The Unlikely Partners Growing the Market for Green Energy

And, in fact, the activists’ tactics worked: TXU built fewer coal power plants, increased its investment into energy efficiency, and doubled its purchase of wind power.

While energy companies like TXU might consider activists and environmental NGOs a thorn in their side, Kellogg management and organizations professor Brayden King argues that activists play a key role in promoting innovation and growth in green power.

In research conducted with Ion Bogdan Vasi of the University of Iowa, King found that besieged energy companies and the activists that target them can form unlikely partnerships that are key to growing the market for green-energy technologies.

Energy companies that activists branded as the dirtiest polluters were the most likely to respond to this stigmatization by adopting green-energy technologies, the researchers found. The companies then received the benefit of free promotion of their green programs by local environmental NGOs.

“We knew that activists were targeting firms for being bad actors, and now we know that energy companies are more likely to embrace sustainable products if they have been labeled as bad actors,” King says. “That shows that environmental activists, in particular, are necessary for the growth of sustainable markets.”

Growing the market for green-energy technologies could pave the way for both bigger returns and a cleaner, greener Earth.

“I have spent my career studying activists and how they influence companies, and I know that energy markets are where we can make a big difference in reducing carbon emissions,” King says.

Dealing with stigma—the right way

Vasi and King’s research investigates technology stigma—the idea that some technologies are more likely to be labeled dirty or dangerous—and the strategies that companies use to dilute that stigma.

Technology stigma occurs across industries: think pesticides in agriculture or mountaintop removal for mining. After the Three Mile Island accident of 1979, in which a nuclear reactor in Pennsylvania released radioactive gases into the environment, nuclear technology was discredited by some as more dangerous than useful.

Coal-burning power plants have faced stigma for decades. After all, they emit the most air pollutants and greenhouse gases of all fossil fuels. “Public opinion around coal began to shift in the early 2000s, and activists promoted that stigma,” King says. “It was the easiest energy production to target if you were an activist and you wanted to pressure companies to change.”

Companies, in turn, employ various strategies for reducing stigma. They might diversify into the food industry, as some tobacco firms did, or engage in reputation management.

In the case of companies that employ coal-burning power plants, adding greener alternatives into their portfolio could bring them good publicity and help counter society’s negative impression of them. Though there are high costs involved in making these changes, there can also be financial benefits.

“The idea of windmills creating energy based on the Earth’s natural forces gives customers a good feeling,” King says. “They might be willing to pay a premium for energy knowing it came from a good energy source.”

Which is exactly the kind of information that environmental NGOs are more than happy to promote.

In the late 1990s, for instance, Xcel Energy formed partnerships with a number of environmental organizations that helped promote Xcel’s Windsource program for renewable energy. This meant that even though Xcel spent less money than other utilities did on marketing, its Windsource program was number one in total customers for green-energy programs in the country for several years.

Measuring dirty power plants and NGOs

King and Vasi decided to look systematically at these kinds of partnerships to try to better understand them.

King knew from previous research that environmental activism can challenge the status quo and shape how firms perceive and respond to environmental risk. So he wondered if energy companies that have been labeled as bad actors would be more likely to embrace sustainable products and partner with NGOs to promote those products.

To find out, the researchers examined data on all U.S. electric utilities from 2002 to 2010, which included information on whether utilities adopted a green-power program and how many customers purchased green power. The research team then tracked which coal-burning power plants were stigmatized and blacklisted by the environmental organization EIP, based on how many “dirty kilowatts” the plants generated.

Next, they juxtaposed that data with the number of environmental NGOs located in the same county as the electricity provider. They controlled for the electric company’s size, its wind-power potential, the state’s regulatory support for renewable energy, and political orientation of the region, since support for renewable energy projects is associated with ideology.

A path to grow the green-energy market

The researchers found that stigma for “dirty” energy—and pressure from environmental NGOs—helped grow the market for green energy.

Companies that used coal power plants that were marked as dirty were 2.15 times more likely to adopt a green-power program than other utilities, they found.

“This is a pretty strong effect,” King says. “Sometimes we think of a market as only good actors and bad actors, but this shows that utilities that are labeled ‘dirty’ have the strongest incentive to embrace sustainable technology.”

The density of environmental NGOs in a county also made a difference: An increase of one NGO per 10,000 residents in a region meant that an energy provider was 1.4 times more likely to adopt a green-power program and that customers were 0.26 times more likely to opt into one of the programs. NGO density had an even bigger effect on dirty coal-power plants: these utilities were 40 times more likely to adopt a green-power program.

“That shows that stigma alone would not help a utility shift to green energy,” King says. “Utilities need partners in the NGOs to help advertise it to the right customers. NGOs are willing to do that because they want to push for actual changes that are good for the climate.”

After all, King continues, “there has to be demand for this market to grow.”

Indeed, utilities were more likely to adopt green-power programs in high-income, pro-Democratic counties (where consumer support for renewable energy tends to be highest), while utilities were less likely to do so in regions with oil- and gas-extraction industries.

“Customers must be willing to pay,” says King.

Viable marketing opportunities

Not only do energy companies receive free marketing from NGOs, they often receive good press when they offer greener alternatives. When TXU Energy began offering solar power in 2010, for instance, elected officials and environmental NGOs praised the company.

The research shows that activists aren’t always the bad guys for companies—they can also be allies who help companies achieve their strategic goals. “When companies choose to collaborate with activists, it creates a viable path for marketing opportunities that you wouldn’t have had otherwise,” King says.

Still, the research focused on an emerging market of green energy that took place years ago in the 2000s. Since then, backlash against renewable energy sources has stunted the growth of these markets—a phenomenon that King is studying now.

“Anytime we go through transformational political change, it creates backlash,” he says. “Sometimes it is strong for a few years then dissipates, but it depends on political choices. The Inflation Reduction Act accelerated growth in this market the last couple years, but we won’t know until after the election how much more dramatic the backlash against green energy might become.”