Using Customer Credits to Stimulate Green Power Sales in California, Rhode Island, and New York

Several clean energy funds have taken an interest in encouraging the development of the green power market. The idea of providing a "customer credit" to green power marketers originated in California. With a customer credit, a state clean energy fund pays the green power purchaser (or more realistically, marketer) a per-customer or per-kWh incentive for each green power sale. California's program involves a simple ¢/kWh credit (up to a maximum of 1.5¢/kWh) to green power customers for each kWh of eligible renewable energy purchased. Learning from California's experience, Rhode Island and New York have also begun to experiment with modified customer credit programs that offer alternative incentive structures. This case describes the program design, results, and lessons learned from all three programs. Innovative Features The idea of stimulating voluntary customer demand for renewable energy is innovative in itself. The use of per-kWh or per-customer sign-up bonuses to encourage such demand has only recently developed. Rhode Island and New York observed some of the problems encountered in California, and have created programs that:

• more strongly target new renewable resources,
• allow certificate-based products to qualify for funds,
• provide incentives that allow for sustainable pricing of green power products, and
• use more discretion in the selection of green power providers to fund.

Results

• California's program has distributed $59.4 million and created a market that grew to 160,000 residential and 40,000 non-residential green power customers.
• California's experience in trying to foster green power demand was influenced by both the overall electricity market structure in which it operated as well as the specific design of the customer credit program. The customer credit program operated within a retail electricity market that was fundamentally hostile towards retail choice and price competition. As a result, the customer credit became popular among marketers as one of the few means of offering price discounts, leading to the creation of a green power market that can be characterized as price- rather than value-driven, and therefore unsustainable. The intense focus on price also led to a disproportionate reliance on existing (i.e., cheap) rather than new (i.e., more expensive) renewable resources, which the design of the customer credit did little to discourage. The precise design of California's program, therefore, should not be replicated.
• The modified New York and Rhode Island programs have attempted to address some of these issues, but have been operating for too little time to have clear results.