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The Power of Green

Green Mountain Energy was more than ahead of the curve-it was almost ahead of its time. Founded over a decade …

Green Mountain Energy was more than ahead of the curve-it was almost ahead of its time. Founded over a decade ago, when eco-friendliness was still widely associated with tree-hugging, the Vermont-based company had a tough slog initially convincing retail customers to purchase renewable electricity. But the fast-growing green economy has been catching up with Green Mountain, much to CEO Paul Thomas’s satisfaction, and the company is now ripe for profit in an environmentally conscious age.

In addition to having a decade’s worth of experience behind it, Green Mountain also claims a business model that continues to be unique in the industry. Rather than constructing large-scale wind farms in America‘s heartland or manufacturing the delicate solar panels that harness the sun’s power, Green Mountain functions as a retailer, packaging up the green electricity produced by renewable energy providers and selling it to end users much the way Macy’s sells clothing it buys from designers and manufacturers. “We’re a pure retailer,” Thomas explains. “We don’t have any steel. We don’t own or operate.”

What they do is aggregate demand for clean power on the consumer and business sides and then sign long-term contracts with developers on the other end to purchase all their output. “The developer will take our commitment to a bank, go get financing and get a facility built,” Thomas says, noting that this model has spurred 35 renewable energy projects around the country to date.

Because regulatory environments around the country vary so widely, Green Mountain has had to be flexible in finding the right strategic partnership. In deregulated Texas, for example, Green Mountain competes directly with incumbent utilities, while in regulated markets, such as Oregon and Florida, it partners with existing utilities to bring green power to customers. In de regulated New York and New Jersey, Green Mountain participates, along with many other providers, in utility programs sponsored by incumbent players.

Whichever way it sells clean power, Green Mountain has been claiming a larger piece of a growing pie. The company now boasts three distinct business units: residential electricity, commercial electricity, and carbon offsets, the practice of neutralizing one’s own energy use by paying for the reduction of greenhouse gas emissions elsewhere. That last unit represents the smallest share of revenue, but Thomas expects it to expand quickly going forward. With $300 million in sales today, the company has been growing revenues at about 40 percent per year compounded over the past three years. “I don’t have any reason to believe that that’s going to slow down,” says Thomas. “In fact, I’d be disappointed if we don’t go faster than that. It’s just moving our way.”

Should the green movement prove to be more fad than sustainable trend, the popularity of such offerings as carbon offsets, and even renewable energy, could wane with the public’s interest in sustainability. But Thomas believes a trifecta of policy drivers will keep demand for its products high.

Concern over global warming and the environmental dangers of coal-based energy and fossil fuels is spurring legislation to move the country over to clean energy, which will work in Green Mountain‘s favor. And the price of oil continues to rise even as the price of renewable energy comes down with decreasing technology costs, making the latter far more competitive. The third factor is national security, Thomas explains.

“To have home-grown, non-diminishing sources of energy is very important,” he notes. “Despite the ups and downs in popularity and national fads, the combination of those three really strong policy drivers will ensure that renewables are here to stay.”

Thomas’s big challenge today, he says, aside from getting better access to heavily regulated markets such as California, is getting his message out to customers and changing perceptions that alternative forms of energy are either less reliable than traditional utility offerings or more expensive. “We’re in a category that traditionally hasn’t gotten a big share of people’s mind. People don’t talk a lot about their electricity. They don’t go home at night and say, €˜How was the electricity today?'” Thomas points out. “So we need to draw folks’ attention to it, and tell them how we can make a real difference for them.” _

-C.J. Prince

About C.J. Prince