Update to wind-power company's misleading cards

 Uploaded Images Wind-Power-Card-706200
Sustainablog has a thoughtful response to my entry on the wind-power cards I complained about yesterday. Jeff McIntire-Strasburg makes several good points. I agree I shouldn't have characterized Renewable Choice Energy as an Enron-like company. However, I do think that Renewable Choice Energy's practice of selling cards that look like a gift card or a stored value card is deceptive.

I have no problem with people asking for money for a good cause, and I think wind power is a good cause. But I do have a problem with people who use questionable tactics to get you to donate money. And I think the use of these cards and the campaign around them is misleading.

Take a look at Renewable Choice Energy's home page. It says: "The Wind Power Card is a first-of-its-kind product that makes purchasing wind power easier than ever before!" and has a button below it that lets you "Activate the card." That doesn't seem right to me. Renewable Choice Energy is using a card style traditionally associated with cards that have some kind of stored value in them. For instance, the $15 card has an indicated value of "750 kilowatt hours." And their claim that you are "purchasing wind power" is sneaky. I guess you are purchasing wind power, in a roundabout way, but not in the simplistic way they state on their Web site.

Now, several bloggers have taken me to task for not understanding "green tags" and for not reading the FAQ on the Renewable Choice Energy Website. But the part that describes what a "renewable energy credit" actually is doesn't do a very good job of explaining what actually happens to the money from the cards people purchase:

A renewable energy credit — also known as a wind energy credit –allows individuals and businesses to choose clean power and support the development of renewable energy resources. When a wind farm produces electricity, it also issues renewable energy credits, equal to the amount of power added to the electric grid. It generally costs more to produce electricity with wind power than by burning fossil fuels. These credits capture the additional cost and value of wind power to consumers. Renewable Choice sells these credits, on behalf of our partner wind farms, to companies and individuals around the country. Wind farms rely on this revenue to make wind farm developments.

I would like to see a flow chart of where the money goes. This graphic doesn't answer that question.

Others have said I'm stupid for thinking that these cards are like a Starbucks card. But isn't Renewable Choice Energy's responsibility to inform stupid people like me how they use people's donations? The problem, for me anyway, boils down to this: it's lame to use cards that look like stored value cards when they are nothing of the kind. This sneaky tactic could give the false impression that the company is sneaky in other ways, too. I'm not a marketing person, but I would much rather walk into a Whole Foods and see a representative from Renewable Choice Energy standing at a table explaining how the program works and asking me to sign up.

I'm happy to hear your thoughts on this.

Tons of eader comments in extended entry

Kevin says:

I'm curious if you've pinged Whole Foods on this,

and If they've responded…

As for the marketing approach, I wholeheartedly agree

that the device of using a card that so clearly resembles

a common form of purchased and *redeemable* value

is misleading at its most innocent. I find it hard to believe

that these folks haven't thought about the obvious

similarity and how they might benefit from the

consumer confusion about it. It seems to me that it's

incumbent upon the wind power card sellers to *overcommunicate*

with the consumer to differentiate the mechanic they are using

from stored value.

This seems like an attempt at market sector subsidy through

passive consumer fraud.

Ross says:

I don't think the cards would sell as well if they said "SUBSIDIZE OUR PRIVATE, FOR-PROFIT ENTERPRISE" on them.

Sean says:

I'm an avid Boing-Boing reader (even though I can't stand your politics).

That said, you are absolutely correct. These cards purposely give the false impression that one is buying "an energy gift card" that can be exchanged at a later time for real energy produced by wind power.

The company knows exactly what it is doing; why else would they make them look like gift cards? Mere coincidence? Hardly.

Shea (a founder of Renewable Choice Energy) says:

I just put up a post with some photos of what the Whole Foods Wind Cards look like in the stores that you might be interested in. And here's a post that explains how wind credits work.

Tony says:

I just wanted to comment on the whole Wind Energy Card thing. I think that the people calling you an idiot or taking you to task for not understanding what the cards are about are missing the point. These things are aimed at the general consumer, more specifically Whole Food shoppers. Now I live on the "Eastside" of Seattle where there is a Whole Foods in Redmond. The people that go in there are kind of hoity toity suburban moms and whatnot that I highly doubt can figure out what the true intents of the card are. I'm sure if you showed one to them they'd all think the same thing as you.

The marketing lesson here is to make your message clear about what you are doing and why. Marketing tactics like this just confuse the average consumer and end up hurting your brand more than any of the sales will amount to. Just my two cents from a lowly marketing employee.

Maury says:

Mark, I think you are right on this. If I saw this in a store I would
certainly think that I was buying wind power in such a way that the
amount i purchased on the card would be applied to offset my power
bill. I had a good look at the RCE site and it's full of misleading
statements and it in fact encourages businesses to use media to get
coverage that they're "switching to wind power" but "switching" is
definitely NOT what's going on here. It's all about offsetting their
use of standard energy and getting publicity for it.

