Comments Tom Stoddard has made

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Please stay tuned.  AVEC has indicated that they will post a comment shortly after close of business AK time.On Legit or not? posted 2 years, 5 months ago 11 Responses

NativeEnergy's Views

Gar - NativeEnergy here.  Your article raises several important issues that are being vigorously debated by lots of people in this emerging market, and frankly, it asks the questions that should be being asked of all marketers.  I do, however, have concerns with some of your assumptions and conclusions.  They remind me how crucial education around the issues is, as misconceptions can arise even when some level of research is conducted.

To clarify:

*    You suggest that AVEC could simply have raised their wind power cost to their customers from 15 cents per kWh to 17 cents per kWh to cover the extra operations and maintenance costs.  That puts the cart before the horse.  If, as actually happened, the turbines needed significant reconfiguring following the testing period, or if there were other early breakdowns, as happened with its prior project, the turbines can't generate the power needed to obtain that extra 2 cents to pay for the reconfiguration or repair.  That's why we provided an O&M reserve, up front.  A project that isn't generating power cannot pay for its own repairs out of sales revenues.

*    I never said that "offsets" are a nebulous concept.  I stated that "additionality" is a nebulous concept.  I do agree with you, however, that more analysis and detail is required in the offsets context than if we sold the RECs simply as green power.  NativeEnergy continues to be one of the longest and loudest proponents of that view.  The question is how much more is required?  With offsets, the market reality is that both sides of the equation, the footprint and the offset, must necessarily be estimated.  The National Association of Attorneys General Environmental Marketing Guidelines for Electricity (NAAG Guidelines) state that when a specific emissions claim is made, you need to disclose your basis for making the claim, and that disclosure "should be presented in a manner that makes the basis for the comparison sufficiently clear to avoid deception."  The NAAG Guidelines do not require precision - just transparency.  

*    Every detail on how we calculate the emissions reductions estimated to be produced by the projects we help fund is set forth at http://www.nativeenergy.com/how_we_calculate.html.  Our web site is replete with disclosures of both the fact that the claimed emissions reductions are estimated, and our methodologies for estimating them.  We do not, contrary to your suggestion, claim to offset "an exact amount of carbon emissions."  We claim to offset an estimated amount of carbon emissions, just as our customers estimate how much they want to offset.  We also employ significant discounting to ensure that our estimates are conservative.

*    Additionality is a nebulous concept, and there is a great diversity of opinion on the subject.  The bulk of marketers take a very minimalist view, claiming that all renewable projects built after the inception of the market for green power are additional.  By contrast, we believe that additionality should be assessed on a project-specific basis whenever possible; and when assessed for a project group, discounting should be employed, which we do, to account for "false positives."  What is important to understand is that concluding that a specific project is additional necessarily requires exercising judgment in particular circumstances that are unique to that specific project.

We were fully aware of the project's generation cost and the cost of the power it displaces.  We had extensive discussions with AVEC regarding the additionality of the project, its wind development efforts overall, the barriers it faced and that others face in trying to build and operate these projects in extremely remote and isolated areas and under extremely harsh conditions.  This direct relationship with the project developers is actually one of the major differences between NativeEnergy and others.  

We looked closely at the project through the eyes of the United Nations Framework Convention on Climate Change Tool for the Assessment and Demonstration of Additionality, and we exercised our best judgment.  We concluded that this project faced significant technical barriers to successful operations (as opposed to construction) that could be overcome with our offsets revenues.  

As in most matters of judgment, the yes/no line is seldom as bright as we might like.  So we seriously considered the potential ramifications of this project's success or failure for future wind development in Alaska Villages - the potential for a widespread view that "oh, AVEC tried wind turbines down in Toksook Bay and they just didn't work."  We also considered the potential drawbacks of committing to this project rather than others.  There is no shortage of projects that need additional revenues to get built or to operate successfully.  Demand for offsets is the real limiter.  We have no motivation to commit to a project we see as non-additional when so many additional projects are available.  Based on all these factors, we concluded that the AVEC project, our customers, the market and the climate were better served by our funding an adequate O&M reserve through offsets than not.  As none of the "revelations" in your article are news to us, we remain convinced.

One final note - what the Oscars purchased did not come from NativeEnergy, nor did we put anything in the goodie bags.  
On Legit or not? posted 2 years, 5 months ago 11 Responses

questionable support

NativeEnergy here.  I'd like to thank ltlf653 for pointing out an important distinction between buying green power (through RECs) and offsetting CO2 emissions, and for linking to our web site for more information.

I'd like also to clarify NativeEnergy's view that while purchasing RECs absent demonstrated additionality isn't a waste.  Far from it.  "Using" clean energy through the purchase of RECs is valuable and beneficial to the market for clean energy and for the environment.  We commend Vail for its purchase.

Nevertheless, the issue isn't merely one of semantics, and that's why we are careful on our web site to distinguish between our Green-e certified CoolWatts product - RECs from operating wind farms - which we sell as a green power option, and our "help build" RECs and offsets products that meet our additionality requirements (www.nativeenergy.com/additionality) and thus qualify as offsets for purposes of offsetting direct fossil fuel use, such as for driving, flying, heating and business process heating.On Among bad deals, TerraPass's methane offset project? posted 2 years, 8 months ago 7 Responses

Tipping point

Good question, and we're not sure where the tipping point is, but we know there are companies out there that are long on RECs.

