coal.
2004 APPA National Conference
Program DesignDesign Conscious decision that green pricing program
would contain only wind. Biomass from waste will be used to meet Renewable
Objective, but not seen by customer as “green enough”.
Marketing Need a straight forward message. Need utility commitment. Need to focus on the customer and keep it
simple.
Pricing Highly elastic product – price is very important.
2004 APPA National Conference
Program DesignMarketing Green Power Products
Marketing – Need straight forward message. Create an identifiable image. Clearly identify the renewable resource.
Clearly state the value proposition. Getting an environmental benefit, not delivered
kWh. Ramping down fossil fuel source on our system. Message – Buying a 100kWh of wind power each
month has the same environmental impact, of CO2 reduction, as planting ½ acre of trees or not driving a car 2,400 miles.
2004 APPA National Conference
Program DesignMarketing Green Power Products
Marketing – Need straight forward message (continued) Keep it simple.
We use 100 kWh blocks. Rejected fixed dollar amount and percent of use.
Allow customers to change amount monthly.
Some sign-up via web.
2004 APPA National Conference
Program DesignMarketing Green Power Products
Marketing – Need straight forward message (continued) Commercial/Industrial Customers require
different message. Nationwide, more than 20% of the green power sales
are to business customers. Value proposition is different and typically
reflects: Organizational values Civic responsibility Public image Employee morale Green marketing Reduced regulatory exposure
2004 APPA National Conference
Program DesignMarketing Green Power Products
Marketing – Need utility commitment Programs will only be successful when totally
committed to the program and marketing. Product is totally discretionary!! Continual marketing presence is critical to
momentum. SMMPA now continues marketing initiatives regardless
of the timing of new turbines coming on – Fill in with Green Tags.
What’s the utility’s “OWN” commitment to wind power?
CEO/Manager, employees, utility facilities purchasing wind power?
SMMPA Corporate Environmental Challenge.
2004 APPA National Conference
Program DesignPricing Green Power Products
Green power products are highly elastic
A primary reason for originally selecting 100kWh blocks was the an understanding that a $7/month incremental cost was a likely barrier.
Our original PPA resulted in a $2.90/100 kWh block wholesale cost. With member costs, the price ranged to $3.50/100 kWh block.
According to NREL, the green pricing customer purchased 2+ blocks.
Source: National Renewable Energy Laboratory
2004 APPA National Conference
Program DesignPricing Green Power Products
Source: National Renewable Energy Laboratory
Original SMMPA/Member Premium = 2.9¢ to 3.5¢/kWh
Green power products are highly elastic.
When the SMMPA premium was 2.9¢, the average blocks per customer was ~ 2.2.
In the months since the 1¢ premium, the average blocks per customer is ~ 3.6.
SMMPA Premium is cost based and ONLY reflects the incremental cost of acquiring the resource with any state and federal incentives applied.
New SMMPA Premium = 1¢/kWh
2004 APPA National Conference
Development Issues & Barriers
Siting County land use ordinances – eliminating potential sites. Deliverability – transmission? Renewables typically distant from load centers. Interconnection studies required by the Midwest Independent Systems
Operator (MISO) – costly and can add at least 6 months to development. Ambiguous nature of counties taxing renewable generation.
Economic (Remember elasticity!) Ability to pass tradable tax credits as part of the “Energy Bill”?? Ambiguous nature of federal Renewable Energy Production Incentive (REPI). Achieving economies of scale in small projects – sometimes incentives work
against.
Philosophical How shall “green pricing” resources be used to meet utility renewable state
obligations? How will “green tags” be treated?
Certification – Tracking – Acceptance of which program in which state?