Introduction to Renewable Energy Credits & Carbon Offsets
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You will learn about: Our energy & climate challenges Renewable energy credits Carbon offsets Corporate action Renewable Choice services Renewable Choice Energy is a leading provider of climate change solutions including green power, carbon offsets, and renewable energy advisory services. Recognized as a trusted partner to numerous major brands, Renewable Choice was the recipient of the prestigious Green Power Supplier of the Year award in 2012 from the U.S. Environmental Protection Agency and has been featured in hundreds of media outlets. To learn more, visit www.renewablechoice.com.
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Introduction to Renewable Energy Credits & Carbon Offsets
- 1. Introduction to Renewable Energy Credits & Carbon Offsets
- 3. A Partner to Leading Brands
- 4. Contents: Our energy & climate challenges Renewable energy credits Carbon offsets Corporate action Renewable Choice services
- 5. Energy & Climate Challenges
- 6. U.S. Energy Infrastructure Renewables: 2.5% (Biomass: 1.31%; Wind: 0.83%; Solar: 0.01%; Geothermal: 0.35%) Oil: 1.6%; Other fossil fuel: 0.5% source: EPA eGRID2010 Version 1.1
- 7. The Problem Problems associated with the current U.S. energy generation infrastructure: Climate change Toxic gases and metals in the air Air pollution and smog Respiratory problems in children Mercury in water Mountaintop removal
- 8. Global Climate Change Source: (blue) Vostok ice core, (green) EPICA ice core, (red) Law Dome ice core, (cyan) Siple Dome ice core, (black) Mauna Loa Observatory, Hawaii
- 9. Addressing Climate Change: No Silver Bullet
- 10. Goal: Harness commercial and consumer demand to help drive the growth of renewable energy and clean technologies • 20% wind by 2030 • CO2 at 1980 levels “Geo-Greenism"—is not only what we need to save the planet from overheating; it is what we need to make America healthier, richer, more innovative, more productive, and more secure. Thomas Freidman, Hot, Flat & Crowded
- 12. What is a Renewable Energy Credit (REC)? • A REC is the accepted way to track and trade renewable energy in North America • A renewable energy source is credited with RECs as it produces electricity • A REC represents the environmental attributes associated with the generation of electricity from a renewable energy source • The owner of the REC receives the right to claim its environmental benefits
- 13. Renewable Energy Technologies WIND SMALL HYDRO BIOMASS SOLAR BIOGAS OR GEOTHERMAL
- 14. RECs and the Grid System
- 15. One Commodity – Two Markets Compliance Voluntary Renewable Energy Credits
- 16. Voluntary Market • Most organizations lack the ability to install onsite renewable energy: – Zoning restrictions – Lack of natural resources – Capital limitations • RECs allow businesses to purchase grid-sourced renewable energy
- 17. The Green-e® Energy Standard Board includes members from Environmental Defense, NREL, NRDC, and the Union of Concerned Scientists Guarantees that RECs: • Originate from 100% new renewable facilities • Are produced in the stated calendar year • Go beyond existing government mandates • Pass a process audit by an independent certified public accounting firm The Green-e logo helps consumers easily identify environmentally superior renewable energy options. For more information on Green-e certification requirements, call 1-888-63-GREEN or log on to www.green-e.org.
