Green power: Everything you need to know

Green power is a growing trend for homeowners and businesses seeking sustainable electricity options. The phrase "green power" can have many meanings. Still, in the case of energy purchasing, it refers to environmentally-friendly energy resources that many utilities and energy providers use in their generation mix.

The U.S. Environmental Protection Agency defines green power as electricity produced from solar, wind, geothermal, biogas, eligible biomass, and low-impact small hydroelectric sources. Many electric utilities offer specialized green power options for their customers, who can subscribe to them to support clean energy and reduce reliance on fossil fuels.

A common misconception about green power is that when you sign up for it, you will receive electricity straight to your home produced by a designated green source like solar or wind. That isn't exactly true. When you enroll in a green power program, you pay your utility to buy a certain amount of green power, contributing to the overall grid mix.

Because of the nature of the electric grid, it isn't possible to control precisely where that green power goes. As a result, when you pay for green energy, you can't personally receive only electricity generated by a solar array at your home. Purchasing through a green power program can lead to a higher overall percentage of electricity from renewable resources on the grid.

In this context, joining a green power program is not the same as generating green power yourself. Although solar is part of the green power mix, you can purchase from your utility, having rooftop solar is not related to the green power programs available. Rooftop solar is a "green" energy source, but in this case, it is not the same as a utility-provided green power program.

There are two main ways to get green power: green pricing and green marketing.

Green pricing is a green power option for regulated energy markets. You can't choose your energy provider in these markets, but your utility will often have a green power energy purchasing option for customers.

Green marketing occurs in unregulated markets where several utilities compete for energy customers. In green marketing systems, you can pick an energy provider other than the local utility based on the type of green power program and support they offer.

Green pricing and green marketing models tend to be structured in three ways. These are the main options for purchasing green power from your electricity provider.

Fixed energy quantity block

The first way to purchase green energy is to buy a fixed amount. In this model, customers can buy as many "blocks" of energy as they want. Blocks are usually offered in 100 kilowatt-hours (kWh) units, and you can choose to buy enough to cover an average month's energy usage or only a portion. You pay a fixed monthly price depending on how many blocks of electricity you purchase. This option is available in some competitive markets but is more common in regulated utility green-pricing programs.

Percentage of monthly use

A second option for green power is to purchase a percentage of your monthly electricity use. With this plan, you pay a specified monthly electricity rate from green power sources. For example, if your home uses 1000 kWh in a particular month and you are on a 90 percent green power plan, 900 kWh of your electricity that month will have come from green power sources. Generally, these percentage plans lead to purchasing a "blended" portfolio of both green and conventional sources.

Long-term fixed-price contracts

Usually reserved for larger purchasing agreements from bodies like government and academic institutions, long-term contracts for green power can help a project developer secure financing while providing a large organization with stable electricity for several years. Under these fixed-price contracts, a customer agrees upon a fixed price for power with a developer and commits to a contract to purchase a large quantity of green energy for a long time (often ten years or more).