Do people support renewable energy enough to spend money on it? Two financial incentives aim to find out.
The first idea asks electricity consumers to pay a little extra each month to their utility for green power. The idea has been organized into a “green tag” program in which utilities sell electricity generated from renewable energy sources.
Renewable energy sources include generators that are powered by sunlight, wind, falling water, biomass, waste, or even geothermal. One green tag equals a block of power that could equal 100 or 1,000 kWh of electricity generated from a renewable energy source.
It might be enough to know that some local electric co-ops are selling green power, because understanding how green tags work gets complicated.
Electricity moving through the nation’s transmission grid doesn’t know if it’s green or not—it can’t be separated according to how it was generated. But by using various accounting techniques, utilities work together to buy and sell green tags in ways that essentially do keep track of electricity generated from renewable sources. That means that when a local distribution co-op member signs up for a green tag program, the physical electricity could be from a variety of sources, green and conventional. But all of the consumer’s green tag dollars do support generation from renewable sources.
The incentive part of this program is that utilities can use the money from green tag consumers to trade among themselves. If a lot of consumers sign up for green tag programs, that should encourage the use and construction of even more renewable energy generation facilities.
That’s how it’s working in Kentucky. Seventeen of the state’s 24 distribution co-ops currently offer a green tag option; more co-ops plan to add programs this year.
Fourteen distribution co-ops that get their wholesale power from East Kentucky Power Cooperative offer green power through a program called EnviroWatts. East Kentucky presently generates renewable electricity for EnviroWatts by tapping the methane emitted from landfill gas operations in Greenup, Laurel, Boone, Pendleton, and Hardin counties. East Kentucky is one of the largest producers of wholesale green power in the southeastern United States.
TVA, which generates electricity for several distribution co-ops along Kentucky’s southern border, calls its green tag program Green Power Switch. This green tag program is available in three of the five Kentucky distribution co-ops that buy their power from TVA.
Big Rivers generation and transmission co-op, based in Henderson, is working out details of a renewable energy program for the three distribution co-ops in its western Kentucky service area. This option will offer electricity produced at a co-generation facility. A paper mill in Hancock County that uses steam as part of its manufacturing process uses excess steam capacity to produce electricity. Not only is the steam performing two kinds of work, the fuel at the plant comes from wood waste materials, making it a two-for-one green project.
The other financial incentive to encourage renewable energy sources fits the special circumstances of the utility companies. Building new generation facilities takes millions of dollars in capital, more than can be raised by green tag programs alone.
An important tool to raise such large sums of money from long-term investors is to offer bonds that earn interest. Several years ago, Kentucky’s U.S. Representative Ron Lewis was a key sponsor of a house bill that eventually became part of the Energy Policy Act of 2005 (see The Future of Electricity, October 2005), which introduced Clean Renewable Energy Bonds. Instead of earning interest, CREB bondholders earn a tax credit from the federal government.
Originally capped at $800 million, by the end of December 2006 electric co-ops nationally had already asked to issue $554 million in bonds. Requests to issue more CREBs are adding up so quickly the cap will soon be reached. Congress will need to decide if this increased demand for renewable energy generation facilities should be further encouraged by raising the original cap on these innovative bonds.
To learn more about green tag programs in your area, visit the Web site of the Kentucky Association of Electric Cooperatives at www.kaec.coop
and click on the “Green Power” button.
Next month: Long-term electricity supplies