Green Tags

Green Tags allow companies and individuals in the U.S. to offset the polluting effects of their energy consumption and support the development of renewable energy. When a company buys Green Tags (also called Green Certificates, Green Credits, and Tradable Renewable Energy Credits), the power from a renewable energy facility is not physically delivered to the customer. Instead, the emissions offsets and other environmental benefits created by the facility are assigned to that customer, directly offsetting the environmental impact of the customer’s conventional energy use.

Traditional vs. Green Power Transactions

Note to reader: To better understand Green Power and Green Tag transactions, it may be helpful to view the diagrams below:

In a traditional power transaction, fossil fuel power plants deliver energy into the grid. The energy mixes together and an interconnecting utility receives a generic mix of the energy in the grid. This generic mix is delivered to the utility’s customers.

In a green power transaction, a utility offers a green power product associated with (in this case) a new wind turbine that also delivers energy into the grid. A customer purchases the electricity and its green attributes together, in a single transaction, from the utility. All customers continue to receive a generic mix of energy, but the customer gets “credit” for supporting the wind turbine through the green power premium.

Traditional green power and green pricing programs often (and unintentionally) leave customers with the impression that the electrons being generated by a renewable energy facility are being delivered directly to their homes or businesses. This is not the case unless the renewable energy facility is directly attached to the customer’s building on the customer’s side of the meter. The electrons from any grid-connected generating facility simply mix with the rest of the electrons in the grid, and each customer gets a generic, average mix of all the resources delivering energy to the grid.

Where Do Green Tags Fit In?

Green Tags are based on the premise that renewable energy facilities produce two distinct products:

1. The first is electricity. The electricity generated by the project is sold separately from the Green Tag, as generic power. No environmental claims can be made for this energy because the Green Tag now represents the entire package of environmental benefits associated with the generation of the electricity. The distinction between the two products is created by enforceable contractual agreements.
2. The second is a package of environmental benefits created by displacing the output from conventional, polluting power plants with the output from a new, non-polluting renewable power plant. These environmental benefits can be “stripped” away from the electrical power, quantified (e.g. 150 tons of CO2 displaced) and packaged into a Green Tag. The Green Tag then represents those collective environmental benefits, and creates a property right in them.

For example, a 1 megawatt (MW) wind energy plant that generates and delivers to the power grid 3,000 megawatt hours (MWh) of electricity annually, would create no air pollution. An average fossil fuel facility generating the same number of MWhs would create approximately 2,100 tons of CO2, 11 tons of sulfur dioxide (SOX), 7 tons of nitrogen oxide (NOX), and varying amounts of CO, mercury, particulates and other pollutants. Because that fossil fuel generation is displaced from (not delivered to) the grid, any emissions offset are a direct consequence of the wind generation. Green Tags capture this difference to the extent allowed by law. (Pollution control laws may fail to credit producers of clean electricity for emissions reductions. Nevertheless, BEF believes there is great value in replacing polluting facilities over time with non-polluting facilities like wind turbines.)

In a Green Tag transaction, the customer continues to purchase electricity from its existing supplier, but purchases Green Tags in a separate transaction and usually from another party. Again, all customers continue to receive a generic mix of energy. The “green” customer gets “credit” for (in the diagramed example) supporting the wind turbine through the Green Tag premium, just as the green power customer gets credit even though the wind-generated energy the customer supports is dispersed throughout the grid.

Thus, in neither green power nor Green Tag transactions is the customer paying for actual delivery of renewable energy to its facility. Instead, it is the environmental benefits of new renewable resources being delivered to the grid, displacing older polluting plants, that the customer truly values, and for which the customer is willing to pay.

The Importance of Certification

The Center for Resource Solutions has created the “Green-e” label that certifies that qualifying renewable energy products meet certain environmental and consumer protection standards. The certification process includes a detailed accounting and verification of all green power and Green Tag transactions to ensure credibility.

One of the most important Green-e standards is the distinction between new resources and existing resources. (The distinction between new and existing facilities varies from region to region, based on input from local stakeholder groups. In the Northwest, where BEF is located, the determining date in May 1999.) Under Green-e rules, power products that derive a significant amount of energy from existing renewable energy facilities qualify for certification as green power. All Green Tag products, on the other hand, must be delivered from new renewable energy facilities. This means that proceeds from Green Tag purchases go to support new renewable energy projects.

Advantages of Buying Green

Increasingly, companies are looking at an end goal of climate neutrality for the sum or a percentage of their operations: electricity, gas space and water heating, and transportation. After all feasible energy conservation gains are captured, a Green Tag transaction can offset the remaining necessary level of energy consumption. In addition, companies that purchase Green Tags or green power will be in a position to bank and/or trade the CO2 and other emissions credits when trading begins in the United States.

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By Rob Harmon, Bonneville Environmental Foundation’s Vice President, and director of the foundation’s renewable energy programs. He is credited with developing BEF’s Green Tag program starting in 1999. Before joining BEF, he was active in the energy industry for 14 years, the last 6 years of which were dedicated to the renewable energy sector. He has served as Vice President of Marketing and Business Development for WindLite Corporation and as Business Development Manager of FloWind Corporation. In addition, he has served as the Chairman of the Small Wind Turbine Committee of the American Wind Energy Association and as a member of the California Emerging Renewables Advisory Board. He currently serves on the Board of the Northwest Energy Coalition.

The Bonneville Environmental Foundation, a non-profit organization, was established in 1998 to further the development and use of new renewable energy resources.

Through revenues generated from the sales of green power products, BEF funds projects that restore damaged watersheds and support new renewable energy projects from solar, wind and bio-mass. BEF pioneered the sale of Green Tags in 1999 and has helped establish national standards for certification and trading.

In 2002 alone, BEF Green Tag sales represent the environmental benefits of more than 38 utility-scale wind turbines operating for a year. Since BEF announced its first Green Tag sale — to the US Environmental Protection Agency — in 1999, BEF Tags have accounted for over 100,000 Tons of C02 emissions offset by wind, solar and other new renewable energy projects.

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Created by regional environmental groups and the Bonneville Power Administration, the Foundation operates collaboratively but independent of both.