Creating a better future

$567.54 to offset a tonne of CO2?

I finally got around to measuring the power consumption in the office. Now I wouldn’t say we were big energy consumers with a small office of 11 staff with about 250sqm of office space. So after a few power bills I was finally able to work out what our energy consumption was and to shop around for 100% green power in Sydney.

First thing to note that it is worth finding out what a kilowatt (kWh) is and how much you pay for it. Now this is where it gets interesting. Some energy plans have you on a flat rate per kWh while other plans charge different rates for different times of the day. This is where terms such as peak, shoulder and off peak come to appear on your bill. These rates can vary from 5.1c to 25.1c per kWh so it pays to check out your plan. Luckily we are just on a flat rate so there are no real complex formulas for my spreadsheet. Also to give you an idea they say the average small office of around 10 to 12 people would consume about 25,000 kWh per year.

After 10 minutes of going through the last three bills and putting the details on a very basic spreadsheet I can work out that our monthly average was 1,799 kWh which annually works out to be 21,598 kWh. So armed with this information I decided to shop about for the best 100% green power for the office. I remember a conversation I had a few weeks ago with Nic from the Total Environment Centre telling me to check out this site www.greenelectricitywatch.org.au here you will get useful information including an independent ranking of green energy providers. It really is worth spending a few minutes on this site checking this out before you make your decision.

After checking the rankings I decided to stay with our current provider and switch to the 100% green power option. The additional cost was an extra 5.5c per kWh so my spreadsheet began to grow a few more lines and now looks something like this:

Monthly kWh: 1,799
100% Green Option: = 1,799 X 5.5c
Monthly Extra Costs: $107.86
Annual Cost: $1,294.28 (21,598 kWh a year)

Ok so far so good, happy to pay that in the company budget and would like to drive down energy consumption a bit more.

Now I come to the next part and this is very interesting. From my energy bill I can see how much green house gasses are produced by our energy. So from when we moved into the office last April to Mid December we have used a total of 16,192 kWh causing a total of 1.7163 tonnes of CO2. So averaging this out for 12 months the current estimate would be 2.28 tonnes of C02.

What I am getting my head around is that for an extra $1,294.00 per year we have the privilege of becoming a 100% green power office and thereby offsetting 2.28 tonnes of CO2.

Now this is where I have a slight problem. Doing the simple math of $1,294.00 (being the extra cost of 100% green power) divided by 2.28 (being the tones of Co2)

Gives you a figure of $567.54 per ton of CO2!

Surely I am missing something here? I checked what a tonne of CO2 costs to offset and checked out Climate Friendly (who just also happen to be rated number 1 in the recent Carbon Offset Watch) and the cost was $28.60 per tonne.

So if my calculations are right then we really have two options.
1) Stay with 100% green power and pay an extra $1,294.00 per year to offset 2.28 tonnes of CO2.

2) Use the $1,294.00 and offset 45.25 tonnes of CO2

Maybe I have done the sums wrong or maybe I should really consider that purchasing green power sends a clear signal to the energy providers that there is the demand and helps build the business case for more renewable energy? But to me it does seem like a high premium to pay.

I have asked this question to a number of people and welcome your comments on this.
Please don’t misinterpret this information I am all for 100% renewable energy but are we getting the best bang for our CO2 buck when it comes to green power?

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Comment by Andrew Barson on April 4, 2009 at 7:56pm: Well picked up Nils!

Lee - Nils is right, you've miscalculated. Each kWh of electricity used in NSW produces 1.06 kg of CO2e, so you're producing 22.8 tonnes not 2.28 tonnes.

The general question still holds though, is it better to pay $57 for each tonne of CO2 you've produced or pay for good quality offsets?(which you can get for just under $20 per tonne at this size)

I think it's important to realise that paying for GreenPower increases the demand for Renewable Energy Credits (RECs) that are generated by renewable energy projects, which in turn can help get renewable energy projects over some investment barriers, but it doesn't necessarily mean that the electricity your using is carbon neutral. (also most of the demand for RECs stems from the 20% renewables target rather than greenpower buyers)

Why? It's a bit complicated, as you need to look at the scheduling of electricity generators based on price points throughout the day and your usage times. Basically, when wind blows and wind power enters the grid, the hydro plants, then the gas power plants are the first to shut down as they are more expensive than wind and coal. When you're using electricity during off peak, it is only the cheapest power stations (coal) running. In summary, you're buying wind and using coal.