- 18. Financing a Project: The Four Legs of Wind Energy Depreciation Tax Incentives Energy Sales Renewable Energy Credits
- 19. Value of RECs to Wind Projects * Value as a percent of 20 year rate requirement Source: John Deere Renewables
- 20. Straight From The Developer "By converting Plant Mitchell to biomass, we hope to not only help grow the renewable resource base in Georgia but also to expand the market for renewable energy credits, which ultimately will foster additional renewable energy development.“ ~ Mike Garrett, President and CEO, Georgia Power “To any developer doing a wind farm in today’s market, renewable energy credits are critical to the revenue stream in taking a project over the top. If we do another one, it certainly will be a critical factor.” ~ Dave Osburn, Oklahoma Municipal Power Authority “In ten years, Wind will be bigger than oil in Texas.” ~ T. Boone Pickens, Pickens Plan “Selling of RECs makes the construction of more renewable energy generation plants possible and also makes existing renewable generation more commercially viable.” ~ Tim Swanson, Director of Origination for Florida Power & Light (FPL) “There isn’t a single renewable facility that goes online in this country where RECs aren’t considered in the core financing.” ~ Steve Maller, John Deere Wind Energy
- 21. Voluntary Purchases are Critical • Voluntary purchases of RECs represented OVER 50% of all wind sales in 2008 • Voluntary buyers are making as big or bigger of an impact as state-level requirements Source: Lawrence Berkeley National Laboratory and National Renewable Energy Laboratory
- 22. Slowdown in Construction in 2010 • 5,115 MW installed in 2010 • 51% less capacity installed than 2009 • • Constraints in capital and credit markets impacting development 2009 was a record-setting year with • 40,180 MW of total capacity 10,010 MW installed • Enough to power over 9 million homes Sources: AWEA U.S. Wind Industry Annual Market Report - Year Ending 2009; AWEA 4th Quarter 2010 Market Report
- 23. Renewables Remain < 2% of Generation Renewables: 2.5% (Biomass: 1.31%; Wind: 0.83%; Solar: 0.01%; Geothermal: 0.35%) Oil: 1.6%; Other fossil fuel: 0.5% source: EPA eGRID2010 Version 1.1
- 24. Carbon Offsets
- 25. What is a Carbon Offset? A carbon offset is also referred to as a verified emission reduction, or VER One VER represents one metric ton of carbon dioxide emissions avoided or removed from the atmosphere Purchasing VERs helps fund emissions reduction projects worldwide
- 26. Project Types
- 27. Cap and Trade: Its Origins Cap and Trade first addressed Acid Rain in the 1990’s • Achieved 122% of targeted The Acid Rain Experience Unprecedented environmental protection at unmatched cost efficiency reductions • Cost savings of $2 - $23.6 billion per year • Demonstrated success of market based mechanisms Source: Environmental Defense Fund
- 28. Cap and Trade continued… • Kyoto Protocol incorporated cap and trade based on U.S. Acid Rain success • Carbon offsets are the most efficient way for the market to ensure cost effective reductions • A ton of carbon is a ton of carbon
- 29. Carbon Offsets: The Strategic Rationale • Lowers cost of compliance • Encourages investment & innovation in sectors not required to reduce emissions • Provides time for regulated entities to change technologies • Allows long-term technology development and deployment
- 30. The Role of Carbon Offsets in Kyoto The Kyoto Protocol Expires in 2012… The world is now preparing for a post-Kyoto system Source: United Nations Framework Convention on Climate Change (UNFCCC)
- 31. One Commodity – Two Markets Compliance Voluntary Carbon Offsets
- 32. Importance of the Voluntary Carbon Market • Choice and broad participation • Innovation and experimentation • Social, environmental & economic benefits to project hosts • Economically efficient way to reduce GHG emissions • Help pave the way for more projects • Improve compliance programs
- 33. Voluntary Carbon Markets Doubled Last Year Source: New Carbon Finance, Ecosystem Marketplace
- 34. Leading Standards • Verified Carbon Standard (VCS) • American Carbon Registry Standard • Gold Standard • Green-e Climate • Climate Action Reserve Standards ensure that reduction projects are real, additional, verifiable and permanent, and that offsets are retired only once
- 35. Additionality Tests • Barriers • Common practices • Investment or financial • Regulatory • Performance • Technology
- 36. Comparison of RECs & Carbon Offsets How RECs Carbon Offsets What Geography Units Help fund generation of clean power Renewable energy U.S. MWh Fund reduction of carbon emissions Energy efficiency Renewable energy Methane capture Fuel switching Agriculture & Forestry practices Global MTCO2e
- 38. State of Corporate Activity • 75% actively measure GHG emissions • 60% of corporate boards have carbon on agenda • 50% have programs to reduce or offset emissions • 15% engage in voluntary emissions trading • 40% considering voluntary purchase • >1000 EPA Green Power Partners • Green Power Partners purchase >16 billion kWh of RECs annually Source: The Conference Board, 2006 & U.S. EPA Green Power Partnership, 2008
- 39. Corporate Motivations • Fulfill voluntary reduction targets • Create internal incentives for reductions • Gain carbon market experience • Support renewable energy development • Prepare for regulations • Enhance the brand • Differentiate a product
- 40. The Corporate GHG Accounting Standard • World Resources Institute – Greenhouse Gas (GHG) Protocol – The most widely used standard – Comprehensive accounting guidelines
- 41. What is a Greenhouse Gas Inventory? A greenhouse gas inventory is a comprehensive and documented accounting of all greenhouse gas emissions attributed to an organization’s activities
- 42. Offsetting Emissions: A Closer Look
