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Electricity customers—from residential to large industrial—want to go above and beyond the amount of renewable energy currently offered through the electricity grid. Apart from environmental concerns and reputational advantages, greater use of renewable energy might allow them to reduce their electricity bills and protect themselves against volatile fossil fuel-based power prices. Such customers want more than just the Renewable Energy Certifications (RECs) that allow them to claim credibly that they are using green power—they also want access to the long-term, fixed-price structure of renewable energy.

Utilities are weighing how to meet this evolving customer interest in renewable energy. Outside of the existing competitive electricity markets, utility renewable energy or “green pricing” programs have typically provided only RECs at an additional cost. Because they offer only “unbundled” RECs, separate from energy, these programs do not usually provide a fixed cost of energy as protection against volatile fossil fuel prices. Green tariffs, or riders, are an emerging option in markets where there is no functional retail electricity choice to access fixed price renewable energy. These programs allow eligible customers to buy both the energy from a renewable energy project and the RECs. Green tariffs cater to customers’ preference for a more direct financial connection to nearby renewable energy projects. They can also offer greater economic value to customers than unbundled RECs alone.