Buyers don’t purchase renewable energy, just Wall Street certificates
The Philadelphia International Airport is trying hard to be a good, and green, neighbor. Terminals are smoke-free. Employees drive hybrids and lights are on timers, cutting energy costs and 1,582.4 tons of pollution and carbon emissions – the stuff Al Gore and others link to global warming.
But nothing the airport has done compares with a program announced last March. For $216,514 a year, the airport is purchasing enough wind energy to offset “more than 14 million pounds of carbon dioxide – the equivalent of planting more than 970,000 trees, or not driving more than 12 million miles.”
Sounds great, but is it accurate?
No, says Kevin Doran, a senior research fellow at the Center for Energy and Environmental Security at the University of Colorado.
“It’s green marketing. It serves its purpose, which is to say the company is trying to be green,” Doran said. “But it may not make any difference whatsoever in terms of reducing conventional fossil fuels, reducing greenhouse gas emissions, diversifying the fuel portfolio.”
The reason is most of these so-called voluntary wind power purchase programs deal in wind credits, or marketable certificates traded on Wall Street.
What the airport did was invest in wind energy, not increase its wind consumption. In effect, the airport helped finance a wind farm in Waymart, Pa.
About 750 utilities nationwide offer such programs; Delmarva Power is considering one. Washington Gas Energy Services, an electric supply competitor in Delaware, already offers one. The credits’ value is ensured by new requirements in many states that a certain percentage of a utility’s portfolio be from renewable sources. In Delaware, 20 percent of Delmarva Power’s power will have to be from renewable sources by 2019. Members of Congress are considering a similar nationwide mandate.
To meet these requirements, utilities can buy the renewable energy itself or buy the credits. Many will do both.
The companies that offer voluntary wind power programs call it a practical way for people to go further. They can support the growth of the renewable power industry, no matter how far away they live from a wind farm, the companies say.
But the benefits can be confusing.
Subsidies to green projects
Calvin Davenger Jr., the airport’s deputy director of aviation planning and environmental stewardship, says 8 percent of the airport’s electricity now comes from wind power. The amount is closer to 1 percent.
The 8 percent refers to the credits the airport bought. Davenger said he didn’t know that energy supplier Peco was using credits to make its wind power sales pitch, but said he didn’t feel misled. “If this is how things are appropriated back, to credits as opposed to actually buying electricity, then yeah, I’m OK with it,” Davenger said. “I still see this as a beneficial environmental initiative.”
Peco’s communications manager, Cathy Engel, insisted in several interviews in December that Peco Wind was selling additional wind electricity to its customers. “You’re literally adding more wind-generated electricity to our power pool,” Engel said.
But Community Energy, the company that supplies the Peco Wind program, said the program was credit-based. Engel later confirmed that Community Energy was right, and she hadn’t understood how credits work. Nevertheless, she said it was OK to make the claim. “The more customers that sign up for Peco Wind, the more wind generation that can be brought on line.”
What credits often do is subsidize existing renewable energy projects – solar, wind, methane gas. But credits don’t cut carbon emissions.
Voluntary wind programs can make people feel better, Doran said, but may lull them into thinking they don’t need to do more. “There’s a false perception that we can do this without feeling the growing pains,” he said. “If we want to make a difference with global warming, we have to look at reducing massive amounts of international greenhouse gas emissions.”
Brian Yerger, a Wilmington-based alternative-energy research analyst at Jesup & Lamont Securities, said voluntary programs aren’t as helpful as mandatory ones because the projects tend to already be built, or are going to get built regardless of whether people choose to pay in.
“At this stage of the game, it is more of a feel-good type of situation than actual reduction of pollution,” Yerger said.
Coal is so inexpensive that there won’t be a major move toward renewable energy until the federal government mandates caps or taxes on pollution, Yerger said.
To meet Delaware’s 20 percent renewable energy mandate, Delmarva Power would like to use on-shore wind electricity and credits. The company is exploring a voluntary credit-based system to allow customers to go further, said Delmarva Power spokesman Bill Yingling.
Delmarva Power’s plan has put it at odds with a proposed $1.6 billion offshore wind farm that could further reduce regional pollution and increase the amount of wind energy available to its customers. Bluewater Wind’s 150-turbine project off Rehoboth Beach has been sidetracked as lawmakers study the issue.
Under Delmarva Power’s plan, the utility would promote green energy globally, but do little to curb emissions in Delaware, says Jim Lanard, a spokesman for Bluewater Wind.
“The question is, does Delmarva want to be a leader in the country to show what can be done by a utility to help fight global warming and climate change, or does it want to just follow with these small incremental steps?” Lanard said.
Disclosure and details
The word credit doesn’t appear in the airport’s promotion of its wind program or on Peco’s Web site. That may have something to do with the government’s guidelines, which are fairly permissive.
The National Association of Attorneys General, in a 1999 report, said green energy claims should come with a “clear and prominent disclosure” of the use of credits.
But the Federal Trade Commission staff disagreed, saying in a 2000 report that “a disclosure might actually serve to increase consumer confusion, and could needlessly undermine consumers’ confidence in the new electricity market.”
As wind energy becomes more popular and the credit market expands, the FTC is updating its “Green Guides.” The last time they were updated was 1998, before terms such as “renewable energy credit” and “carbon neutral” became part of the lexicon. As part of its review, the agency will reconsider the topic of credit program disclosures, said Hampton Newsome, attorney for the FTC’s Bureau of Consumer Protection and Enforcement Division.
Engel, of Peco, said her company tries to take “a subject that’s confusing to the average person and make it more understandable.”
For each credit that is available for purchase, there’s a wind turbine spinning and delivering electricity into the regional power grid, she said. “The only way to purchase wind energy and ensure that your house is powered by electricity generated by wind would be to hook your house up to a wind turbine.”
That, in essence, is what Bluewater Wind is trying to do in Delaware. Actual wind electricity tends to flow to consumers closest to the turbines. Because wind farms require swaths of open space, East Coast wind energy developers look mostly to the ocean.
The onshore Waymart, Pa., wind farm is owned by the Florida company FPL Energy, which sells its energy to Exelon, Peco’s parent company. For each megawatt hour of energy created by the wind farm, FPL also earns a renewable energy credit.
Although Stephen Field is in the Peco service area, he decided to go with another company when making his Holiday Inn Express “100 percent wind powered,” as the sign in front of his Exton, Pa., hotel boasts.
After checking into the Peco program, he signed on with Native Energy of Vermont, paying $6,500 a year to offset the approximately 600 tons of carbon dioxide his hotel emits annually. Native Energy buys the renewable energy credits from wind farms that have not yet been built, ones that might not get built without startup capital, Field said.
His money pays for credits to help build wind turbines on American Indian reservations in South Dakota and Alaska, a small, farmer-owned wind project in Minnesota and a methane reduction facility in central Pennsylvania.
“If I buy from Peco, those are [credits] for energy that’s already been bought and consumed,” said Field, who also has a contract with Native Energy for a hotel in Glen Mills, Pa.
Doran, of the University of Colorado, said when a consumer is considering buying into a voluntary program, the first question should be whether the wind farm would be there if not for the sale of the credits. “And in a lot of instances, you’ll find the answer is yes.”
But there’s a value to supporting existing wind farms, said Community Energy spokesman Paul Copleman. Developers count on the revenue that comes from the sale of the credits even after the project has been built. “As more and more customers do sign up, it truly drives demand for more projects and additional supply.”
By Aaron Nathans
18 February 2008
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