- 43. Offsetting Protocols: RECs & Carbon Offsets SCOPE Use of Carbon Offsets Use of RECs
- 45. Greenhouse Gas Inventories Understand • Establish an emissions baseline to understand and report your greenhouse gas emissions Track • Conduct a yearly inventory to track your progress toward a reduction goal Reduce • Identify carbon-intensive activities and target with process, infrastructure changes or offsets
- 46. Renewable Choice Offset Portfolio Renewable Energy Credits • American Wind – Green-e® Energy • Clean Source – Green-e® Energy Verified Emission Reductions • Choice Carbon • American Carbon Registry • Verified Carbon Standard • Climate Action Reserve
- 47. Business Essentials What you get: • Dedicated Client Services Manager • CD of images and graphics • RCE website exposure • Business Essentials Starter Kit – Custom certificate of purchase – Messaging guide – Window clings and magnets – Custom poster – Image library – Facts and figures
- 48. Customized Marketing Support: 1. Determine commitment level 2. Choose a program that fits your company’s or project’s communication & outreach goals 3. Renewable Choice customizes the program you choose and provides ongoing consultation and support
- 49. LEED® Green Power 4,000+ LEED® projects internationally 100% success rate Member USGBC® & CaGBC® LEED APs on staff
- 50. Contact Sales@renewablechoice.com 877.810.8670 4775 Walnut Street, Suite 230 . Boulder, CO 80301 . 877.810.8670 . www.renewablechoice.com
Editor's Notes
- Needs to be updated.
- Mercury picture is of New Idria - a ghost town located in a remote area of the Coast Range of California, outside of Hollister. It was once a center for mercury (quick silver) and asbestos mining. New Idria was at its peak well before the Gold Rush in California of the 1840s and 60s. There are still high levels of mercury and asbestos pollution in the area.
- Solar farm picture – Florida Gulf Coast University (16 acre solar farm). Geothermal is Saltin Sea project we support.
- Source: www.dsireusa.org / June 2011
- Main Point: In most cases, RECs are the only feasible way to purchase renewable energy in the US, on a residential or commercial scale. Most parties interested in accessing renewable energy face zoning, resource, or capital restrictions that make such energy generation prohibitive. RECs provide an easy, effective method of obtaining clean, renewable energy.
- Main Point: Wind power projects are made possible by four distinct revenue streams. Taking away any one of those streams can cripple wind development. Wind power projects are made financially viable for developers through the existence of four financing streams: Energy Sales, Tax Incentives, Depreciation, and Renewable Energy Credits. Projects depend on all four of these streams in order to be successful; remove any one of them, and the project may not occur. Market data suggests that without the existence of REC’s, approximately 57% of wind projects would no longer be financially viable.
- Main Point: Without the revenue stream provided by RECs, the only option that wind developers would have in order to achieve financial feasibility is to increase the price of energy sales. If this happens, wind power contracts would no longer be competitive with conventional power, and the diminished demand would dry up the market. (source: Steven P Maller - Manager, Business Process & REC Trading John Deere Wind) Wind power projects are made financially viable for developers through the existence of four financing streams: Energy Sales, Tax Incentives, Depreciation, and Renewable Energy Credits. Projects depend on all four of these streams in order to be successful; remove any one of them, and the project may not occur. Market data suggests that without the existence of RECs, approximately 57% of wind projects would no longer be financially viable. In this market driven economy, Renewable Energy Credits help drive the value of wind projects. On average, REC’s make up 13% of the controllable revenue streams (REC’s and PPA’s). Whether REC’s are simply pushing a project beyond the threshold of feasibility or providing that extra bit of capital to be reinvested in further development, it is clear that if we are to reach the Department of Energy’s 20% by 2030 target, REC’s will be a driving force in that process. (energy sales price will increase and power contract cease to be competitive) Assumptions: 50 MW project 30% NCF $2,100/KW Capital Wind Speed 6.7 m/s Turbine Nameplate 2.0 MW Debt Term 20 years
- NextEra Energy (formerly FPL) Main Point: The investors behind two of the largest wind farms of all time consider RECs to be critical to their projects success, and it is likely that without the existence of RECs, neither would be have been seen as a worthwhile investment. As one of the largest oil speculators in the history of Texas, Pickens has turned his attention to wind energy, this year investing $10 Billion in the largest wind farm on the planet. In 2005, Pickens said: “I was in wind energy for a minute…. I hate it. And when I got to looking at those damn things I said, I don't want to be a part of putting that on the horizon. I think it's homely and I don't like it. We took a loss and got out of it and I'm glad I did.” Given his history, his change in attitude is largely driven by the newfound profitability of wind energy, which is largely driven by the increased popularity and demand for RECs. The beauty of RECs is that on the small scale, RECs simply make a project financially sensible. However, on the large scale, RECs can make a project quite profitable, in turn drawing large investment from people such as Mr. Pickens who would otherwise be investing elsewhere. The existence of RECs made this project financially attractive to a man of Pickens’ investment capacity. Had it not been for RECs, Pickens may not have moved away from oil speculating.
