Wednesday, December 26, 2007

Should I Sell My Green Tags?

Now that I am producing green power, I have the option to sell the green tags. This is independent of the actual electricity and I can sell them even if we don't generate a surplus. That part may sound a little strange, it did to me. Let's talk about what green tags are first.

Green Tags are the intangible environmental benefits of renewable energy. These benefits are conceptually separated from the actually electricity. It is intangible because it is all the pollution that was NOT produced. Something that was not produced may not be tangible, but if people value it, there is a market. So if you are buying Green Tags, are you buying Green Power? No, they are not electricity; if you are buying grid power you are buying it in whatever mix of green and brown sourced power is there. What you are buying is the eco-benefits of some of the green power that is on the grid. That is some contorted logic, but that is the current system.

How do Green Tags apply to a home PV system? Our system is grid tied so we can sell all the green tags that we produce. This is distinctly different from the electricity where we only sell the surplus, if any. This difference is important, here is an example. Say that we produce 500 kWh in a month but we consume twice as much. It is possible that our meter never ran backwards, we didn't send one electron into the grid, yet in that same month, we can still sell all 500 kWh worth of green tags. Why? The grid, including our house and the PV system on it, is viewed as one giant pool with producers and consumers all contributing to, and withdrawing from this pool. The actual flow of the electrons from producer to consumer is only important for logistics, not the conceptual model. That is why our green tags can be sold even if we consume all the electricity.

How much money can we make? Currently, we can sign a 2008 - 2009, 2 year contract to sell our green tags for $50 per Megawatt-hour ($0.05 per kWh). We expect our system to generate about 4000 kWh per year. That equates to about $200 per year.

Ironically, anyone can buy 1MWh worth of tags for just $35 for solar or only $20 for wind. Too bad I am limited to doing this with only the 4 tags per year that I produce. There are obviously subsidies in this market or it could not exist in such a state.

The only benefit in selling the tags is the cash, let's look at the cost. The contract to sell our green tags limits my ability to claim that I am green powered. These bragging rights are effectively what I am selling. There are some very lawyer-ly restrictions. For example, I could say that I am supporting green power through the generation and sale of green tags, but I could not claim my house was solar powered. If it were just 'bragging rights', I could live with that and cash the check. But it's more, do I truly want to give away all the environmental benefits that I am generating for a couple hundred bucks per year? I certainly did not install the solar panels to make money. If that was the goal, I am a bad investor. Even with the incentives, the pay back is decades (ignoring the compounding growth I could have had on the capital and also using today's electricity prices).

What am I really selling? Here's a little thought experiment. Half of a town is powered by residential solar & wind and the other half is powered by a pollution producing coal plant. If the half of the town that did not have solar & wind bought the green tags from the other half, the entire town can not claim to be pollution free. The part of the town that sold the green tags is now the half responsible for the pollution; Despite the fact that they have the solar & wind!

The green tags are the important part of solar power. The environmental benefits are what separates solar power from brown source power and that is what the green tags represent. If I just wanted to generate electricity, I could have bought a diesel generator and a lot of fuel for the price of this system. And if I sell the green tags, that is effectively what my solar panels become as it relates to our home's power use.

When I first heard about green tags, I thought "Great, a couple hundred bucks per year would be nice. Where do I sign?". This seems to be as far as many PV owners take the thought process. Or maybe some frame things differently such as, the PV system creates an environmental benefit that everyone benefits from, these small checks are to help pay back for that and for my large upfront cost or they think of it as when folks buy green tags, I get a small cut and it helps to support my green production. But that is not the case, the contract I was offered made that clear. The tags represent the eco-benefit and that is what you are selling. You are not signing up to get checks to support your costs.

I am not currently selling my green tags, I am 'consuming' them.

The picture is a different with industrial green power production. There is not a home sitting directly under it consuming the electricity that it generates. Its power is going into the grid for market consumption. Whoever wants to be able to claim this eco benefit, should be able to pay for it.

Do you generate, buy or sell green tags? If so, post a comment and let me know what you think?

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1 comment:

  1. Amazing idea. I hope you succeed selling that.

    I read in a real estate agent reviews magazins that today the number of green houses have rocked, if it is so you will have your market!!


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