T accounts save the world

I went to go pick up some milk at the store last night. On my way in to Safeway, I saw a sign that said "This store is now 100% powered from wind power!" I found this incredibly intriguing, as I hadn't seen a single windmill in San Francisco, let alone in Diamond Heights. Even more so, the Bay Area isn't particularly windy, assuming they bought it from somewhere in the vicinity. Puzzled, I went online to find out more.

So what I did find was the Safeway contracted to derive it's power from wind sources. From where? Well, one utility is up in Solano county, where high atop a hill in a rural area, constant 20 mile an hour winds power scores of 1.8 MW windmills. Still this is one of the few places in the Bay Area rural and windy enough to provide so much power.

So where else are they getting it from? Well, North Dakota for one. I was thinking, man that's an awful long way away to get wind power.

Well, it's an accounting trick really. It's called "alternative compliance." The particular electrons these windmills generated aren't going directly to the stores. Environmentalists came up with an idea and last year put it into law.

The problem is supply and demand. Californians want clean power. The problem is while sunny, solar power is expensive. Wind power is now on par with the cost of grid power, but where it's windy (and rural enough for people not to mind what some people consider an eyesore), they're not real big on clean power. Well, they might be interested, but not big on it like Californians are.

So they figured, why don't they just switch? Basically, Californians would buy the clean power from these windy sources. Then the windy places would buy the regular power from PG&E. The electrons aren't switched, but the accounting all works out. You know, using T accounts to save the world.

The net result is that those who want clean power, their emissions are accounted for (whether CO2 goes into the air in California or North Dakota, it's all the same to the Earth). Basically, California creates a demand for wind power in North Dakota, they get generated there and reduces the need for carbon-based sources, and the overall CO2 production of the closed system (that system being Earth) is lowered. That was basically the idea of the California Global Warming Solutions Act of 2006.

You see, there's been a fundamental problem so far with wind power. Actually it's a problem with building any power plant. It's rarely a "if you build it, they will come". While population centers like the coasts generally grow fast enough to do so, people aren't exactly running to the farmlands. (North Dakota actually shrunk in population in the last census.) So while they have a ton of wind (my mother once said that it felt weird on a day when the wind wasn't blowing), they don't have a ton of demand for new energy sources. And their energy from coal-fired plants is cheap enough that they don't want to take them offline because of some patchouli-smelling hippie.

But if some patchouli-smelling hippie (or earth-friendly business, for that matter) contracts to buy wind power from them, and they take the money from the North Dakotan and use that for California's generation, that makes wind power a possibility, as banks are not going to front the money for a million dollars a megawatt of capacity (sounds like a lot, but actually on par with other generators, like gas and coal, and that's amortized over the life of the windmill, typically 25 years, although they typically pay themselves back in 5-7 years) without a buyer waiting in the wings.

So it's a win-win. Now if only individual users (like me!) could sign up to pay a green premium to get our electricity from green sources. Even if it's from North Dakota.

This all works well until the production of these sources outstrips local demand. However, with production of wind and other renewables in the single digit percentages of overall electrical consumption, this won't be a factor for some years. And then other financial incentives (such as paying a premium for clean power, or charging a "carbon fee" for non-green power, just throwing ideas out there) might be used to build better distribution systems, such as more high-voltage lines from wind-rich rural areas to population centers.

Actually, because of North Dakota's power comes mostly from coal (whereas California's comes mostly from nuclear and hydroelectric, the rest from cleaner natural gas), only powering North Dakota with wind power (still utilizing only about 7% of their potential, whereas about 25% of a California's wind potential is already tapped) would eliminate more carbon emmissions than all of California produces, despite having only 1/55th the population. That might make all the better sense if carbon caps (and thus carbon trading) come into play. It might even be used with programs such as PG&E's soon-to-come ClimateSmart program, that allows users to invest in carbon-reducing projects (such as protecting forests or replacing carbon-heavy electrical production with neutral sources such as wind) so their total carbon output is zero (or "climate neutral").

And it's not limited to wind. A user in foggy San Francisco could buy solar from the sunny East Bay, even though my actual electrons might come from the dirty Bay Point plant. My purchase is offsetting some East Bay plant from producing any carbon at all. That East Bay user is actually buying my electrons and I'm buying his.

All in all, it's a pretty clever way to use accounting to save the world.