NEW YORK - US companies and organizations that conserve electricity by switching to more efficient lighting or by moderating heating and cooling will earn a credit they can trade or bank.
That's the hope of Sterling Planet, a Georgia-based company that has created "white tags," or tradable certificates that are similar to "green tags," or tradable credits for creating and delivering renewable energy, such as solar and wind.
Energy-efficiency credit systems, which Connecticut plans to adopt in 2007, are similar to a market being set up by states in the Northeast where utilities would earn tradable credits for reducing greenhouse gas carbon dioxide.
In energy-efficiency markets, such as those that trade in Italy and Great Britain, companies that save electricity under set targets can sell credits to companies that fall short of their target.
A US Environmental Protection Agency spokeswoman said in an e-mail that efficiency trading systems, where properly designed, have the potential to harness the power of the market to help achieve least-cost options for saving energy.
White-tag programs would work on a state-by-state basis, but could be adjusted if a federal program was set up. States like Texas and Vermont have required utilities to offset 10 percent of their demand growth through energy efficiency.
"Texas has had no problem meeting its targets, which could be a sign that white tag programs could work," said Steven Nadel, the director of the Washington, D.C.-based American Council for an Energy Efficient Economy.
"The rules are a little different in each state, so they are going to have to figure out how to do it in each of them," Nadel said in an interview.
Three states -- Connecticut, Nevada, and Pennsylvania -- will soon require energy efficiency credits as a way to decrease electricity demand. Sterling said next year, Connecticut will be the first state to implement such a program.
Like much of the country, those states have tight electricity transmission line capacity. Sterling hopes white tags could provide some relief to generators trying to get power to customers.
"I think these programs will reduce a fair amount of peak demand that will take some of the pressure off their transmission systems," said Paul MacGregor, vice president of energy efficiency at Sterling.
In such programs, the states would hand down the white-tag certificates. In voluntary company-to-company white-tag deals, nonprofit certification programs such as Green-e would ensure the integrity of the credits.
But developing programs in states, which all have different rules and targets, can quickly get complicated, an expert in environmental markets said.
"It's a great concept, but to turn it into a financial product has been very onerous," said Peter Fusaro, chairman of Global Change Associates Inc. in New York.
Currently, companies in many states can participate in demand-response programs in which they receive monetary or other forms of compensation for reducing their power usage when called upon by the regional grid operator in times of need. But often, companies earn compensation in those programs by running off-grid diesel generators, not through conservation.
The first business-to-business trading of white tags should get under way this summer, said MacGregor, who added that large companies in pharmaceutical and office furniture, as well as leading retailers, universities and municipalities have expressed interest in the program.
Sterling, which bills itself as the largest US retailer of renewable energy, aims to bring buyers and sellers of white tags together. It has developed technology with mathematical techniques including algorithms to verify and certify the credits. (Additional reporting by Scott Disavino)
Story by Timothy Gardner
REUTERS NEWS SERVICE
