Renewable energy system owners can sell the environmental attributes of their systems in the form of renewable energy credits (RECs)—also known as green tags. These tradable commodities are sought by public and private entities that are required by law to offset a portion of their greenhouse gas emissions. In Oregon, as a condition of the Energy Trust subsidy, commercial and business customers own 100% of their systems’ RECs for the first five years, and then the Energy Trust owns them for the next 6 to 20 years. (Note: Incentives are always in flux, and the terms have changed even since my installation in 2006.)
Larch Company sold its green tags for the first two years to 3Degrees Energy, a REC broker. At 5 cents for each solar kilowatt-hour produced, the RECs generated $444 in taxable income each year. While it’s not much in the grand scheme, every penny counts.
By selling off all environmental attributes of the PV system to 3Degrees, Larch Company cannot claim that its electricity is green, climate neutral, or the like. However, I maintain the company’s right to make green claims by buying green tags from Bonneville Environmental Foundation (BEF), a local nonprofit organization. Each year at tax time, I use the foundation’s online carbon calculator to determine my carbon tax, based on the amount of electricity, propane, gas, gasoline, and jet fuel my family and business uses throughout the year. Then I pay my private carbon tax—usually $1,500 per year, which is tax deductible either as a business expense or as a personal charitable contribution, if you don’t develop the venture as a business. A REC is measured as 1,000 kWh of electric energy produced in a CO2-free manner. Prices vary by broker. 3Degrees, for example, charges $15 (or 1.5 cents per kWh for an REC for an unspecified mix of wind, biogas, landfill gas, biomass, geothermal, solar, and low-impact hydroelectric power), while BEF charges $20 (100% wind power), $27 (50% wind, 50% solar) or $35 (100% solar) for the same amount of “green” electricity.