Profiting from reduced IT energy dependency
- 01 October, 2008 09:54
While I applaud any company's attempt to be environmentally responsible and implement "green" projects, I remain skeptical of long-term commitments to green initiatives that don't decrease costs, fatten the bottom line, or polish the organization's image.
Among the projects that can decrease costs I put virtualization, using SaaS suppliers, and facilities management, including datacenter redesign.
Increasing the bottom line by way of a green project is far more difficult. However, many global companies are now noticing that "green efforts" are showing up on RFPs. As an example, I'll cite the European Union Emission Trading Scheme later in this blog.
Unfortunately, in the US it is pretty easy for a company to put a green spin on its image without doing anything more than paying for it.
How to buy a get out of eco-jail free card
If you buy enough RECs (renewable energy credits), you can actually claim your company has a "zero carbon footprint" without doing anything more than paying for the indulgence. REC buyers and sellers call these credits "certificates"; I call them "Get out of eco-jail cards."
RECs, according to Wikipedia, are "tradable environmental commodities in the U.S. which represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy source."
Such sources include solar power, wind power, hydroelectricity, micro hydro, biomass, and biofuels.
But these energy sources do not have to be actually used by your company. You can keep burning all the coal and oil you like.
At best, you are paying for someone else to invest in these sources. At worst, your company is paying a middleman who, in theory, is investing in other companies that are investing in renewable energy. Simple isn't it?
In other words, your company buys certificates from a company such as Native Energy, a company that claims to invest in renewable energy. In return for the payoff, you get to say your company has purchased renewable energy when all you have actually done is buy a certificate to display on the wall at headquarters. I'm sure there is also a logo like the Good Housekeeping Seal of Approval that you can stick in the corner of every ad you run.
Proponents claim the payments give companies that do produce renewable energy a spiff or a subsidy to create more electricity from these green energy sources.
I spoke with Ryan Martens, CTO of Rally Software Development, a company that appears to be committed to being green even if it costs them.
Martens' admits, however, that his company buys those RECs "to support the claim that our hosted operations has a zero carbon footprint."
Rally pays Native Energy a dollar per hundred kilowatts, which by the way does decrease its bottom line to some degree.
This costs Rally only $200 per quarter to cover the power and cooling costs. But Rally is also paying extra to buy recycled and compostable materials using a green catalog form Corporate Express and to have its trash hauler pick up compost from its site twice a week.
"I hope to find a new model with the City of Boulder and the University of Colorado where those RECs actually go into a fund to build solar on our building," says Martens, whose heart is obviously in the right place.
Native Energy is putting wind plants on the ground in Native American lands. Companies such as Rally pay Native Energy -- and similar organizations -- for RECs, which enable Native Energy to put up more windmills. That's how it works in theory. How many windmills they actually put up will take some looking in to.
EU offers carbon credits and carbon trades
The EU set up an emission trading scheme that many say is preferable to a carbon tax. If you can reduce carbon emission below a certain cap you can trade it in the European market. There are enforcement and monitoring issues, of course, but carbon trades still seem to me a better idea than our RECs.
Each company in the EU is given a permit for the number of metric tons it can spew out. If the company goes over that cap, it has to buy those extra carbon permits from a company that is under the cap and can therefore sell its earned credits.
According to David Simchi-Levi, chief science officer at ILOG, a supply-chain company that helps companies green up their supply chain, a company can sell its permits at 14 euros per metric ton. Therefore, if your company has a cap of 2 million metric tons of carbon and reduces that by 10 percent, it has 200,000 permits to sell at 14 euros per ton.
Last year, Simchi-Levi says the permit market saw 40 billion euros changing hands from those who can't reduce carbon emissions to those that can.
Adding those kinds of numbers to any company's bottom line could be the right kind of incentive to convince major spewers of carbon emissions to clean up their act and, in so doing, clean our air and our dependence on fossil fuels.