Once the emissions trading comes in to play: we will have one emissions target for Australia, which includes all our electricity generators. The extra renewable energy you're buying will help Australia reach its target, but if the target is legislated, we would probably have reached the same target anyway.

The way I see the question is: do you want to pay ~$52/tonne CO2e to invest in renewable energy in Australia or to pay $20/tonne to invest in renewable energy projects in developing countries?

My tip: Invest the $1200 in energy efficiency measures in your office, starting with all the measures with a payback under 3 years, and then moving to the more expensive measures. These measures will reduce your power bills, and then you can choose to invest that money in further energy efficiency, GreenPower or offsets.

Comment by Nils Davis on January 28, 2009 at 10:23am: I did a quick calc and I think I see your problem - I think you're responsible for more like 22 tonnes of CO2, not 2.2 tons. According to the FAQs on this page from the Oak Ridge National Lab, each kWh is worth about 2.3 pounds, or 1 kg, so 1,000 kWhs is about a tonne of CO2. At 22k kWhs, your yearly CO2 footprint is about 22 tonnes, and the cost per tonne of the green option is about $57.

Now, I've heard that the cost of CO2 in a cap and trade system will probably come out at about $80/ton (U.S. units this time), so you're getting a better deal than it first appeared.

Comment by Lee Stewart on January 23, 2009 at 3:07pm: Nic, Thanks for your comments and yes I agree with you and the first thing we are doing in the office is doing everything we can to limit our power consumption. I also agree a bit baffling and we will be watching this space closely and maybe one day we wont have to offset at all...

Comment by Nic Moodie on January 23, 2009 at 2:57pm: Yes Lee and others it’s all a bit baffling I agree.

(Mostly) We all accept that reducing anthropomorphic carbon levels are important and voluntary offsets are certainly part of the solution, but there’s more at stake then simply dealing with your company’s carbon footprint.

Most significantly there just aren’t enough good quality carbon offsets available across the market to offset anywhere close to the amount of CO2 equiv gasses required to avoid the high risk scenarios of climate change.

With green energy, as I understand regardless of the provider, if demand exceeds supply then providers must invest in actual onshore renewable energy infrastructure to meet that demand. So every 100% green energy purchase is driving the levels of renewables higher and economies of scale start to come into play.

Also there’s a variety of offsets on the international market, many based offshore in developing countries, and in the case of some forestry offsets for example there’s the risk of further exacerbating equity issues around food markets from pressure on agricultural land. There is already a food crisis under the weight of our developing interest in bio-fuels.

Then there’s the investing in Australian green industries issue and the clear statement of consumer demands which shouldn’t be underestimated.

I would suggest best responsible energy practice would be to reduce energy use through efficiency measures, then green power and finally offset …

But as you can see there’s no simple answer.
Make informed decisions about your offsets.

But maybe it’s good to remember that if we were all using low carbon intensity renewables, we wouldn’t have to offset at all...?

Comment by James Swanston on January 23, 2009 at 12:39pm: Hi Lee, I've just been looking at some carbon offset schemes myself and the prices I am getting told are around £8-10 (so around AUD20 per tonne offset) via accredited schemes... It's a real shame that the scheme that has the lowest carbon footprint is way above the cost of normal electricity options. Perhaps over in the UK, it is easier to find electricity schemes that come closer to normal price points. James

Comment by Lee Stewart on January 22, 2009 at 8:21am: Michael, Thanks for your comments and yes maybe we should be looking at other investment options in order to get the most out of the $1200. From my very basic calculations we can offset 45 tonnes of CO2 but maybe we should look at using those funds to drive energy efficiency as I believe that offsets should be the last resort.

Comment by Michael Parker on January 21, 2009 at 3:17pm: Congratulations on looking into a task that most of us have considered but possibly never actioned. It does pose an interesting question - assuming the cabon offset pricing is correct and it deilvers what it is intended to do. Also are there other investment options to be considered with the $1200 commitment that has the potential to have an even greater positive impact to climate change?

Comment by Ewan Palmer on January 21, 2009 at 11:20am: Another question that pops into my head after reading this post is - are the carbon offsets that people are peddling completely legit??

Carbon offsetting has always seemed overly cheap too me...

Comment by Marcus Lam on January 20, 2009 at 8:33am: An interesting discovery. Many people just choose the option they assume is best. Often, we're too lazy to seek alternatives. It's important to stay open-minded. Let's perform more calculations to see which choice sustains our environment best.