So you’re considering paying the slightly higher fee your electric company is charging for green energy? Perhaps you’re looking into why, exactly, green energy prices are so high while fossil fuel charges appear to be a bit on the low side? Either way, there are perfectly good explanations to both the price hike and the reasoning behind the higher prices.
First, solar and wind farms are only just now beginning to generate enough power to make a substantial amount of users’ needs satisfied. An aggressively green power company (usually owned by a municipality as opposed to a purely private sector entity) should have a goal in mind to draw up to 80% of its power from renewable resources within the next 10 years. This is doable, but it takes a substantial investment.
Energy companies usually buy green energy in blocks. A company I worked for, Austin Energy, made these purchases in blocks that lasted between 10-15 years, making the price of electricity the same throughout the duration of the contract. If the purchase was made at a reasonable rate, it should fall at between 20-30% higher than current fossil fuel rates. So, if you’re paying $0.15 per kWH for electricity on fossil fuels (including the fuel costs), then you might expect the green energy option to run you about $0.20 per kWH.
On paper, this looks like a lot of money, but fossil fuel customers are subject to constantly shifting fuel costs. Over time, this cost almost always goes up. In a period of five years, it would be reasonable to expect it to rise between 20-40% given current trends. Add five more years to that and you’re going to be spending more for fossil fuels than you would for green energy.
This is where the investment comes in. Remember how gasoline prices were $0.99 per gallon 10 years ago? Today, we’re lucky to find gas at less than $4.00 in most places around the country. This is what’s happening with fossil fuels like coal and natural gas. Prices increase with inflation, global economic issues, war, and other supply factors. The chances of fossil fuels suddenly becoming a lot cheaper than they are today is slim, but it’s a possibility. By investing in a long-term green energy account with your electric company, you’re making a bet that this locked-in rate at which you’re buying power will be lower than the fossil fuel prices at some point during the duration of your contract. After having worked for an energy company for five years, I can say this has certainly paid off for the people I’ve interacted with.
Your investment also goes directly to more green energy purchases. You’re sort of making an investment on the environment in addition to your own financial future.
Not every energy company sells green energy the same way. Before you make the decision to go for the slightly higher green energy rates, make sure that rate is locked in for a set number of years. 10 years is great, but 15 years is better if you plan on living wherever you are for a long period of time. If you’re in an apartment or some other short-term living situation, this may be a terrible financial investment for you as the prices may not shift until you move.
Some companies will allow you to transfer your green energy account to another address so you don’t have to incur a rate hike. Not everyone does this, so ask ahead of time.
Do you feel that investing in green energy is a good idea, or do you prefer to stick to what’s cheaper here and now? Let us know your thoughts in the comments below!
Solar Power Plant by Petr Kratochvil