The Power of Savings

Originally published for Environmental Risk Magazine

By Elisa Wood

US commodity brokers expect the energy efficiency certificate or ‘white tag’ market to grow dramatically in the next few years as more states begin to treat efficiency as a tradable commodity. Elisa Wood investigates

Energy efficiency advocates are fond of saying that the cheapest megawatt is the one never used. But in the US, the true value of that saved megawatt is only now becoming clear, as an energy efficiency commodity market begins to take shape.

Following the lead of the UK, France and Italy, three US states have set up rules that allow trading of energy efficiency certificates or ‘white tags’, as they have been dubbed by Georgia-based energy efficiency marketer Sterling Planet. Several other states and members of Congress are contemplating the concept.

A certificate represents one megawatthour (MWh) of electricity saved – perhaps through the installation of efficient lights in an office building, advanced motors at a factory or fuel-saving cogeneration units attached to a university. Utilities and other retail electricity sellers buy the certificates to comply with a state-mandated energy efficiency portfolio standard (EEPS), an enforcable energy savings requirement.

Craig Lilly, an attorney who handles clean energy deals from the California Silicon Valley office of Squire, Sanders & Dempsey, describes the rules as a kind of “financial engineering to establish an energy efficiency market”. And so far the engineering seems to be working in Connecticut, the first state to push forward with the approach. Connecticut instituted an EEPS in 2007 that requires utilities and retail sellers to secure certificates equivalent to 1% of their retail electricity sales.

To read this full story and others by Elisa Wood go to http://www.realenergywriters.com and click on Elisa Wood.