Angus Duncan

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Green Tags Building a Better Green Power
Product Stoel Rives -- October 18, 2006

• Angus Duncan
• President
• Bonneville Environmental Foundation

Source GE Wind Energy
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The Bonneville Environmental Foundation

• Independent Non-Profit, established in 1998
• Solar, wind, biomass project developer
• In 2000, pioneered sales of RECS/Green Tags
  directly to residential, commercial and
  institutional customers

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US Green Power Markets 1999 - 2004 Fun Facts

• 600 Utility Green Power programs in 34 states
• Average customer participation rate is 1.3 (best
  programs reach 5)
• Business sales grow twice as fast as residential
• RECS dominate business market, which accounts for
  almost 30 of sales (by MWhs)
• Green Power stimulates new renewables 2200 MW of
  (mostly) new windfarms earn Tag revenues

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Whats Green Power?Green Tags?

• Green Power bundled electrons environmental
  attributes (e.g., emissions displaced)
• Green Tags environmental attributes unbundled
  from electrons
• All electrons look alike, have minds of their
  own
• cant be color-coded environmental
  attributes cant be wire-delivered

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Why Is it Green?

• Primary Considerations
• Displaces fossil fuel generation/emissions
• New (since 1999) therefore changes status quo
  composition of the power pool
• Secondary Considerations
• Light Physical Footprint of Facility Low or No
  Emissions - CO2, CO, SOx, Nox
• Low Impact Fuel Source
• May Be Certified (Green-e, Climate Neutral)

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Why Buy Green Power/Tags?

• Value is in the outcome
• more revenue drives more renewable generation
  into the power pool, therefore . . .
• less fossil fuel burned
• lower emissions
• Product integrity -- for both compliance and
  voluntary markets -- requires that these values
  be plausible, additional, provable, trackable,
  auditable
• Voluntary market further requires simplicity,
  clarity

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Green Tags -- Issues

• All issues -- of vintage, valuation,
  accounting, etc. -- are fundamentally issues of
  product integrity

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Issue I Whats Green

• Marketplace Values Wind and Solar
• Geothermal, Biomass Are Poorly Understood
• Hydro? (lt30 MW? LIHI?)
• Non-Generation Tags from Energy Conservation,
  Carbon Sequestration?
• New v. Existing ----gt

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Issue II New v. Existing

• Q Why Not Tags from Existing Renewables
• No legal prohibition if disclosed.
• Reward Early Adopters
• Reward hydro thats been cleaned up (LIHI)
• A Because Customers Believe Their Money is
  Changing the Environmental Status Quo
  (Additionality)
• especially on CO2, other Greenhouse Gases
• Early Adopters or Windfall Profits?
• Capital diversion from support of new renewables
• New post January 1, 1999

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Issue III Whats In a Tag

• One Green Tag all environmental (non-energy)
  attributes of one MWh of renewable generation
• Or . . . Disaggregate emissions offsets (CO2, CO,
  SOx, Nox, etc.) of each MWh and sell separately
• Or . . . Disaggregate emissions offsets and sell
  separately, then sell whats left as a Renewable
  Energy tag.

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Issue IV Who Owns the Tag?

• Multiple Choice
• (a) The Utility that hooks up the facility?
• (b) The Government that gives the tax credit?
• (c) The Trustee that oversees the meters
  charge program subsidizing the facility?
• (d) The Owner of the renewable facility?
• Answer Its Not Clear
• FERC PURPA doesnt convey Tags to Utility
  (105FERC S61.004)
• ID PUC ruling left Tags with facility owner
• Is a State or utility claim on Tags an unlawful
  taking, absent owners consent and quid pro quo?
• But It Should Be Incentives should be additive

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Issue V -- Double Selling/Counting

• NAAG Advisory 1999 Three tests
• Double Selling addressed by consumer fraud law
• Double Counting can be more uncertain
• Utility cant ratebase wind resource and sell
  RECS
• Utility cant use RECS for compliance and sell
• State content disclosure laws?
• Do visible solar panels on roof constitute an
  implied claim, while RECS may be sold?

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Issues VI ValuationWhats a Green Tag Worth?

• Dollar Value . . . May Be Set by Market or State
• Varies by resource,region, market demand
• lt1/Tag to gt50/Tag
• Price Stability attribute accrues to . . .
  green power buyer? Utility customers in
  aggregate? Who bears risk?
• Emissions Value
• In WECC -- 0.4 Tons CO2/aMW In SERC?
  (probably gt0.4 T/aMW) In NEEPOOL?
• Value measured against average emissions/MW? Or
  emissions of marginal dispatchable resource? Or
  of displaced/unneeded new resource?
• Set value as national average? By power pool?
  State?
• utility service territory?

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Issue VII Tracking

• Bilateral Contract Relies on Attestation, Audit,
  Enforcement
• Simple transactions to date result in few
  problems
• But Tags difficult to track, enforce through
  multiple owners
• Absence of structured market (except consumer
  fraud law) has allowed Tag markets and products
  to evolve creatively
• Tracking Within Power Pools
• Texas, NEEPOOL track to establish RPS compliance
• Western states developing WREGIS
• Is more structure needed for RPS, carbon content
  standards, global trading of carbon credits?
• Will regulation reinforce product integrity, or
  chill voluntary market innovation?

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Issue VIII Regulation and Unintended
Consequences

• SOx Cap-and-Trade means no SOx offset in a Tag
• Only polluters play in closed CapTrade
• NOx rules under Clean Air Act means maybe NOx
  offset captured by Tag (in non-attainment areas)
• Greenhouse Gas Cap and Trade Regimes?
• Generator-based systems (RGGI)?
• Load-based systems (CA, OR)?
• Set-asides for Voluntary Market RECS?
  Accelerated Reductions?

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Public Policy Outcomes of Tag Markets

• Demonstrate Political Support for higher
  renewable content, lower carbon content
• 1 to 5 of customers buy green power
• 80 support more renewables in power pool
• Create Pathway to Regional, National Renewable
  Portfolio Standard or Carbon Content Standard
• Create Basis for Global Carbon Credits Trading

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Summary and Conclusions

• Green Tags Changed the Green Power Landscape
• Gave green power liquidity, mobility,
  accountability
• Opened markets to non-utilities
• Created customer choice in voluntary markets
• Green Tags Are One Tool in a Low Carbon Future
• Basis for global carbon markets add liquidity,
  compliance flexibility to cap-and-trade
  structures
• Green Tags One of ENRONs better ideas
• (hint it didnt come from Accounting)

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Bonneville Environmental Foundation133 SW Second
Avenue, Suite 410Portland, OR 97204(503)
248-1905 www.B-E-F.org --
www.GreenTagsUSA.com