- Has been updated 09 most current. Main Point: Voluntary green power purchases match the support for renewable energy provided by compliance markets, making each REC market equally critical to the success of wind energy in this country. Recently, the voluntary market has been growing faster than the compliance market.
- Main Point: In 2007, the wind energy market nearly doubled it’s output over the previous year. In 2007, the wind energy market nearly doubled it’s output over the previous year, with over 5,200 MW of new wind capacity installed, representing 15.9 Billion kWh per year. Currently, the 48 Billion kWh of wind energy produced in the US is accounting for just over 1% of total electricity use. The 45% increase in just a single year helps to move us toward the department of energy’s goal of 20% renewables by 2020.
- A wide range of project types with different co-benefits and stories exist including: Landfill Gas Destruction Agricultural Methane Destruction Wind Energy Biomass Energy Small Hydroelectric Large Hydroelectric Energy Efficiency Fuel Switching
- Cost $1.0 - $1.4 Billion per year compared to cost estimates of $3-25 billion per year!
- Main Point: VERs are critical to the environmental strategies of the most forward thinking organizations, from State Governments to NGO’s to Financial institutions. The most forward thinking organizations in the world buy RECs. The State of California purchases RECs in the compliance market because they cannot achieve their clean energy objective of 20% renewables by 2020 through onsite generation alone. They turn to RECs because it helps them achieve their targets while also driving investment in wind energy. The Environmental Protection Agency, one of the worlds most trusted environmental organizations, turns to RECs in order to offset their own energy requirements.
- Provides choice to those not in capped or regulated industry to advance GHG reductions • Contribute to climate protection through real and additional, permanent, and verifiable greenhouse gas (GHG) reductions, while limiting unintended negative consequences. • Reduce GHG emissions in an economically efficient way. • Enhance the social and environmental benefits to project hosts. • Stimulate social and technological innovation and participation by new actors sectors and groups. • Create and build constituencies for more effective and comprehensive national and international solutions. • Avoid perverse incentives that could stymie broader climate protection actions and policies. • Synergistically work with other climate protection measures.Innovation and Experimentation Broad Participation – Including those not under a compliance requirement Corporate Goodwill Cost Effective Helps make projects happen given long certification process for CERs
- Importance of Standards and how they ensure quality – MENTION REGISTRIES
- WRI developed the GHG Protocol. The most widely used and recognized GHG accounting and reporting protocol. Co-developed by the UN, EPA, multinationals, and NGOs. It is the definitive guide to GHG accounting that all standards reference. Primary goal is to avoid double counting but also a means of understanding and assigning ownership. And also, more importantly, looked at in terms of defining a strategy to address these emissions.
- The appropriate offsetting strategy is based on industry guidelines for classifying emissions. Emissions are classified into three Scopes. The scopes were established for inventory and accounting purposes. Scope 1 - Direct emissions – company owned assets: fleet, cogeneration facility, boilers, other industrial processes 2) Scope 2 - Indirect emissions from purchased electricity 3) Scope 3 - “Everything else” The verifying and certifying standards for the voluntary market provide explicit guidelines on the type of offsets appropriate for the type of Scope of emissions. Scope 1 – Carbon offsets. Conceptually, and organization is emitting pollution and purchases a carbon offset to balance this emission. Scope 2 – Renewable Energy Credit. Primarily a US commodity. RECs ensure that renewable energy is put on grid for the energy you consume. Scope 3 – Carbon offsets. RECs only apply to purchased electricity.
- Current standards recommend RECs for Scope 2 emissions Carbon offsets for all Scopes