Posted by Shane McLaughlin
on 10/03/2013 at 11:09 AM
Alex, a TrueCost user, wrote to us asking about how well green plans sell after reading comments about solar energy somewhere else.
One of the commenters wondered if there was any data on how many people say they're willing to pay more for 100% renewable vs. the actual number who do once a cost is defined. A response to that mentioned one might be able to get an idea of how much of a price premium consumers would be willing to pay be examining 100% renewable plans vs. conventional in deregulated electricity markets. So I thought TrueCost might be a good place to try and get some form of that data, since it captures market offerings and consumer data for people who purchase through the portal.
Great question, Alex.
One of the inspirations behind TrueCost was to help people make decisions about the cost of their electric plan. Everyone knows green plans are almost always more expensive, but by how much? Our electric price index tracks this spread, and we call it the "Green Premium" -- that is, how much more does the 100% renewable plan cost?
This chart shows that for 12-month plans (the most popular product), 100% renewable plans cost around $7 more, on average, over the last 12 months than non-100%-renewable plans.
But that premium moves around with the market; there was a brief period when the green premium went negative, and the average 24-month green plan cost less than the average 24-month non-green plan.
How many people chose the green plans? Overall, just under half the plans switched to via TrueCost have been 100% renewable. I don't have any data on what the overall market looks like, but I've been surprised how many people go green. I believe TrueCost's estimates make that decision easier turning vague cents/kilowatt hour costs into something we all understand: dollars per month.
Alex's question also touches on price sensitivity. As you can see from the graph above, 24-month green plans tended to have the most competitive pricing, or the smallest green premium. The following chart shows what percentage of each contract length went green.
While we have some plans -- like the eight-, nine-, and 15-month -- that are more seasonal, the main plans do follow what the green premium chart shows: more people buying a 12-month plan selected green than the six- or 24-month plan where the cost of doing so is higher. Even without the attractive green premiums, most people who signed up for a 12-month plan picked a green one.
So there you have it: Houstonians love green energy, and will pay a little more for it when they know what to expect the cost to be, but are still looking for the best deal.