Will solar power's cost make it a tough sell?
More green for green
Now that Austin Energy is committed to building the country’s largest solar power plant, the utility may face an uphill battle to convince customers to buy the new green energy — its priciest power ever.
Earlier this month the Austin City Council authorized the city-owned utility to seek an agreement with San Francisco-based Gemini Solar Development Co. to build a 300-acre solar array in the eastern Travis County village of Webberville. The $250 million plant would generate 30 megawatts annually, enough electricity to power about 5,000 homes.
Austin Energy said the plant is a big part of its plan to generate 30 percent of its energy through renewable sources by 2020, including 100 megawatts from solar. The new plant, expected to be ready in 2010, would bring the utility’s renewables portfolio to 13 percent.
But the project, which comes on the heels of the approval of a $2.3 billion biomass plant in East Texas last year, has been controversial — largely because of its cost to Austin Energy’s customers. Solar power is the most expensive type of electricity to generate, about twice as much as wind power and four times as much as conventional electricity. Although building the new plant in Webberville would sidestep problems with transmission grid congestion that have plagued wind power coming from West Texas, the steep cost of photovoltaic solar panels means solar would be the most expensive power Austin Energy has offered.
Experts said that poses a unique marketing challenge to the municipally owned utility, which hopes to develop a promotional campaign in the next few months and roll it out before the plant is ready.
“There will have to be a significant sell to all individuals and companies in order to try to get them to buy solar power,” said Kevin Tuerff, co-founder of Austin-based companies Green Canary Sustainability Consulting and EnviroMedia Social Marketing. “Ultimately, you’ll have more pickup and sales when your price is comparable, and so price is key, but it’s not the only factor in consumer decisions. So hopefully the people who sign on will do it to make a statement, just as those who first bought hybrid cars did it less for the pollution and gas mileage than for the statement about who they are and what they believe in.”
Ed Clark, spokesman for Austin Energy, said the utility won’t spend a lot of money on marketing. He said marketing will be done through speakers’ bureaus and neighborhood groups, as well as through the Internet and newsletters that customers receive with their utility bills. The utility will also “assess what paid media will be advantageous. All the components will be looked at, and the campaign would be created to achieve maximum results at the lowest costs.”
But Tuerff said a significant marketing budget is needed to explain the new program and that the campaign needs to be multiyear.
“You have to reinforce the message for quite some time,” he said. “Just ask [Whole Foods Market Inc. founder] John Mackey. When his first store was on North Lamar, organic grocers were few and far between. Now, to buy organic food you can go to Wal-Mart and HEB. Clean energy is becoming a social and lifestyle movement very similar to the way organic foods became one, but it takes time.
“Getting people to change their purchasing behavior is a lot harder than trying to sell a product off the shelf, and it takes a much higher frequency of repeating the message,” Tuerff said.
Austin Energy sells its renewable energy — only wind, for now — through its Green Choice program, which started in 2002. Since then, it has sold out of every annual output of wind power it has offered except for the current batch, which was available starting this January. That batch has sold just 1 percent, attributable to the fact that wind power is more expensive than ever, Clark said.
Wind power bought through Green Choice costs 8 cents per kilowatt hour through a five-year period, almost five times the cost when wind was first offered six years ago. Conventional energy customers pay 3.65 cents per kilowatt hour, while customers who bought wind power before January locked in their prices. These costs are on top of operational costs — which are the same regardless of the power source — and typically account for about two-thirds of an electric bill.
Clark said Austin Energy is developing a solar-only option in its Green Choice program, as well as a blended solar, wind and biomass option. If it fails to sell enough solar, it will need to spread the cost to its nearly 400,000 customers — something the City Council asked Austin Energy to avoid.
Corporate customers of the Green Choice program, such as Freescale Semiconductor Inc. and Spansion Inc. (Nasdaq: SPSN), have complained that the new solar power could not only translate into significant increases in the fuel pass-through charge for all of Austin Energy’s customers by as much as 100 percent through 2015, but also for bulk electricity consumers who are already feeling the economic heat.