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Much of the optimism about restructuring reflects a faith in the benefits of natural gas and the possibility of a market transformation sparked by environmentally conscious purchases. The gas question is complex. Consider air pollution: Modern gas-burning facilities emit rather low levels of conventional air pollutants and only about one-half the greenhouse gases per unit of electricity as coal facilities. Where gas replaces coal, it is an environmental winner; however, where it replaces nuclear facilities or meets new demand, it is an environmental loser. Some environmentalists therefore consider natural gas a "transition fuel." They believe, for instance, that gas could provide the technical and commercial infrastructure for a clean hydrogen economy. In one permutation of this vision, hydrogen made from natural gas and delivered by existing companies through existing pipelines could prepare consumers for hydrogen produced by electrolyzing water with current from renewable energy facilities.23 Furthermore, analysts note that all distributed energy systems share policy and market needs; opening the system to gas-powered microturbines and fuel cells would benefit distributed biopower, photovoltaics, and other renewable energy technologies. Yet as the United States moves toward coronating natural gas as the savior of the electric system, skeptics wonder darkly about the back end of the transition: Will the current tide of inexpensive gas swamp all competitors, dirtier and cleaner alike, leaving no zero-emission options to turn to if gas prices rise or the climate becomes dire? In other words, they are asking how we can use gas in a transition away from coal rather than as a convenient way of dodging tough questions about the future. (For more on the regulation and environmental significance of natural gas, see Box 2.) What about green markets? Are they a sham—a way for power companies to sell a small amount of renewable energy at premium prices while inflicting serious harm on the environment through their main product lines? Or are they the last, best hope of integrating environmentalism with consumerism? The evidence that is available so far is mixed. Pilot programs that explored the functioning of retail markets indicated grounds for optimism, suggesting that people would buy green power even if it cost more. In Massachusetts, for example, 31 percent of program participants chose a green power option. But the optimism may not be entirely justified. For one thing, most pilot programs focused on residential customers, who account for only about one-third of electricity use in the United States. For another, participation in most programs was voluntary, and it may be that only those people likely to consider switching were involved. In actuality, green marketers must not only convince customers to buy their product; they must teach them what it means to shop for electricity in the first place and why they should do so. To date, no real-world green power market includes more than 3 percent of the potential residential customers, and some are a good deal smaller. California's initial experience points to the difficulty of setting up an active power market. Aspiring power marketers assert that state policymakers have set misleadingly low prices for customers who choose not to leave their current utility, making it difficult or impossible for newcomers to compete on price. Indeed, Enron Energy Services, which was expected to be one of the leading purveyors of green power, stopped taking on new residential customers, saying that the high cost of educating and signing up new customers far outweighed the potential profits.24 Nevertheless, there are some encouraging signs. Pennsylvania has had much more success in fostering active retail markets for both green and conventional power by setting the price of staying with the current provider high enough to induce switching. The Land and Water Fund of the Rockies, an advocacy group, has cooperated with the Public Service Company of Colorado to market wind-based power; their customers include not only the state and several local governments but also major corporations such as Coors Brewing Company, Lockheed Martin Astronautics, and IBM. Green Mountain Energy Resources, a Vermont firm, is attempting to become a national green power marketer. And one California marketer, Commonwealth Energy, now derives all of its electricity from geo-thermal sources. |
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