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by Chris Carroll, AARP Bulletin, March 22, 2010|Comments: 0
It began as an attempt to save energy in the face of a massive impending electric-rate increase. But Tami Wilson, 50, and her husband, Randy, 54, soon went much further.
“We didn’t plan all this from the beginning,” says Tami Wilson, showing gray-black solar panels that sprouted last summer on the roof of her house in Harrisburg, Pa. “But step by step, one thing led to another, until we were practically off the grid.”
The Wilsons are pioneers in a brand-new U.S. energy market, one in which households can save money and help the environment by reducing fossil fuel consumption—and actually get paid to do so. In January they likely became the first people in the world to sell what’s called a personal carbon credit.
Experimenting last spring with ways to save electricity, the Wilsons noticed a local newspaper story about a new company called My Emissions Exchange. The start-up company promised not only to help track energy savings, but to add up the amount of pollution avoided as a result, and sell it as carbon credits in the voluntary U.S. carbon offset market. The Wilsons signed up last year and sold their first offset in January for a whopping $21.50–or just over $17 after My Emissions Exchange took its commission.
Sound strange? It is — in the United States, where companies can emit an unlimited amount of carbon dioxide and other greenhouse gases into the air. Buying carbon credits is an entirely voluntary form of environmental charity. But in places like the European Union that have placed a cap on carbon emissions, carbon credits (not produced by individual households, however) are bought every day. Companies that fail to reduce their own emissions enough to comply with regulations essentially can pay someone else to do it.
This market-based concept, called “cap-and-trade,” could be coming stateside soon. It was part of President Obama’s campaign platform, and while a bill to cap carbon emissions is stalled in the U.S. Senate, proponents say they’ll keep pushing until Congress passes a law to fight global warming.
But it wasn’t this big picture–global energy markets and climate change–that motivated the Wilsons to begin making alternate energy plans early last year. They were simply focused on what they’d been hearing for months from their local electric company.
For well over a decade, state-ordered rate caps shielded 1.4 million Pennsylvania residents from the steadily rising cost of power as global demand grew. Through 2009, customers of PPL Electric Utilities essentially paid 1990s prices for their electricity, the Allentown, Pa.-based company says. But the rate caps were set to expire on Dec. 31, and the company told its customers to brace for a 30 percent increase.
The Wilsons decided to act. Randy had just retired from the accounts department at a local health insurer, and the couple was also trying to grow a home business. The thought of digging into their pockets to pay 30 percent more than their usual $100 monthly electric bill held little appeal.
They started in the spring of 2009 with the simplest measure they knew—replacing incandescent bulbs with compact fluorescents, which use up to 75 percent less electricity than an equally bright traditional bulb.
“Next, we started looking at other things and noticed we were leaving computers on all the time even though they didn’t always need to be on,” Randy Wilson says.
Then the Wilsons started getting serious, purchasing a $25 device called a Kill A Watt that they could hook up to electrical appliances to find out how much energy each was using, or wasting when not in use. They began habitually unplugging unused electrical devices, and got rid of their son’s heated waterbed.
They began watching thermostat settings and moderating their use of energy-guzzling appliances. “I have what you might call a hybrid clothes dryer,” Tami Wilson says.
“It’s just a normal dryer, but I air-dry clothes,” after spinning them in the dryer for 10 minutes, she says, to fluff them up. “Clothes get just as dry that way.”
After a few months of refining their energy-saving techniques, they had cut 30 percent off their monthly energy bill—the amount of the impending rate hike. Mission accomplished, end of story?
“We still weren’t satisfied,” she said.
Taking the plunge
Instead of just saving energy by shielding themselves from the law of supply and demand, they decided to sidestep economics altogether and produce their own supply. In August 2009, a local solar contractor installed a $58,000 solar electrical system with rooftop photovoltaic panels capable of generating up to 8,100 watts of DC power in peak conditions. The installation process took just two days, and the results were immediate.
“It was a beautiful sunny afternoon, and our electric meter was actually running backwards,” Tami Wilson says.
But how does saving a few hundred dollars a year on electricity for a 1,500-square-foot house justify a $58,000 system? Only in recent decades have solar panels been seen as a practical way of producing electricity. And even then, many economists argued that because of their high price, they’re not economical when distributed on buildings or homes like the Wilsons’ house in Pennsylvania because they don’t take advantage of economies of scale, as centralized generation does, solar or otherwise.
