Wednesday, October 7, 2015

Green Defaults Help Consumers Choose Renewable Future

By Brandon Kline, Energy Fellow

“The future ain’t what it used to be,” the great Yogi Berra once said. In the world of energy policy, the existing path for getting to the future has usually come down to engineering a trade-off between the costs and benefits for the current generation and those of future generations. Rather than an “either-or” approach, what we need, of course, is a framework that provides a balance that is good for both.

The early development of renewable energy sources means decreased dependence on imported fossil fuels.Since the late 1990s, economists have cited this trade-off in calling for restructuring electricity markets to promote newer, clean, renewable energy resources (i.e., Renewable Portfolio Standards for wind, solar, biomass and geothermal). States have a variety of approaches to Renewable Portfolio Standards.

Since 2007, Oregon’s largest utilities have been obligated to source 25% of their electricity from renewable energy by 2025.

Earlier this year, Hawai’i became the first state in the nation to require its utilities to generate 100% of its electricity from renewable sources by 2045. Meanwhile, Ohio legislators are calling for an open-ended freeze to that state’s policy requiring utilities to meet annual increases in clean-energy production.

What’s in a Renewable Portfolio Standard?

According to the National Renewable Energy Laboratory, a Renewable Portfolio Standard refers to a state-level requirement, typically established through legislation, to provide a minimum amount of energy from renewable resources. These requirements are often defined as a percentage of renewable-energy use by a given date – for example, 20% by 2020. States define what technologies are eligible for RPS requirements and which utilities are subject to them.

But not every state has adopted a Renewable Portfolio Standard. As of the end of 2013, 29 states and the District of Columbia had an RPS in place, while eight states had voluntary renewable-energy goals.

With that backdrop, last week Portland General Electric announced a new limited program enabling customers to obtain their electricity from a solar energy project in Willamina that generates enough power to produce 2,935 “blocks” of solar energy.  This community solar program has the virtue of meeting PGE’s RPS requirement while allowing PGE customers to make a choice that reduces their carbon footprint.

Such community solar programs have gained popularity as utilities and developers have started to see a serviceable market for households that want to plug into renewable energy sources, but are precluded by their circumstances (e.g., renters, apartment dwellers, and others).

Why not implement an automatic green default? That way, utilities would have to automatically enroll customers in renewable-energy alternatives. By reversing the dynamic, consumers would have to opt-out to use fossil-fueled power, instead of having to opt-in to get clean electricity. Green defaults make it the norm to go clean rather than putting up a roadblock at the point of consumer decision-making.

In a thoughtful piece published in the Harvard Environmental Law Review, Harvard Law School professor Cass R. Sunstein and Copenhagen Business School Lucia A. Reisch make a strong case for the role of default rules in their article, “Automatically Green.” Their research suggests that public and private institutions can make great progress on environmental problems by becoming far more attentive to selecting appropriate defaults.
“If the goal is to protect the environment, and to save money in the process, default rules are an important tool in the regulatory repertoire, and they may well be able to achieve a great deal more than other tools, including those that would cost taxpayers or the private sector a great deal of money.”
Beyond energy policy, defaults play a pervasive role almost all of the choices we make in our daily lives – from fuel and emissions standards in new cars to paper receipts and plastic bags at the grocery store. In the face of weak preferences, we are often engineered to mindlessly consume as a matter of course.

Indeed, Sunstein and Reisch illustrate how this can be reversed in a range of domains.
At Rutgers University, for instance, a policy changing the computer lab’s default setting from “single-sided” to “print on front and back” reduced paper consumption by 44% – the equivalent of 4,650 trees.

Another example stands out in light of PGE’s new program. In Germany, utilities have achieved clean-energy usage rates well above 90% through green defaults. In the Black Forest community of Sch¨onau, local residents passed a referendum to establish an eco-friendly utility cooperative in the wake of the Chernobyl disaster. That company now promotes solar energy and places a great deal of reliance on renewables.

In contrast to Oregon’s PGE, Sch¨onau customers are allowed to opt out and to use other energy sources, but they have to find relevant information to identify alternatives. Almost no one opts out. Over the course of a number of years, the opt-out rate was less than 1%.

Sunstein and Reisch are certainly onto something. Clearly, green defaults are in the future.
For now, no state has gone as far as adopting a Renewable Portfolio Standard with a green default rule…although Hawai’i, with its 100% renewable RPS, comes pretty close. Or as Yogi would advise, “When you get to a fork in the road, take it.”

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