Article for Medill: The business of saving the planet

About 277,000 tons less of carbon dioxide made it into the air in 2002, according to the Center for Resource Solutions, a non-profit environmental organization in San Francisco.

And it’s all because of little things called green tags.

By January, sales of those little green tags brought Mainstay Energy LLC’s revenues to about $100,000. And the privately held start-up on Chicago’s Near North Side — working out of a virtual office woven together by phone lines, e-mails, a Web site and instant messaging tools — expects the little green tags to help generate revenues reaching about $500,000 in 2004.

“We want to create innovative, market-based financing for small- and medium-scale renewable energy products,” said Hoyt Hudson, Mainstay’s founder and chief executive officer.

A green tag is also known as a renewable energy certificate and a tradable renewable certificate.

It is a certificate that producers of renewable energy — like wind farms and solar power facilities — get for the renewable energy they produce. It represents the environmental benefits of their renewable energy.

Richard Rud, a 50-year-old resident of Hoffman Estates, began selling his green tags to Mainstay last summer after a visit from Swedish friends who told him Americans “waste so much of everything.”

That perception inspired Rud to install a 2.88-kilowatt solar panel system on the roof of his house in March 2003.

Over the course of a year, Rud’s solar panels may generate roughly 4 megawatt-hours of energy, the amount it would take to run a 100-watt light bulb for about 4.6 years.

That’s 4 megawatt-hours of electricity not generated by a polluting energy facility, such as a coal plant. Rud’s solar panel system would therefore create 4 megawatt-hours worth of green tags. They represent all the pollutants that didn’t go into the atmosphere because the coal plant burned less coal by not having to generate the 4 megawatt-hours that Rud’s solar system generated. This is called the environmental benefit.

But Rud’s 4 megawatt-hours of green tags are too small to sell on the national market, where green tags are sold in 100 to 1000 megawatt-hour amounts.

Enter Mainstay Energy.

Hudson, who has a bachelor’s degree in applied physics, started up Mainstay in early 2003 as an entrepreneurial challenge and to explore his longstanding interest in energy. The company’s first product is the bundling of small green tags coming from numerous small renewable energy producers — people like Rud — across the country into large green tag packages. These large green tag packages can then be sold on the national market at prices determined by supply and demand.

Buyers include utilities, larger green tag resellers and big organizations trying to be more environmentally friendly.

Rud recently got his first check, for $20, from Mainstay for his solar power system’s green tags.

“I think it’s a great program,” he said. “That’s one way you can get something back immediately.”

Mark Crowdis, president of Think Energy Inc., a Maryland-based company that buys Mainstay’s green tag packages, said Mainstay’s work with small-scale producers like Rud is a “unique angle on the market.”

“I like the fact that they’re going out and working with small developers of renewables and they’re helping those developers make cost-effective installations,” he said.

“If you take a look at solar, there are very few megawatt systems in the world,” said Bob Maddox, the Northeast regional manager for Georgia-based Sterling Planet Inc., another buyer of Mainstay’s green tag packages. “The only way you can blend solar into a green power offering is if you put together a bunch of systems.”

In 2002, 150,000 megawatt-hours of green tags — certified as legitimately coming from renewable energy facilities under the nationally recognized “Green-e” standard maintained by the Center for Resource Solutions in San Francisco — were sold nationwide. That’s about 0.004 percent of total power produced in the United States for the same year, or enough power to run a 100-watt light bulb for about 171,000 years.

Based upon anecdotal evidence indicating a rapidly expanding market, green tag sales in 2003 could have been twice as high, and sales for 2004 could grow equally fast, said Dan Lieberman, program manager at the Center for Resource Solutions.

Beginning in 2003, Mainstay contracted with small renewable energy facilities that have a combined capacity of about 10 megawatts. Together they generate about 20,000 megawatt-hours in green tags over a year, Hudson said. A 100-watt light bulb could run for about 23,000 years on that energy.

Mainstay will sell those green tags to a dozen or so buyers it has agreements with, but the price of the tags varies across the United States. States with renewable portfolio standards — or laws requiring that a certain amount of used energy be provided by renewable energy facilities — offer a more lucrative and stable price for green tags.

Green tags costs from 2 1/2 cents to 4 cents per kilowatt-hour in Massachusetts, a state requiring 1.5 percent of its energy to be renewable, Hudson said. The solar panels on Rud’s roof and their estimated green tags of 4,000 kilowatt-hours could fetch between $100 and $160 at that price. Illinois lacks a mandated renewable energy standard though it has put forth goals of 5 percent of energy to be from renewable sources by 2010, up to 15 percent by 2020. The City of Chicago stated a goal of 20 percent of its energy to be from renewable sources by 2006. Indiana has no renewable energy standard.

Hudson, who sells only certified “Green-e” green tags, expects the green tag market, and the number of renewable energy facilities underlying it, to grow explosively due to advances in renewable energy technology and increased consumer interest in renewable energy.

Another big reason for growth is the deregulation of the electric utility industry, according to Hudson and Joshua Cynamon, Mainstay’s product manager for project financing.

Deregulation — initiated nationwide by an order from the Federal Energy Regulatory Commission in 1996 — allows power consumers to choose who generates their power, creating a “pressure to move toward a large quantity of smaller systems,” Cynamon said.

Mainstay plans to enter that growing market by financing small- and medium-scale renewable energy projects. Hudson expects that next year Mainstay will become profitable and revenues will hit about $2.5 million. Beyond that, he envisions Mainstay becoming a “next-generation utility company” offering clean energy through many small renewable energy facilities across the nation.

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