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Costs and benefits of green power

Last updated 6/7/2019

Buying renewable energy can be as easy as signing up for a green power program with your utility. However, there are economic factors at work that are important to keep in mind, and green power doesn’t operate in the same way that a traditional energy purchase through your utility works.

Green power costs

green power costs equation

There are a few practical costs associated with green power. First and foremost, you might notice that green power comes at a premium price (hence why it is sometimes called “green pricing”) when compared to a normal electricity plan from your energy provider. The extra money you pay per kilowatt-hour (kWh) goes towards renewable energy certificates (RECs), which represent the “renewable benefits” of your electricity. It can also be used by the utility to continue investing in and developing more renewable energy projects. 

The actual premium price you see on your green power bill depends on several factors. The source of your electricity (wind, solar, etc.), location, size of purchase, and contract duration, among other aspects, play a part in determining the price you see as a consumer. For example, local green power projects generally cost less, and buying power in larger increments will often reduce your per-kWh rate.

What prices might you see for a green power program? According to the National Renewable Energy Laboratory (NREL), the average residential premium for participating in a green power program is around $0.018/kilowatt-hour (kWh), or about $195/year based on an average home’s energy use. 

Green power economic benefits

green power economics equation

Choosing a green power program can have many economic benefits.

First, buying into a green power plan is a way to support electricity resources that have more stable pricing. This is especially true with solar, wind, and geothermal-based green power programs, as there is not much of a fluctuating price associated with generating wind, sunlight, or heat from the earth. Traditional fossil fuel-based generation techniques are subject to supply and demand economics, which can lead to dramatic upticks in energy prices over time. When you support green power projects, you are supporting a transition to a more stable power grid mix by the addition of renewable sources.

Second, green power contributes to job creation. Developing a new renewable energy generation site involves many jobs, from planning to construction and long-term oversight. Biomass projects in particular are labor-intensive and require high volumes of workers even after the initial development phase.

Lastly, green power programs always reward customers for long-term and high-volume purchases. For example, if you are participating in a fixed energy quantity block program, buying more blocks will lower your price per block of energy. For large organizations who are looking to enter long-term agreements with green power developers, the longer the contract term, the lower per-kWh price you will receive for your electricity.

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