That’s changing quickly, many solar energy experts contend. Just as flat-panel TV displays once commanded a steep premium but fell in price as they gained popularity and production ramped up, solar prices are falling as well.
“System prices have recently dropped by half,” says Travis Bradford, founder of the Prometheus Institute for Sustainable Development, a Chicago-based alternative energy research firm. The combination of falling prices and subsidies from the government and utility companies means that consumers who install a solar electric system now can generally expect it to pay for itself in 10 years–or even five years in the sunniest locations, like Southern California, Bradford says. “Once it’s paid back, you have free power for as long as you own the system.”
Though Harrisburg isn’t the sunniest place, the Wilsons estimate they’ll recoup their investment within five years and begin enjoying free electricity. The biggest factor in the equation is a combination of state and federal tax rebates and incentives, instituted by legislatures to drive demand for solar energy and reduce greenhouse gases. Pennsylvania’s current rebate is $2.25 a watt of installed solar capacity. That effectively lopped $18,225 off the price of the Wilsons’ 8,100-watt solar panel system. A federal measure will generate another $17,400 in rebates.
Such rebates are sometimes characterized as a waste of taxpayers’ money. “If the Wilsons or any other family wants to invest in solar panels or windmills to save money, they should be permitted to do,” energy policy researcher Nick Loris wrote for the conservative Heritage Foundation. “But they shouldn’t do it with the taxpayers’ help. There’s a reason renewable energy only meets a very small portion of our energy needs. Wind and solar cannot survive without preferential treatment through subsidies, mandates, and tax breaks.”
But solar advocates say that if the point is to establish low-carbon renewable energy sources for the future, it’s worth it to pay a premium now. “The reason is partly to help develop a market to bring down costs over time,” says Bradford, of the Prometheus Institute.
“If you look at it this way, the subsidy isn’t really for the Wilsons’ house so much as it is a jobs training program for the installers who will grow and get better so that when they do the Wilsons’ neighbors’ houses, they’re all cheaper, too.”
Power companies are helping as well. In recent weeks, Tami Wilson says, PPL told the Wilsons they’d get a $5,000 company rebate. In addition, because Pennsylvania law requires electric utilities to generate a certain percentage of its electricity through renewable sources like solar or wind, PPL actually pays the Wilsons for generating the power they use at home. Essentially, their solar electric system has turned the Wilsons into contractors for the utilities.
Ironically, it’s the carbon offsets, the smallest component of the Wilsons’ solar payoff plan, that has generated the most fascination in the United States and around the world, where greenhouse gas emissions have been capped under the Kyoto Protocol, an international agreement to fight climate change—which the United States didn’t sign.
“They’re a mechanism that uses the market and entrepreneurial spirit to accomplish emissions reductions in places you couldn’t otherwise regulate through policies,” says Michael Gillenwater, executive director and dean of the nonprofit Greenhouse Gas Management Institute, based in Washington, D.C. “Basically, if I help you reduce your emissions, I can pay you some money in the form of an offset.”
A typical offset project might be a mine in Siberia emitting excess methane. European companies pay to help the mine cut its pollution, and are credited as if they had reduced their own by an equal amount. The reasoning is that emission reductions in the Siberian mine can be implemented much more quickly and cheaply than the European company could accomplish in its own facilities.
“Climate change is a global phenomenon, so it doesn’t matter where you reduce the emissions so long as you reduce them,” Gillenwater says.
Selling the savings
The company the Wilsons used, New York-based My Emissions Exchange, so far has signed up more than 2,000 participants, says project manager Paul Herrgesell. The typical family doesn’t have a solar electric system, so they won’t amass credits as fast as the Wilsons.
“The Wilsons have gone full bore, but typically we advise people to go slow and look at incremental changes they can make,” Herrgesell says. But for those who make a significant investment, “A typical family of four might save $400 to $500 in energy costs and generate two or three credits in a year.”
An Ohio company that builds machines for recycling aluminum, Molten Metal Equipment Innovations Inc., bought the Wilsons’ first carbon credit.
“For us, it’s just a nice little added incentive,” Tami said. “For most people, anything to help them focus on cutting their energy usage is a good thing. And maybe it’s the final push to motivate them to do what we’ve done.”
Chris Carroll is a writer from Maryland.
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