Renewables Can Benefit from Energy Aggregation

Renewable energy can benefit from the use of purchase aggregation, according to a report prepared for the U.S. Department of Energy.

BOULDER, Colorado, US, 2001-04-18 <> Renewable energy can benefit from the use of purchase aggregation, according to a report prepared for the U.S. Department of Energy. “Aggregation does hold potential for increasing demand for green power,” say Edward Holt and Lori Bird in their report, ‘Customer Aggregation: An Opportunity for Green Power?’ There are many types of aggregation available across the United States which have set up to take advantage of deregulation, and “many have the potential to effectively use their organizations to increase sales of green power.” Environmental groups appear to be the “most likely” to offer green power, and the groups can act as buying agents for their members, as providers or resellers of green power, or they can simply endorse a particular product, it notes. “Acting in any of these roles, groups can increase access to green power, perhaps lower the cost, and offer incentives for members to participate.” “However, a group acting as a provider or reseller of green power may be more effective in achieving a discount for its members than one that merely endorses a green power provider,” it notes. “On the other hand, serving as a provider or reseller requires more sophistication and knowledge of the industry and some groups may want to shy away from the risk.” Small consumers are slow to obtain the promised benefits of restructuring because retail suppliers find it too costly to inform and service small clients, and green power marketers “suffer from some of the same problems” because it is expensive to market to individual customers, education is important but costly, and demand must be sufficient to make it worthwhile to obtain supplies. Existing and newly formed aggregators have attempted to procure green power for their members or customers, and the authors researched the experience of aggregation groups to determine whether customer aggregation offers an opportunity to bring green power choices to more customers. The report found that aggregation for green power faces several barriers, such as premium cost, the need for greater education and information about benefits, market rules that dampen competitive markets, the lack of human capital for organizing group-buying and green power options, and the scarcity of renewable resources for green power products in some markets. Aggregation is the combination of individual consumers and their loads, into a large pool in order to reduce costs. In addition to existing groups or associations, municipal governments and religious organizations have also aggregated their members, while buying pools are also used. Energy cooperatives, such as fuel oil and electric cooperatives, are likely to support green power sales and have experience in aggregated energy purchasing and roots in social responsibility, and are considered to be “strong candidates” for aggregation efforts. Federal and state governments are likely candidates, especially if a sustainability initiative exists or under federal Executive Order 13123, which calls for agencies to increase their purchases of renewable electricity. Religious groups are “very good candidates” for purchasing green power because of their hierarchical structure and beliefs, while municipal governments and schools may be interested in purchasing renewable energy for their own facilities. “Community choice may be difficult to implement because it will require political support, and may require a lengthy political process, but the potential impact on green power demand could be large,” concludes the report. “It is more likely to be effective if residents and businesses are automatically included in the aggregation, with the opportunity to opt out.” “Not enough thinking has been done about how to integrate green power into the products aggregators offer to group members,” says the report. “Generally, the leaders of groups that might be supportive of green power are focused on lower costs and do not know much about environmental issues.” “Aggregation for electricity is a business; however, some organizations lack entrepreneurial thinking, technical experience, or environmental leadership,” it adds. “Cities may have difficulty bundling energy efficiency and green power purchases to reduce overall energy costs because energy efficiency investments and electricity purchases come out of separate budgets. Other aggregation entities may find that many efficiency projects have already been implemented.” The report includes a number of recommendations to maximize the impact of aggregators, and to develop more resources for the education efforts required. “If it is not possible to compete because of low default service prices, it may be better to wait until the market is more competitive and can attract suppliers,” it recommends. “The interim period may provide a good opportunity to plan and organize before actually launching a product.” “As we begin to see more activity in competitive markets and as the cost of renewable energy options decreases over time, green power aggregators will play a more prominent role in the marketplace,” concludes the report. “These aggregation groups have the potential to increase sales of green power by educating their members about the benefits, increasing options, and lowering prices. As opportunities unfold in the marketplace, existing groups and green power advocates may be able to learn from the early experience of aggregation groups to bring green power choices to a greater number of customers.”

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