Imagine a huge wind turbine towering above Vail Mountain. Vail Resorts chief executive Rob Katz imagined it and didn’t like the image.
Yet Katz wanted to address his firm’s use of electricity from coal and natural gas, fuels that contribute to global warming.
He made national news by announcing that, instead of generating its own renewable power, Vail Resorts would pay for the environmental benefits of energy produced by wind and solar farms that may be thousands of miles away.
Vail Resorts, Whole Foods, Safeway, New Belgium Brewing and dozens of other companies have helped push the sale of renewable- energy credits – known as green tags or RECs – to record highs. Annual sales total more than $185 million and could grow to nearly $1 billion by 2010, according to a report from the Golden-based National Renewable Energy Laboratory.
But the popularity of energy credits has ignited a controversy over a key question: Do they truly advance the development of renewable energy or, as critics suggest, do they simply provide a public relations boost via “checkbook environmentalism” for wannabe corporate do-gooders?
The thinking behind energy credits is that businesses can offset the power they consume – most of it from coal-burning power plants – by subsidizing the same amount of clean energy made from renewable sources. To do so, they pay a fee that represents the extra costs to developers for building wind, solar, hydro and geothermal plants.
Concept has skeptics
But one of the most outspoken skeptics of the concept, Colorado energy analyst Randy Udall, worries that the practice of buying and selling energy credits does little to encourage the development of new renewable-energy projects.
“RECs send a signal to the renewable-energy market, but it’s such a distant signal it might as well be coming from Pluto,” said Udall, director of the Aspen-based Community Office for Resource Efficiency.
Although renewable-energy credits are marketed as a way to encourage power developers to build new wind farms, Udall claims that many of the credits sold to corporate buyers come from wind projects that have been up and running for years.
“The original idea was that RECs would accelerate renewable-energy development,” he said. “Some RECs do, but most don’t.”
As for the buyers of renewable-energy credits, Udall spares no words in his distaste for companies that buy the power offsets instead of generating or conserving on their own.
“RECs are for the lazy, for those who want to achieve the exalted state of ‘carbon neutrality’ without doing anything but writing a check,” Udall wrote in a recent opinion piece.
Quayle Hodek bristles at the criticism. His company, Renewable Choice Energy in Boulder, is one of the largest brokers of renewable-energy credits. It handled the nation’s two biggest deals for Whole Foods and Vail Resorts.
He sees RECs as a way for companies to support alternative energy when it is impractical for most to build enough wind turbines or solar panels to provide all their own power.
“Even if there is not renewable energy in their backyard, it allows them to support renewable energy,” Hodek said. “To have renewables grow, it needs this kind of support.”
Deals audited, certified
Hodek said all of the deals brokered by Renewable Choice Energy are audited and certified by the San Francisco-based Center for Resource Solutions, whose “Green-e” program reviews REC transactions to make sure that renewable-energy generators don’t sell the same credits more than once.
Vail Resorts thoroughly studied the idea of building its own wind turbines to directly supply power for the firm’s ski areas.
“But these aren’t Dutch windmills that blow easily in the breeze and look gorgeous,” CEO Katz said. “They would need transmission lines and enormous amounts of batteries. You think about all the infrastructure needed to make us a power-generating company, and that’s not what we’re about.”
Vail Resorts would not disclose how much it paid for the energy credits it purchased last year. Renewable Choice Energy never releases financial details of the transactions it brokers between buyers and wind-farm sellers.
However, energy analysts have estimated that Vail paid slightly less than $10 per megawatt-hour for renewable-energy credits, or a total of about $1.5 million for its annual power use of 152,000 megawatt-hours. That’s on top of the estimated $13 million a year it pays for its regular electricity through western Colorado supplier Holy Cross Energy.
“This is a long-term sustainable approach in allowing companies to convert to alternative energy,” Katz said.
He added that he is not concerned over the debate on whether RECs are inducing new renewable-power projects, or, as critics suggest, simply supplying financial “icing on the cake” for owners of already-built wind farms, solar collectors or geothermal stations.
“There’s no question that’s a challenging issue,” Katz said. “But whether these credits were sold when a shovel went into the dirt or when the plant was already on line, they still fuel more and more demand for these types of plants.”
Spurring new projects?
Not everyone agrees.
“There are problems we have to resolve about whether (REC sales) are going to new renewable projects,” said Lars Kvale, an energy analyst with the Center for Resource Solutions.
A recent Business Week article examined the Academy Awards’ highly publicized purchase of credits to offset greenhouse gases.
The magazine found that income from the sales played little or no role in developing five out of six renewable energy or carbon-offset projects that sold the credits.
The ability of credit sales to help renewable-energy developers get financing for new projects is questionable, said Blair Swezey, principal policy adviser at the National Renewable Energy Laboratory.
That’s because most of the contracts for sales of credits are short term – from one to five years. Financiers are looking for longer revenue streams.
On the other hand, Swezey said, REC sales are “driving these developers to do more projects,” even if they don’t land a bank loan.
Companies interested in buying renewable credits should do homework to find the right brokers, said Ron Lehr, western region representative of the American Wind Energy Association.
That includes determining if the brokers’ deals are audited and certified, and if the credits being sold are for existing or new power projects.
“The tricky part is getting those funds where they’re really needed,” Lehr said. “On balance, I think the idea (of RECs) is a net positive. It’s happening because people want to make a change.”
Staff writer Steve Raabe can be reached at 303-954-1948 or sraabe@denverpost.com.
