INTRODUCTION
Two years ago, some bright young folks from
the Green Mountains of Vermont came to me with an idea. They said
let’s take on one of the nation’s biggest environmental
problems - air pollution created from the generation of electricity
- and clean up that pollution by USING A FREE MARKET APPROACH.
We will educate consumers that it really matters what electricity
you buy, sign up customers and create a green brand that helps
people clean the environment through their buying habits.
When I was a Boy Scout, we used to sing a
song around the campfire: "The stars at night are big and
bright, deep in the heart of Texas.’’ I live in Dallas;
the stars at night are no longer big and bright. A brown haze,
which I used to see on trips to Los Angeles or Taipei, has slowly
been creeping across the Dallas sky. The problem has hit home.
We Texans are so smart that we leave our huge
cleaner resources of sun, wind and natural gas grossly underutilized
while we buy $1 billion a year of Montana coal and bring it down
by train to burn in Texas coal plants like "Big Brown"
so as to turn our blue skies to brown.
In the words of the cartoon character, Pogo,
"We have met the enemy and he is us.’’ Us 20 million
Texans; us 6 billion people on the planet.
So I thought, "If we each help cause
the problem, perhaps we each could help solve it.’’
As I pondered that request for venture capital, I wondered whether
there really was a new approach to solving environmental problems
beyond legislation, regulation and litigation. Could Adam Smith
and Rachel Carson help each other out? In 1776 Adam Smith said,
"Free markets work." And after 72 years of experiments
in the 1900’s dating from the Bolshevik Revolution to the
Fall of the Berlin Wall over whether state control of markets
worked better, the world now knows that Adam was right. In 1960
Rachel Carson said that our industrial revolution was spoiling
our earthly home and creating serious doubt whether our grandchildren
could survive with any decent quality of life.
I am a believer in the free market. I believe
in its power to do good. I have been particularly impressed by
the good that occurs when we introduce competition into a previously
regulated monopoly or oligopoly. Besides dropping real prices
20 - 80% on telephones, airline travel, trucking and natural gas
in our country, market competition has also spurred dramatic innovation.
Take the telecommunications industry. Today, because of replacing
monopolies with competition, we see cell phones, caller ID, 5
cents long distance, the World Wide Web and a big boost to technology
based on economic growth.
What are the innovations competition is beginning
to bring to the last remaining USA monopoly? People are coming
to understand that "smaller is better," and a whole
movement toward cleaner distributed generation is accelerating.
Fuel cells, solar cells, wind power and cogeneration are examples.
Tidal power is not here yet, but it will come. Let’s take
a look at New England where Green Mountain is headquartered. Somewhere
between 7 and 15 megawatts of new natural gas capacity is either
being built or on the drawing board. This is nothing short of
an effort to replace the existing fleet of generation in the region
with cleaner and cheaper gas, of which North America has enormous
resources, the engineers who can produce it, and the pipelines
to get it to market. Competition is spurring innovation that is
leading to a major technology turnover. The first steps of competition
have shown the existing fleet of generation to be obsolete. Innovation,
held up for years by monopoly and its regulation, is ready to
explode. Competition will result in both lower costs and cleaner
air.
What can competition in the electric industry
do for the environment? I believe a lot. In 1989 the United Kingdom
began deregulating. From 1989 to 1995 Co2 emissions from power
plants dropped 39 %; Nox emissions dropped 51%. Competition leads
to choice, efficiency and innovation and to a non-polluting society.
The evidence pops up in Omaha; the First National Bank of Omaha
switched to fuel cells to power its credit card operation. That
bank needed uninterruptible power to run its business, and it
uses a non-polluting source to do it. The New York City Police
Department, rather than rip up Central Park to update its precinct’s
technology, opted for fuel cells. Something is beginning to happen.
Ms. Carson, meet Mr. Smith.
Until now the $217 billion USA electric utility
industry has been a regulated monopoly, controlled by politically
selected state government. This old system brought electric power
to homes and business throughout the 20th century but
at a high cost. THE GENERATION OF ELECTRICITY REPRESENTS THE SINGLE
LARGEST SOURCE OF INDUSTRIAL AIR POLLUTION. It is an industry
dominated by coal burning plants, which have contributed hugely
to climate change, acid rain, smog and an increase in respiratory
illness. Air pollution represents one of the great threats to
life on this planet. We Americans are less than 5% of the world’s
people and we emit nearly 25% of the earth’s air pollutants.
2 billion of our planet's 6 billion people still don’t have
electricity. Will ours and theirs be clean or dirty tomorrow?
Government regulation, while doing much, has
not solved the problem. There is an additional way to fight air
pollution.
GreenMountain.Com illustrates that way. GREEN
MOUNTAIN IS A COMPANY WHOSE MISSION IS TO CHANGE THE WAY ELECTRICITY
IS MADE. By educating and empowering consumers; by using the marketplace;
we can help solve this air pollution problem and also make a profit.
Call it the marriage of Adam Smith and Rachel Carson.
Our goal is to make Green Mountain a name
that you can trust for environmentally friendly services and products
all over the world.
Green Mountain is the leading brand and retailer
of "green’’ electricity to residential customers
who have chosen to switch in this first year of USA deregulation.
We presently operate in California and Pennsylvania — the
first two states that have effectively opened their markets to
competition. (Other states have pretended to do so.) We have the
highest combined market share in these two states even though
most of our products sell at a premium. We are asking Americans
to value clean air, and they are beginning to do so.
Our green electricity blends are produced
from renewable and other environmentally preferable generation
sources, such as wind, solar, biomass, water and natural gas.
