RECs, TRCs and Green Tags -- Paying for Renewable Energy

Renewable Energy Has Premium Value--How to Capture It?

Renewable Energy Certificates (RECs), also known as Green Tags, Renewable Energy Credits, or Tradable Renewable Certificates (TRCs), are environmental commodities in the United States which represent proof that 1 megawatt-hour (MWh) of electricity was generated from an approved renewable resource.

Renewable energy is produced by wind farms, solar farms, biomass energy and waste-to-energy facilities, low-impact hydropower, geothermal energy, and the like. These sources are not usually located close to energy consumers who want access to renewable electricity.

So when the electricity they produce is fed into the grid a REC is created for every MWh delivered. A certifying agency gives each REC, and therefore each MWh, a unique identification number. These certificates can be bought and sold. So an energy consumer can purchase them to cover some or all of its electricity consumption, effectively paying a premium (over its existing electric bill) for the generation of that renewable power.

Pay For the Renewableness Separately From the Electricity

In effect, purchases of RECs transfer money from electricity customers who want to prove they are using renewable power to the producers of such power, in a quantifiable and verifiable way. These payments create additional income for the renewable electricity generator, often making the difference between profit and loss, or increasing profit or reducing loss. The energy user is paying a premium for purchased power, but not through its utility. It pays the premium directly to the generator of the electricity.

The cost of RECs is set in the open market, and depends on the supply of and demand for electricity produced from renewable resources. The recent prices of various RECs are shown at this Department of Energy site.

This is a form of component pricing, common for agricultural products, applied to electricity, which wouldn't seem to have many components.

Level the Playing Field

The cost of RECs can be seen as a voluntary "tax" paid by some energy consumers to compensate for the tax breaks, subsidies, and externalities associated with nuclear and fossil-fuel electricity generation, thus making production of renewable energy economically feasible.

Can RECs Make You Carbon Neutral?

Whether companies which purchase certificates to cover all of their electricity use can claim to be "carbon neutral", at least with respect to electric power, is open to dispute. Most renewable energy projects which issue RECs would not qualify under the stricter Kyoto Agreement rules on "additionality". But there is no doubt that these transfer payments stimulate investment in renewable energy and its increased production.

For more information check this overview at 3 Degrees, and this Wikipedia article.


[crossposted to the HaraBara blog]

Waste-to-Energy a Winner for India

Rice Husks to Provide Reliable Village Power

Husk Power Systems, which delivers clean technology to Indian villages, won the Social Innovation Competition at the University of Texas and its $50,000 prize. India Abroad reported that the entrepreneurial team of Manoj Sinha and Charles 'Chip' Ransler, from the University of Virginia's Darden School of Business, were judged to have the most compelling new idea to change the world.

The prize is awarded by The University of Texas's RGK Center for Philanthropy and Community Service of the Lyndon B. Johnson School of Public Affairs.

Husk Power Systems has created proprietary technology that cost-effectively converts rice husks into electricity. It has developed and installed 35-100kW "mini power plants" in villages of 200-500 households within the Indian "Rice Belt" and offers electricity as a pay-for-use service. HPS has successfully implemented its service in two villages in Bihar, India and will expand its footprint by 20 villages in 2008, 100 in 2009, and 2500 by 2013. The company plans to offset close to 200 tons of carbon emissions per village, per year in India. The sale of these carbon credits makes the project financially feasible.

Costs of Future Carbon Reductions Estimated by IEA

We Can Cut CO₂ Emissions In Half, But It Won't Be Cheap

A new report from the International Energy Agency provides some estimates of the cost of reducing global CO₂ emissions 50% by 2050. Their scenarios depend on implementing new technologies such as carbon capture and storage, and involve cost of tens of trillions of dollars. Information about the report is here. The executive summary is here(pdf).

Maintaining Our Current Course Might Cost Just As Much

The IEA's "business as usual" scenario sees oil demand increasing 70%, requiring increased production equal to five times Saudi Arabia's current output. Obviously this would require huge investment, plus imposing much higher oil prices on future consumers. And under this scenario CO₂ emissions would rise 130%. Who knows how much would have to be spent on climate change mitigation projects?

So we are going to invest many trillions either way. It is a question of what sort of planet we will have in the end.

(Environmental Leader article)

People Like Green Cars Because They Make a Statement

The smart ForTwo and the Prius

Both the Daimler AG smart ForTwo and the Toyota Prius are selling like hotcakes. The ForTwo has been on sale in the U.S. for about five months, has sold about 9,000 units, and has a one-year waiting list. People really like a car that says "I'm green" loud and clear.

The ForTwo (picture from U.S. EPA) gets around 38 miles per gallon, and only carries two people. The Prius carries four, gets around 46 mpg, and costs about $10,000 more. The ForTwo gets the best fuel efficiency of any non-hybrid sold in the U.S. But the Toyota Corolla gets almost as good mileage (about 38 mpg actual experience), carries four, and only costs $4,000 or $5,000 more than the ForTwo. And you can actually get one. But it just looks like any other car.

