Legit or not?
While writing about medium wind in Alaska, I ran into information that led me to believe there were some questionable offsets involved with the project. More extensive research, including interviews with Brent Petrie of AVEC and Tom Stoddard of Native Energy, have revealed a more complicated situation, one that still doesn’t look good to me.
Here is what the situation looks like at first glance: AVEC has installed wind turbines that produce electricity for around 15 cents per kWh, according to the interview on which the first post was based. That 15 cents per kWh wind is displacing 45 cents per kWh electricity — of which 13-25 cents per kWh is diesel and diesel storage alone. Yet Native Energy is selling carbon offsets at up to $12/ton for this project — claiming that this produces additional wind power compared to not getting the subsidy.
How does Native Energy justify this? The Alaska Tundra may be the harshest environment in the world for running renewable energy projects. The claim is that if the Tookok and other projects failed in the early stages this would have discouraged further development. The money from offsets has been used so far for operations during the first two years to cover monitoring and recovery from failures during this time.
In Brent Petrie’s words:
It is one thing to put these wind turbines up, but it is another thing entirely to get them to operate successfully on a long-term basis. If they are not operating, they cannot possibly reduce CO2 emission or our electricity costs. With Native Energy’s funding, we are able to ensure that putting them up will turn out to have been worthwhile, because we have a significant reserve available to fund the cost of ensuring that the projects perform.
Tom Stoddard of Native Energy (the offset broker) makes the same point:
… AVECs previous (hydro) projects that lacked O&M funding experienced significant operation failures. As wind projects are even more sensitive to environmental conditions, it seemed that there was a significant risk that these wind turbines would as well, and in fact they were experiencing problems at the time. Thus, the construction funding for these projects came up short on the full “enablement” picture, and in our judgment there was a role for carbon offset funding to provide the rest — to overcome a barrier to successful operation by providing a needed cash reserve to fund extremely expensive O&M expenses, enabling these turbines to operate successfully, and enabling them to demonstrate that wind development in Alaska can be successful, if the O&M is enabled along with the construction. In our judgment, that is a sound basis for crediting these turbines as additional, especially given the potential ripple effects of their success or failure.
These raise new questions. Petries mentioned in our original interview that O&M was actually lower than anticipated so far. (The turbines have been operating for roughly a year.) So if all these costs were anticipated, had he really not built them into the original financing? Given the cost (15 cents per kWh vs. 45 cents per kWh for diesel), couldn’t AVEC have raised their cost to 17 cents per kWh and covered the extra O&M?
However, there is a more important point here. When you talk of this money contributing to the future of wind, you have to remember that Native Energy is not selling general green power. They are selling offsets, a claim of carbon neutrality.
Native Energy is definitely putting an exact number on what they are selling. But tell me how easy it is to put that same exact number on what they are buying. How much time in operations would AVEC have lost without Native Energy funding? How much of future wind power in Alaska will be due to the extra Native Energy funding of the Toksook project? Can Native Energy really put a number on it? Do we even know that the number is something other than zero?
When I first talked to him, Brent Petrie described the Native Energy offsets as a “bonus,” a “nice extra.” Now, as the quote at the beginning of the post shows, he backed off completely from this — with extensive backup from Tom Stoddard of Native Energy. But the agreement AVEC signed with Native Energy certifies that the offsets are a “significant contributor to economic viability and seller’s efforts to build additional wind capacity.” So if Petrie had not backed off from those statements, AVEC would have been in serious legal difficulty of some sort.
It may be those terms really were slips of the tongue in a routine interview. It is possible that additional revenue did enable AVEC to keep the turbines running more of the time than if it had not been available — that even with the huge cost differences, AVEC could not have found the money to fund the extra O&M somewhere. But the point is that we will never know if the money really did enable extra running time that would not have otherwise been funded, and if it did enable such, we will never know how much it funded. We will never know if Native Energy’s claim that small wind would have failed in Alaska without them — though we may be excused, I think, for doubting it.
When the Oscars claimed their purchase of Native Energy offsets made them carbon neutral, when Clif Bar tells its interested customers to buy offsets to reach carbon neutrality, they are not merely claiming to be nice organizations who contribute to good renewable energy causes. They are claiming to have offset an exact amount of carbon emissions. If you want to buy offsets as an individual, Native Energy even helpfully provides a calculator so you can figure out exactly how much carbon to offset.
There are all sorts of ways to fund renewable energy. But when you sell carbon offsets rather than more general green power, you are making a very specific claim. And it looks like a claim that is no easier to prove in the voluntary carbon market than under the Kyoto CDM.
As Tom Stoddard said in his phone interview with me, an offset is “such a nebulous concept you have to deal with it in the context of market reality.” Talking about another project (the family-farm wind program Native Energy also helps fund), Stoppard said, “We can’t pick and choose on a per-farmer basis, because transaction costs are too high.” So basically they try to estimate how much their subsidy to the turbine manufacturer increases turbine sales. Again, Native Energy is buying something nebulous and vague, and turning around to sell it to offset a very precise amount of carbon emissions.
I sometimes hear offset providers claim that this does not matter; offset purchasers have no illusion about what they are buying. First of all, I wonder if this is really true. Neither the producers of the Oscars nor the owner of Clif Bar are energy experts. At any rate, even if the key decision makers know what they are buying, I’m pretty sure that a high percentage of those visiting the Clif Bar website, or those reading the certificate in an Oscar goodie bag, believed the claims of carbon neutrality. If precise numbers really don’t matter, then offset providers could simply call themselves sellers of green power, without making a pretense of offsetting a particular amount of carbon. But of course, the claim to offset an exact amount of carbon is precisely what companies like Native Energy are selling.