The Quest for Wind Power

When the state initially deregulated the electricity market, I had little use for it. It wasn't that I loved our monopoly provider, BGE, it was more that I really didn't believe I would benefit from deregulation. A year or two ago, I finally found a benefit: Pepco Energy Services offered to sell me 100% wind power at at premium over the price of regular power. (For what it's worth, BGE's supply is, I believe, coal and nuclear). A few days ago, we received a letter here at the house informing us that Pepco no longer will be offering their residential wind power product; unless we do something, we'll automatically revert to BGE's standard offering. Some work online convinced me that there weren't any really good alternatives around... so BGE it will likely be. As a result of the coming return to coal and nuclear power, I decided it was time to evaluate carbon offsets and renewable energy credits, to determine if these would be a viable alternative. Ultimately I spent several hours trying to sort the wheat from the chaff. The following is a summary of my research. For a person wanting to buy wind power, for whom wind power is not available through the utility, Renewable Energy Certificates (RECs) are the traditional option. When an energy supplier produces a megawatt of energy through renewable means, it can issue an REC. In theory, the producer sells this REC as a way to cover the additional cost of producing the green power. Sometimes the producer sells the power "as green power," in which case the REC goes with it. More often, the power is simply pumped into "the grid" (with the producer receiving the same amount for it as its non-renewable counterparts), and the REC is sold separately. When someone like me buys the REC, we can claim to be using renewable energy.

The EPA has a good paper explaining the difference between "actually" buying green power and buying RECs, which are also known as "green tags." RECs are a mixed bag. The retail market for them runs between $0.01 and $0.03 per kilowatt hour. ($10 - $30 per megawatt hour). The wholesale market is said to be in the range of $0.002 - $0.010 per kWh. There are several concerns with RECs. Auden Schendler describes many of these concerns in his post, Why Buying Cheap Energy Certificates Worsens Climate Change. Essentially, his argument is that at these prices, they offer little more than "icing on the cake" to producers. They don't encourage anyone to build a renewable source, because the real cost is a huge up front some ... and an extra few bucks per megawatt now and then isn't going to make a big difference. This is a legitimate argument. Tom Stoddard, of Native Energy, a reputable provider of RECs rebuts Schendler's assertion in his post, The Economics of Renewable Energy. Stoddard argues two primary points: First, that buying RECs helps to create a market -- if no one buys them, there will be no demand, therefore the price will drop further -- if many people buy them, price will ultimately go up, because there is not an infinite supply. Second, he discusses a model known as "forward RECs," something Schendler makes only passing reference to. Forward RECs essentially create an environment where a developer can build what would otherwise be an unprofitable project, because the RECs (bought in advance) turn the project profitable. Ultimately, my belief is this: Buying traditional RECs is pretty cheap.

At our house, we use way too much power: about 8 megawatt hours per year. When purchased from Native Energy (they call them vintage RECs, and brand them as CoolWatts), that means $80 per year. Yes, that's right. For $80 per year, we can claim to run on wind power. Given all of the controversy around RECs, I don't feel good about just buying regular RECs. I really do believe they're not expensive enough, and aren't really doing anything to ensure construction of new renewable power facilities. This is what lead me to read up on Carbon Offsets. Of course, carbon offsets may be even more controversial than RECs. The New York Times provides a good summary of the questions, as does Business Week. Ultimately, it comes down to identifying a supplier of "high quality" offsets. Clean Air-Cool Planet has published the Consumers' Guide to Carbon Offsets. In my view, it's required reading for anyone considering the purchase of offsets. I also recommend Carbon Concierge's Carbon Offset Provider Evaluation Matrix.

Ultimately, all of my research lead me to the conclusion that for carbon offsets, Native Energy is the premier provider. They provide incredibly detailed information about the programs they fund, and I'm not sure I've seen anything negative about them. For RECs, there are a number of providers. As long as they're Green-e certified RECs, there's not a significant issue here, as long as you understand what you're buying. Personally, I think we'll be buying both RECs and carbon offsets from Native Energy. This is absolutely duplicative; we could just buy the offsets. On the other hand, I think it's good to support the "traditional" REC market ... and ultimately, if I can make our personal power cost high enough, perhaps it will provide a more significant incentive for us to reduce consumption.