Green Power: Product Differentiation, Or Subsidy Boondoggle?

This Philadelphia Inquirer article points out some really important things about green power: people are willing to pay more for it, yet it also receives government subsidies. I think offering customers the choice of green power is a valuable improvement on the regulated service offerings that utilities typically present to their (captive) customers. It illustrates beautifully the value to both consumer and producer of product differentiation — consumers who are willing to pay more to know that their power is clean can do so, and innovative producers who provide the clean power can profit from satisfying their wants. But subsidies on top of that create distortions of incentives that reduce efficiency. This article does a nice job of explaining these issues.