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Why should you subscribe to your utility company’s “100% wind energy plan”?

May 16, 2011

I attended a seminar in Houston last week where one of the other attendees asked me to help her understand her utility company’s offer to subscribe to a plan that provides 100% wind energy.  She told me she opted to subscribe to the new 100% wind energy plan, and was willing to pay a little more for wind energy, but she didn’t understand whether she was really making a difference.  After all, it didn’t seem likely that her utility company could direct wind generated electricity exclusively to her home.  I got the same question again today, so let me clear this up.

It’s true, utility companies around the world are offering 100% wind energy subscription plans.  It’s also true that they have absolutely no way to direct wind generated electricity to your home — once a wind farm puts electricity on the grid, those electrons become indistinguishable from electrons generated from coal, gas, nuclear, or any other resource.  So how does such a plan work for you, the consumer?

What most people don’t realize is that wind farms produce two separate revenue streams.  One revenue stream comes from selling the electricity generated by the wind turbines.  The wind farm owner sells the electricity his turbines generate to the utility company at competitive trading prices.  That means the wind farm owner doesn’t get a premium rate for his electricity just because it was generated by wind.  He has to sell his electricity on the trading floor, being price competitive with electricity generated by all of the other resources.  If his rates were significantly higher than the rate for electricity from other resources, he would not be able to sell his electricity on the open market.

The second revenue stream comes from selling Renewable Energy Certificates or RECs (also known as Renewable Energy Credits or “green tags”).  For every 1000 kilowatt hours of electricity the wind farm owner produces, he can sell one REC.  Selling RECs is how wind farm owners make a profit, and this is why investors look favorably at wind farms as a good investment.  RECs are tracked and certified by a third party auditing agency to ensure that RECs are never duplicated — once a REC is sold, no other REC can ever be generated for the same 1000 kilowatt hours of electricity that was produced.

Who buys these RECs?  Well, indirectly you do.  When your utility company offers a 100% wind energy plan, what that means is that your utility company uses the extra money you pay on your bill to buy RECs from wind energy providers.  It doesn’t change the type of electricity that comes to your home, but you do help to make wind farms more profitable.  And in a free market economy, when wind farms show a profit, more wind farms will be built.

So by all means, subscribe to wind energy plans.  It is one effective way you can make renewable energy a priority.

More about RECs:

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