A People's Car?

People who want to be different will love the ForTwo. Reviews are generally good, though some reviewers have reservations (Consumer Reports blog (not review); New York Times; Wired.) But all agree the car is cute. Maybe it will catch on like the Volkswagen Beetle did. Green, cute, a statement. (And the ForTwo, while about the same width as the VW Bug, is more than four feet shorter. It's more than three feet shorter than the BMW MINI.) This is a small car like the Beetle was a small car, only more so.

Daimler is working on a hybrid electric version of the ForTwo. And in London they have been testing all-electric ones.


Smart USA site

What Is Your Ecological Footprint?

We Are Using More Earths Than There Are?

"Humanity's Ecological Footprint is over 23% larger than what the planet can regenerate. In other words, it now takes more than one year and two months for the Earth to regenerate what we use in a single year. We maintain this overshoot by liquidating the planet's ecological resources."

I recently got to hear Mathis Wackernagel, Executive Director of Global Footprint Network, speak at a swissnex event. Global Footprint Network is in the business of encouraging ecological sanity by getting people to think about their "Ecological Footprint". The Ecological Footprint is a resource management tool that measures how much land and water area a human population requires to produce the resources it consumes and to absorb its wastes under prevailing technology.

Mathis' message, entertainingly delivered, was:

Keeping track of the compound effect of humanity's consumption of natural resources and generation of waste is one key to achieving sustainability.

As long as our governments and business leaders do not know how much of nature's capacity we use or how resource use compares to existing stocks, overshoot may go undetected - increasing the ecological deficit and reducing nature's capacity to meet society's needs.

Check Your Footprint

You can use the tools on this page to calculate your own Ecological Footprint. How much of the Earth's resources, land, air and water do you require to support your lifestyle? What if everybody lived that way?

South Australian Vintners to Make Green Wine

Australian Food News reports that South Australia's wine makers and grape growers are the first industry group in the Australia to sign an agreement to accurately track and reduce their greenhouse gas emissions. South Australia state legislation targets 60% reduction of greenhouse gas emissions from 1990 levels by 2050. The wine makers and grape growers associations have committed to support that goal.

What Consumers (and Tesco) Want

This action reflects concern that consumers and distributors across the globe are beginning to favor wine makers that are actively reducing their carbon footprint. "The UK is Australia's largest wine export destination. Of the nearly A$1 billion of Australian wines sold in the UK each year, South Australian wines make up a massive 72% of that market," said South Australia Premier Mike Rann. "South Australia exports nearly 400 million liters -- or A$1.6 billion of wine -- annually. Put simply, the wine industry is recognizing today that it cannot afford to ignore the planet or their markets." He went on to say, according to the article: "Sir Terry Leahy, the Chief Executive of Tesco, was recently reported saying that he wanted to devise a system of labeling that would enable shoppers to compare a product's carbon footprint just as easily as they can currently compare its price or nutritional value. I am told that Marks & Spencer has similar plans, as does the US shopping chain Wal-Mart."

Will They Give Up the Bottle?

A recent analysis (pdf here) calculated that transporting a bottle of wine from Australia or France to Chicago caused the emission of about 2 kg of CO₂. A large fraction of this is due to the weight of the glass bottle.

Transportation is responsible for most of wine's emissions footprint. And I didn't see any analysis in this report about the energy needed to produce that bottle (glass is energy-intensive). Will vintners down under switch to more energy-efficient boxes?


(A post about wine in Tetra Pak containers, and CO₂ savings.)

F1 to Allow "Hybrids" But Not For Efficiency

Recent news articles (like this one) have touted the announcement that some Formula One teams are working on hybrid gasoline/electric cars for the 2009 season. Indeed this is true. The rulebook has been modified to allow electric motors to be added to F1 cars. Some have hailed this as "fuel-saving" technology for these extreme vehicles.

Everybody Wants to Be Green

The key is that hybrid technology will not be used to increase fuel efficiency but to boost power temporarily, for example for passing. The additional weight of motors and batteries can be absorbed because F1 cars typically weigh less than the rule minimum, and carry ballast meet the required weight. This change may make F1 more interesting. In effect it gives cars a "turbo" or "nitro" button for bursts of speed, but not higher horsepower for the whole race. This will introduce a new element of race tactics. But it is unlikely to create technological breakthroughs that will benefit the rest of us. The real challenge for hybrid vehicles is to reduce battery weight and cost, and increase battery lifetimes. This is not likely to be an issue in a sport where cars get three miles to the gallon and go through dozens of tires in every race.

Will NASCAR Be Next?

We can only hope. Maybe then hybrids would gain broader appeal and get Detroit's attention.