Regarding how loud RECs speak, certainly the theory is that buying RECs from existing (preferably recently built) wind farms demonstrates that demand is there for RECs, and by making these wind farms more profitable, that demand encourages additional investment.  The problem with that is that current wholesale prices for REC represent a very very very small portion of a wind farm's overall economic return.  So by buying RECs from existing wind farms, you send a market "signal," but at today's prices, that signal is weak.  Given the weakness of that signal, new wind farms are getting built for other reasons.  What we're seeing is utilities taking long-term positions on wind projects as a hedge against anticipated future legal requirements, and unloading the short-term RECs they have no need for onto the market at low prices.

That's why we focus on projects that really need REC revenues secured on a long-term basis to get financed and built, and that don't have a utility around that is willing to step to the plate on a long-term basis.  And as the voluntary market only wants short-term purchases, we convert their one-year purchase, through our Future RECs model, into a purchase that has long-term impact for the project, by buying down its up-front construction costs.  That way, our customers not only send a market signal, they actually help finance construction of a specific new wind farm that really needs their help.
On Can we really buy the change we want to see in the world? posted 3 years, 3 months ago 14 Responses

Carbon Offsets

As the offset provider for Dave Matthews Band, I'd like to weigh in on a few of these issues.

First, offsets aren't so you can drive instead of riding your bike.  They're for when you can't ride your bike.  I assume, Charles, that you drive sometimes, and heat and power your home.  Yes, we should all reduce our energy use, but as a practical matter we can not eliminate it. We'd freeze in the dark.  Offsetting is to mitigate the impacts of the energy we can't avoid using.

Second, renewable energy does displace fossil fuel power, whether the amount of energy the world uses is a fixed constant, or is rising or falling.  It's a matter of the laws of physics.  At any given level of electricity demand, to maintain constant voltage, the amount of electricity going into the grid must equal the amount being used at that moment.  If the wind starts blowing at a wind farm, the extra electricity must be compensated for.  If demand is constant, the grid operators must turn down other generators by an equal amount.  If demand is falling, they must turn other plants down by the amount it is falling plus the amount of the wind farm's power.  If demand is rising, they must turn them up less, by an amount equal to the wind farm's power.  In each case, the influx of the wind power results in less power being generated from other sources than otherwise would have been.  The one's the turn down are the fossil fuel plants - hydro and nukes are always used to their fullest capacity.

Third, it is correct that crediting DMB with climate neutrality while the actual implementer(s) take credit would be double counting.  That's why we make sure that the actual implementers are contractually prohibited from taking credit.

Fourth, not all REC purchases finance new construction.  Many projects are built because they are cost effective, and Patrick is correct that they'd be sprouting up everywhere if we didn't subsidize fossil fuels so much.  But the fact is that we do subsidize fossil fuels, and thus many wind farms cannot compete.  The Native American wind project DMB is helping build is in an area (SD) where it has to compete with coal power that can be produced for 1.2 cents per kWh.  It and wind farms like it absolutely will not get built without someone stepping to the plate to pay a premium for the RECs.  We encourage people considering RECs and other kinds of offsets to do their due diligence.  There are three kinds of RECs:

1. RECs from projects that were built because they were cost effective.  Because they exist, the RECs will be generated whether you buy them or not.  Your purchase makes the project more profitable, and theoretically attracts more investment in wind farms because they're seen as more profitable.  The problem is that you're not rewarding a real risk taker, so your "signal" to the market is weak.

2. RECs from projects that were built in reliance on market demand for RECs.  Because they exist, the RECs will be generated whether you buy them or not.  Your purchase, however, rewards someone for taking the financial risk that REC revenues will be forthcoming, and so sends a stonger signal - you show that market demand favors risk takers, so risky projects have less competition from non-risky projects.

3. RECs from projects that aren't built yet and can't get built without a firm contractual commitment (one that they can "take to the bank") to purchase the RECs on a long-term basis (commensurate with project financing).  Here's the rub.  Projects are financed on a long-term basis, and if they really need REC revenues, they need them on a long-term basis.  The buyers in the market, however, don't want to make long term commitments.  That leaves a lot of projects in the lurch, especially the smaller, distributed projects that are valuable in strengthening the grid and building local economies.

Finally, I agree that personal offsetting won't fix global warming.  We do need "concerted investment by governments and large industrial entities."  For that we need widespread and strong public support for major policy changes.  The offsets market provides a platform for the education and awareness building - and for conversations like these - that are needed to build that support.  Offsets also can be, if you choose the right ones, a way for each of us to do our part, however small that may be individually or in the aggregate.  To argue that we shouldn't offset because even collectively it won't amount to much, is also to say, like it or not, that we shouldn't bother to reduce our personal energy use, for by definition it can only amount to less.  Only offsetting can mitigate 100% of your energy use.  You can only reduce part of it.

So please reduce your energy footprint, offset what remains, and choose offsets that make a real difference.

Thanks!
On Can we really buy the change we want to see in the world? posted 3 years, 4 months ago 14 Responses