The demand for green energy has grown so much that the market for renewable energy credits may award the movement its greatest honor: an increase in price.
Suppliers of renewable energy are having a hard time coming up with new sources of renewable energy -- mostly from wind -- to meet the rise in popularity.
Among the big consumers of the energy credits are Yahoo Inc., which just signed up for 1.6 million kilowatt hours of green power locally -- the equivalent of half the annual energy output of a large wind turbine. Cisco Systems Inc. is another big purchaser. So are Applied Materials Inc. and Agilent Technologies Inc.
Each of these companies is purchasing the energy credits through Silicon Valley Power, Santa Clara's city-owned utility, which hopes the credits will expand the capacity of renewable energy providers.
"The added income stream from the certificates helps producers (of renewable energy) procure more financing to pay for energy developments," says Larry Owens, division manager for customer relations at Silicon Valley Power.
Renewable energy credits -- or certificates as they are sometimes called -- are a new kind of commodity that allows consumers and businesses to purchase the positive environmental attributes of a wind turbine or solar panels by the kilowatt hour.
Some call this a solution to greenhouse gas emissions. More cynical observers see it as a way to burnish one's environmental image. In fact, it's both.
Companies tout their purchases of the credits, and the revenue from selling the feel-good credits gives solar and wind-energy producers capital to expand.
The credibility of a similar arrangement for buying carbon offsets to lessen one's guilt over emissions created by an airplane trip has been questioned. But the renewable energy credit market claims greater maturity -- it dates back to 1997 -- and says every credit is tied directly to a kilowatt hour of production at a wind turbine or other source of renewable energy.
"These certificates are like stock certificates," says Owens. "They are metered and certified by a third party."
The Palo Alto Electric Utilities Department was the first in the area to offer its customers renewable energy credits. Silicon Valley Power is another early champion of them. It offers them to both residential and business customers.
Earlier this month, Silicon Valley Power signed up Yahoo Inc. to buy 1,604 million kwh of power at a cost of $24,000. That comes to about 6.5 percent of Yahoo's Santa Clara energy need. The utility also counts Applied Materials Inc., Agilent Technologies Inc. and Cisco Systems Inc. among other large buyers of the credits.
Consumers and businesses pay a 1.5-cent premium for the renewable energy credits over their normal energy bill. Silicon Valley Power charges residential customers 8.5 cents a kwh. Businesses pay from 8.2 cents to 12.4 cents per kwh, depending on the size of their purchase. According to the Department of Energy, the average premium that green energy buyers pay has fallen about 8 cents a year between 2000 and 2005, when it stood at 2.36 cents. In all, Silicon Valley Power has sold renewable energy credits for 56,682 megawatt hours of green power.
The credits are intangible. Lenny Hochschild, director of renewable energy markets for consultant Evolution Markets, calls them "green bragging rights." And so public companies like Cisco who buy them have some explaining to do to their stockholders.
"We have a balancing act," says Washington, D.C.-based Jennifer Greeson, senior public relations manager for Cisco. "We have to be fiscally responsible and have to be progressive in how we look at environmental issues. Renewable energy is one of the ways we are exploring to reduce our environmental footprint."
Government agencies are also contributing to the rise of the energy credits. NASA's Ames Research Center at Moffett Field, is buying 1,600 megawatt hours of renewable energy credits now and wants to triple that by 2013.
The anticipated effect is market stimulation.
"Somewhere in the grid someone is getting the green energy," says Steve Frankel, chief of the plant engineering branch at Ames. "It may not make it all the way to our wires, but it's being used, and we are contributing to that generation."
The market for green power sales was between $50 million and $70 million in 2005, the most recent data from the U.S. Department of Energy's National Renewable Energy Laboratory. At least half of that amount came from renewable energy credits sales, the report says.
About 8.5 billion kwh of green energy was generated in 2005, which is a tiny fraction, about 0.2 percent of total U.S. electricity sales. But demand is growing.
Green sales were up 37 percent in 2005, and sales of the credits doubled.
"The market has shown amazing growth," says Dan Kalafatas, president and COO of 3 Degrees, the San Francisco-based energy marketing company from which Silicon Valley Power buys its renewable energy credits. "It is dramatically higher than we had anticipated and higher here than anywhere in the United States."
Now producers of renewable energy are struggling to find locations to install their wind turbines and solar panel arrays, an increasingly difficult task especially close to urban areas.
"The best sites have been tapped," Kalafatas says. "The long-term fundamental demand will raise prices."
The California Public Utilities Commission does not allow the large investor-owned utilities to sell the renewable credits, preferring instead that the utilities develop their own renewable energy. But in September, the commission will look at the idea at a workshop. State law requires the utilities to use more renewable sources by 2010.
A spokesman for PG&E said that it was preparing a position paper regarding the purchase of renewable energy credits, but he said he would not tip the utility's hand until the position is outlined in a filing with the CPUC later this month.
A slight cost increase for the renewable energy credits will not deter Yahoo from the energy credit program, says Rick Cuevas, senior facilities manager.
"If the cost doubled, we might have to have a look at it," Cuevas says. "But we are committed, and we want this program to go on."
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