Introduction to Renewable Energy Credits

& Carbon Offsets

Renewable Choice Services

A Partner to Leading Brands

Contents:

Our energy & climate challenges

Renewable energy credits

Carbon offsets

Corporate action

Renewable Choice services

Energy & Climate Challenges

U.S. Energy Infrastructure

Renewables: 2.5% (Biomass: 1.31%; Wind: 0.83%; Solar: 0.01%; Geothermal: 0.35%)Oil: 1.6%; Other fossil fuel: 0.5%

source: EPA eGRID2010 Version 1.1

The Problem

Problems associated with the current U.S. energy generation infrastructure:

Climate change

Air pollution and smog

Mercury in water

Toxic gases and metals in the air

Respiratory problems in children

Mountaintop removal

Global Climate Change

Source: (blue) Vostok ice core, (green) EPICA ice core, (red) Law Dome ice core, (cyan) Siple Dome ice core, (black) Mauna Loa Observatory, Hawaii

Addressing Climate Change: No Silver Bullet

• 20% wind by 2030• CO2 at 1980 levels

“Geo-Greenism"—is not only what we need to save the planet from overheating; it is what we need to make America healthier, richer, more innovative, more productive, and more secure.

Thomas Freidman, Hot, Flat & Crowded

Harness commercial and consumer demand to help drive the growth of renewable energy and clean technologies

Goal:

Renewable Energy Credits

What is a Renewable Energy Credit (REC)?

• A REC is the accepted way to track and trade renewable energy in North America

• A renewable energy source is credited with RECs as it produces electricity

• A REC represents the environmental attributes associated with the generation of electricity from a renewable energy source

• The owner of the REC receives the right to claim its environmental benefits

Renewable Energy Technologies

WIND SMALL HYDRO SOLAR

BIOMASS BIOGAS OR GEOTHERMAL

RECs and the Grid System

Renewable Energy Credits

Compliance Voluntary

One Commodity – Two Markets

Voluntary Market

• Most organizations lack the ability to install onsite renewable energy:

– Zoning restrictions

– Lack of natural resources

– Capital limitations

• RECs allow businesses to purchase grid-sourced renewable energy

The Green-e® Energy Standard

Board includes members from Environmental Defense, NREL, NRDC, and the Union of Concerned Scientists

Guarantees that RECs:• Originate from 100% new renewable facilities• Are produced in the stated calendar year• Go beyond existing government mandates• Pass a process audit by an independent certified public accounting firm

The Green-e logo helps consumers easily identify environmentally superior renewable energy options. For more information on Green-e certification requirements, call 1-888-63-GREEN or log on to www.green-e.org.

Financing a Project:The Four Legs of Wind Energy

Tax IncentivesDepreciation

Energy SalesRenewable Energy Credits

Value of RECs to Wind Projects

* Value as a percent of 20 year rate requirement

Source: John Deere Renewables

"By converting Plant Mitchell to biomass, we hope to not only help grow the renewable resource base in Georgia but also to expand the market for renewable energy credits, which ultimately will foster additional renewable energy development.“

~ Mike Garrett, President and CEO, Georgia Power

Straight From The Developer

“To any developer doing a wind farm in today’s market, renewable energy credits are critical to the revenue stream in taking a project over the top. If we do another one, it certainly will be a critical factor.”

~ Dave Osburn, Oklahoma Municipal Power Authority

“In ten years, Wind will be bigger than oil in Texas.”

~ T. Boone Pickens, Pickens Plan

“Selling of RECs makes the construction of more renewable energy generation plants possible and also makes existing renewable generation more commercially viable.”

~ Tim Swanson, Director of Origination for Florida Power & Light (FPL)

“There isn’t a single renewable facility that goes online in this country where RECs aren’t considered in the core financing.”

~ Steve Maller, John Deere Wind Energy

Voluntary Purchases are Critical

• Voluntary purchases

of RECs represented

OVER 50% of all wind

sales in 2008

• Voluntary buyers are

making as big or

bigger of an impact

as state-level

requirements

Source: Lawrence Berkeley National Laboratory and National Renewable Energy Laboratory

Slowdown in Construction in 2010

Sources: AWEA U.S. Wind Industry Annual Market Report - Year Ending 2009; AWEA 4th Quarter 2010 Market Report

• 5,115 MW installed in 2010

• 51% less capacity installed than 2009

• 2009 was a record-setting year with

10,010 MW installed

• Constraints in capital and credit markets

impacting development

• 40,180 MW of total capacity

• Enough to power over 9 million homes

Renewables: 2.5% (Biomass: 1.31%; Wind: 0.83%; Solar: 0.01%; Geothermal: 0.35%)Oil: 1.6%; Other fossil fuel: 0.5%

source: EPA eGRID2010 Version 1.1

Renewables Remain < 2% of Generation

Carbon Offsets

What is a Carbon Offset?

