Five Percent: Conserve Energy

Climate Change Is Important: Energy Conservation is the First Step


May 7, 2006

Renewable Energy Credits

Category: Companies,Conservation,Cool Sites,Economics,Policy,Save Electricity – Tom Harrison – 3:40 pm

Whole Foods Market gets it. They are purchasing energy credits to “offset 100% of the electricity used in all stores, bakehouses, distribution centers, and offices”. You can participate by buying credits at RenewableChoice.com, and Whole Foods will even share some of the costs.

Whole Foods is purchasing wind power. That power is probably not used by Whole Foods in particular, but it is used by someone — electricity is electricity. In most case throughout the country today, it is produced by burning fossil fuels. But the key is, someone close to a wind farm will use that electricity and not use fossil fuels.

The economics of energy credits are as simple as economics get … in other words gnarly.In some ways it’s simple. Transmitting any energy over a distance is costly, which is to say that it uses energy. Electricity is lost as it flows over a long straight wire, more loss the further it goes. Electricity is the simplest form of energy transmission loss.

But the cost is not really that different with oil, gas, coal, ethanol, hydrogen or any other source of power: producing, transporting, and delivering all energy results in a loss. See that big oil tanker sailing across the ocean? The huge pipelines — better, but still require huge pumps to move oil. You get the idea. So energy credits work by allowing better forms of energy to be transported a shorter distance using a transfer of currency, which is almost completely free. I don’t have access to much good electricity, but my money will increase the supply (and lower the cost) for people or businesses that do, thereby making a clean and renewable source of energy a better financial choice.

Energy credits are simple because they are really just a way for us to subsidize good sources of energy. They are realistic because the truth is, clean energy is simply not available to most homes and businesses yet and this is a way to use our powerful economic systems to even out the balance a little. The Energy Policy Act of 2005 had several good measures, but were dwarfed in dollar amount by tax credits and write-offs, effectively subsidies, to oil producers in order that we could get more oil faster.

Like all economics, nothing is as simple as it seems. Increasing supply of any energy, clean or not, has the effect of reducing prices, which means we use more. So energy credits are a bad thing in this way. But decreasing price reduces profits for the suppliers at a time when their supplies are already stretched, so they are bad for the fossil fuel companies. And increased demand for alternative fuels (wind energy, in the case of Renewable Choice) provides capital for further investment and allows for economies of scale which tend to reduce prices, and bring more research and development.

The main flaw of economics, in my opinion, is that it fails to account for the way people are! Yes, people act in their own self-interest, but only when they know what it is. So awareness is a key part of making economics work. OK, my family and I are getting pretty good at being aware and “doing the right thing” and so on. But we hadn’t acted on energy credits. Whole foods made it easy for us to take the first step, and that’s almost always the hardest. The best and most important part of efforts like Whole Foods is that they raise awareness, and are demonstrating that corporations with a strong green mission are not only viable, they are thriving.

1 Comment

  1. […] the end, CO2stats buys renewable energy credits (RECs) for the total carbon used by its sites. Thus, all the bad electricity is used to subsidize the […]

    Pingback by You’re Reading a Carbon-Neutral Website thanks to CO2stats | Five Percent: Conserve a Little Energy — October 24, 2008 @ 12:13 pm

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.