For example, we offer products like Wind for the Future 2.0. In
California 25% comes from newly built wind turbine generators
and 75% comes from other renewable resources, including small
scale hydroelectric, biomass and geothermal facilities. In Pennsylvania
we offer Enviro Blend. The power generated to create this product
is derived 3% from new renewable landfill gas, 47% from other
renewable resources, and 50% from natural gas and/or large- scale
hydroelectric facilities. We are one of the first companies to
use the Internet to sign up electricity customers. We believe
we are poised to create a large and sustainable business, a great
consumer brand— AND HELP CLEAN UP THE AIR IN THE PROCESS.
Green Mountain illustrates that environmental
values and the market economy can indeed be aligned. In fact,
if our society is ever going to successfully address environmental
health hazards, they must be aligned. Our vision is that informed
consumers can use the power of their everyday purchases as a force
for positive environmental change.
Three megatrends support this vision:
- Environmental Awareness. According to a
recent Environmental Research Associates survey, 87% of American
adults now consider themselves environmentalists. The annual
Green Gauge of the Roper-Starch poll tells us that 57 % of American
adults say they know a lot about environmental issues. That’s
up five percentage points from 1997. When it comes to buying
habits, 52% say they have actually purchased a product based
on environmental advertising and labeling; this is also up 5
percentage points. These are mainstream consumers and voters,
not just environmental activists.
- Deregulation of electricity markets. For
the first time, consumers are being able to choose their own
provider of electricity based on price, product differentiation
and value added services. California was first. Then came Pennsylvania,
followed by New Jersey in 1999. In 2000 Massachusetts, Connecticut
and Rhode Island are to follow. In 2001 eight additional states
are scheduled to move to competition, reaching 45% of the country.
By 2003 we could be operating in 29 states representing 85%
of all U.S. households. Texas and Ohio passed their laws this
year. Free markets to replace the electric monopolies are beyond
the point of no return.
- The Internet — The World Wide Web
is enabling multi-millions to share information and conduct
business as never before. The Internet has emerged as the fundamental
driver of change in the global economy. The META Group predicts
that, "Utilities and other energy companies that do not
embrace the Web and use it as a weapon in the energy market
will lose on both customer and transaction cost fronts.’’
We agree.
Put that all together and you have a company
that uses the Internet and the power of the market to offer cleaner
electricity choices to customers.
Some say there is no place for the market
in such an important mission as cleaning the air. I strongly disagree.
It only takes empowerment and education. And the World Wide Web
is the most powerful self-educational tool since Gutenberg created
the printing press.
To be successful in Pennsylvania and California,
we had to engage in an enormous consumer education campaign. While
most Americans consider themselves environmentalists, the research
also shows that those same Americans think that, when they flip
a light switch, the electricity they are getting is "clean."
Well, the electrons may be, but what went into making them probably
is not. Indeed, the same Roper Starch environmental survey I referred
to earlier tells us that when asked to rank 20 different industries
according to their adherence to environmental principles, the
American people ranked the electric utility industry the fourth
cleanest. In the Olympics, 4th place is just one position
removed from receiving a medal! The American people ranked the
industry even better than telecommunications and electronics.
How can this be? The Regulatory Assistance Project has found out
that only 20% of us think that coal is the main source of electric
generation. Clearly, we have work to do to educate Americans about
the true environmental harm from the way power is now made.
But we at Green Mountain have already started
that educational work in California and Pennsylvania. And that
work paid off once they were no longer electricity slaves of the
local power monopoly; once we told people about the problem, they
began to switch their electric suppliers. We have — in less
than two years — more than 100,000 customers, and that number
is growing. Our market share is over 20% of the combined market
of switchers. Our awareness levels are 55% in Pennsylvania and
24% in California. What we have done is to brand a kilowatt hour
with our name meaning cleaner air. History shows that distinctive
branding allows one to establish market leadership around traditional
commodity products. Branding counts, and Green Mountain is the
most trusted and best known environmental brand of energy. Today
- California and Pennsylvania. Tomorrow - all over the world.
This is beginning to have real consequences
for the environment. As a result of customer demand, Green Mountain
has had built the largest solar energy facility in Pennsylvania,
and we are about to break ground on the largest wind farm in the
eastern U.S. We have built windmills in California and just announced
an agreement to build a new solar facility there. American and
European companies who want to build renewable production are
negotiating with Green Mountain to be their marketing partner.
By the middle of the next decade, our company
will have reduced pollution equivalent to removing millions of
cars from our highways.
As each state and nation deregulates its electric
industry, we plan to enter with our information campaign and help
create a vibrant competitive market for electricity that gives
our customers and shareholders value and changes the way that
power is made. Ultimately the majority of our customers will find
us and be served over the World Wide Web.
At three years old we are in our entrepreneurial
infancy. Our work is just beginning. When people are empowered
and educated to factor the environment into their everyday choices,
we will reverse climate change and air pollution. It can be done.
Not only can Adam Smith and Rachel Carson
co-exist, they need each other. Rachel can help Adam turn a profit.
In turn, Adam can use that profit and the World Wide Web to educate
people who care about and want to solve Rachel’s problem.
I call that GreenMountain.Com, and the result is cleaner air for
the children of the earth. Our motto is, "Choose wisely.
It’s a small planet."
Sam Wyly, Chairman
GreenMountain.com
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Postscripts:
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In November 1999 Green Mountain was honored by The
Financial Times of London as the world’s energy
industry "Best Marketeer."
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In January 2000 Wall Street recognized the explosive
opportunities coming for clean energy in a deregulated
world by bidding Plug Power (a fuel cell for homes company
underwritten by Goldman Sachs, Merrill Lynch, Hambrick
& Quist and FAC Securities) from an IPO price of
$15 to $80 — a $3.3 billion market capitalization.
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