A carbon offset is also referred to as a

verified emission reduction, or VER

One VER represents one metric ton of

carbon dioxide emissions avoided or

removed from the atmosphere

Purchasing VERs helps fund emissions

reduction projects worldwide

Project Types

Cap and Trade: Its Origins

Cap and Trade first addressed Acid Rain in the 1990’s

The Acid Rain ExperienceUnprecedented environmental protection at

unmatched cost efficiency • Achieved 122% of targeted

reductions

• Cost savings of $2 - $23.6

billion per year

• Demonstrated success of

market based mechanisms

Source: Environmental Defense Fund

Cap and Trade continued…

• Kyoto Protocol incorporated cap

and trade based on U.S. Acid

Rain success

• Carbon offsets are the most

efficient way for the market to

ensure cost effective reductions

• A ton of carbon is a ton of

carbon

Carbon Offsets: The Strategic Rationale

• Lowers cost of compliance• Encourages investment &

innovation in sectors not required to reduce emissions

• Provides time for regulated entities to change technologies

• Allows long-term technology development and deployment

The Role of Carbon Offsets in Kyoto

The Kyoto Protocol Expires in 2012… The world is now preparing for a post-Kyoto system

Source: United Nations Framework Convention on Climate Change (UNFCCC)

One Commodity – Two Markets

Carbon Offsets

Compliance Voluntary

Importance of the Voluntary Carbon Market

• Choice and broad participation

• Innovation and experimentation

• Social, environmental & economic benefits to

project hosts

• Economically efficient way to reduce GHG

emissions

• Help pave the way for more projects

• Improve compliance programs

Voluntary Carbon Markets Doubled Last Year

Source: New Carbon Finance, Ecosystem Marketplace

Leading Standards

• Verified Carbon Standard (VCS)

• American Carbon Registry Standard

• Gold Standard

• Green-e Climate

• Climate Action Reserve

Standards ensure that reduction projects are real, additional, verifiable and permanent, and that

offsets are retired only once

Additionality Tests

• Barriers

• Common practices

• Investment or financial

• Regulatory

• Performance

• Technology

Comparison of RECs & Carbon Offsets

How What Geography Units

RECs Help fund generation of clean power Renewable energy U.S. MWh

Carbon Offsets

Fund reduction of carbon emissions

Energy efficiencyRenewable energy Methane capture

Fuel switchingAgriculture &

Forestry practices

Global MTCO2e

Corporate Voluntary Actions

State of Corporate Activity

Source: The Conference Board, 2006 & U.S. EPA Green Power Partnership, 2008

• 75% actively measure GHG emissions

• 60% of corporate boards have carbon on agenda

• 50% have programs to reduce or offset emissions

• 15% engage in voluntary emissions trading

• 40% considering voluntary purchase

• >1000 EPA Green Power Partners

• Green Power Partners purchase >16 billion kWh of RECs annually

Corporate Motivations

• Fulfill voluntary reduction targets

• Create internal incentives for reductions

• Gain carbon market experience

• Support renewable energy development

• Prepare for regulations

• Enhance the brand

• Differentiate a product

The Corporate GHG Accounting Standard

• World Resources Institute

– Greenhouse Gas (GHG) Protocol

– The most widely used standard

– Comprehensive accounting guidelines

What is a Greenhouse Gas Inventory?

A greenhouse gas inventory is a comprehensive and documented accounting of all greenhouse gas emissions attributed to an organization’s activities

Offsetting Emissions: A Closer Look

Offsetting Protocols: RECs & Carbon Offsets

SCOPEUse of Carbon Offsets Use of RECs

About Renewable Choice?

Greenhouse Gas Inventories

Understand

• Establish an emissions baseline to understand and report

your greenhouse gas emissions

Track

• Conduct a yearly inventory to track your progress toward

a reduction goal

Reduce

• Identify carbon-intensive activities and target with

process, infrastructure changes or offsets

Renewable Choice Offset Portfolio

Renewable Energy Credits

• American Wind – Green-e® Energy

• Clean Source – Green-e® Energy

Verified Emission Reductions

• Choice Carbon• American Carbon Registry• Verified Carbon Standard• Climate Action Reserve

Business Essentials

What you get:• Dedicated Client Services Manager

• CD of images and graphics

• RCE website exposure

• Business Essentials Starter Kit– Custom certificate of purchase

– Messaging guide

– Window clings and magnets

– Custom poster

– Image library

– Facts and figures

Customized Marketing Support:

1. Determine commitment level

2. Choose a program that fits your

company’s or project’s communication &

outreach goals

3. Renewable Choice customizes the

program you choose and provides on-

going consultation and support

LEED® Green Power

4,000+

100%

Member

LEED APs

LEED® projects internationally

success rate

USGBC® & CaGBC®

on staff

4775 Walnut Street, Suite 230 . Boulder, CO 80301 . 877.810.8670 . www.renewablechoice.com

Contact

Sales@renewablechoice.com877.810.8670