To me this is simply a clever way for a for-profit business to make
money by preying on consumer guilt. And I think of at least a dozen or
so other businesses that could also use this method. Here's a couple:
You could send the cash equivalent of the cost of all the wood in your
house to a company that promotes sustainable harvest tree farms. You
could send a bio-diesel company the same amount as all the gasoline
you purchase. Maybe you'll feel better about yourself but you're
paying twice as much for everything and you're still consuming
old-growth timber and fossil fuels. I don't know many people who can
afford to do that, but I guess you have the hope that it will help
create better markets in the long term for sustainable products.

Mithras says:

I'm a business lawyer in Philadelphia. I think the legal question is what an average shopper in the circumstances in which the cards are presented would reasonably think. Based solely on your description of the cards – I have not seen them myself – I would say there a good chance a court would find an average shopper would believe s/he was buying a dollar-for-dollar (or at least kilowatt-for-kilowatt) offset to the electric bill. I would disagree with your statement that "I guess you are purchasing wind power, in a roundabout way", because whether you keep the card or gift it, whatever "wind power" you "purchase" goes entirely to someone else. This presents a good chance of a successful class action lawsuit for fraud. Whoever the lawyers were who signed off on this did RCE and Whole Foods no favors.

Shea (responding to the comment above), says:

This guy doesn't know what he's talking about.

He clearly states he hasn't seen the cards, yet goes on to state :
"This presents a good chance of a successful class action lawsuit for
fraud. Whoever the lawyers were who signed off on this did RCE and
Whole Foods no favors."

That's BS. No one is getting sued for this and this guy is tossing out
an opinion without knowing all the facts. The point of sale displays
make it pretty obvious what you're buying. If someone did buy the card
and find out it wasn't exactly what they thought it was, RCE would give
them their money back. They don't want confused customers, nor do they
want to "trick" people into buying their products. They want customers
who understand the value of what they are buying.

There is no fraud here, just confusion arising from the fact that
Renewable Choice is selling a fairly hard to understand product in a
new and innovative way.

It's been a great discussion though! Thanks for the attention.

Joe says:

I followed Shea's link to the photo post and made a comment. He had
been responding to critical comments fastidiously (but not
substantively – see "/ZombieShuffle"). When I returned my comment had
apparently been deleted.

It read as follows: "Just admit that the cards are deceptive. They
absolutely do not represent an ?offset? in any way, shape or form.
They are a subsidy, a charitable donation to a corporation, nothing
more. It might be accurate to say that purchasing one of these cards
is equivalent to *not cutting down* X number of trees, but to say it
is equivalent to planting X number of trees assumes that any power
this company generates with wind would otherwise be generated in some
other known way, which would require you to be able to read the future
– which, of course, is nonsense, just like this entire scheme."

Jonathan says:

As a resident of Boulder, CO (where the "Wind Cards" were first
sold), I called Renewable Choice Energy and the local Whole Foods
store after reading this post. Both spoke with me at length, but not
to my satisfaction.

Wind power's status as a "good cause" does not justify the use of
duplicitous marketing tactics.

The "gift card" concept, as well as the accompanying text on
Renewable Choice Energy's website, is clearly intended to conceal the
fact that the cards contain no stored value for the consumer.

Renewable Choice Energy is a privately-held company, with a pre-
existing business relationship with Whole Foods. They profit from
"wind card" dollars. When I spoke with them today, they wouldn't
reveal what percentage of the wind card dollars they keep, and what
percentage they give to wind farms (although, to their credit, they
did say that they give away "the majority").

If Whole Foods wants to support wind energy, they shouldn't do it by
using a misleading marketing tactic that funnels an unpublished
percentage of a "gift" to a for-profit company. A better option might
be to establish a non-profit organization that distributes honestly-
gathered money among various wind farms and wind-energy groups.

Large companies contribute to socially responsible causes because
they profit from the resultant reputation for social responsibility.
In this case, it seems like Whole Foods is trying to offset the cost
of that reputation by collecting money from their customers.

Ed says:

I am astonished that NO ONE has opened up the wind turbine scandal.
These "Wind Companies" are now being staffed by former Enron execs,
that are shell companies for Wall Street hedge funds. The biggest in
upstate NY is Nobel which is a front for JP Morgan.

And who is their CFO?

Ms. Edgley worked for Citibank, GE Capital, and was CFO of Enron Europe.

They come into VERY rural areas and try to get rights to put up these
turbines so they can get massive tax credits that are traded on the
world's financial markets, THEY HAVE no interest in the environment,
in fact they DRIVE HUMMERS to "impress the locals".

THESE ARE NOT environmentally friendly, not-for-profits, they are Wall
Street hedge funds making a buck. They are pitting neighbor against
neighbor, putting up to 100's of 400 – 600 foot obsolete turbines,
with NO regard for local input. This is not the desert, nor open
oceans, these are local communities where people live and work.

They treat the locals like children. The local town board is staffed
with people with just an 8th grade education, facing a wall of Wall
Street executives.

The story will break, but who knows when? Please pass this on if
anyone at this point will listen.

Ethan says:

I work financing renewable energy projects and have successfully completed wind farm transactions, and wanted to educate you a little bit about wind energy, and how Renewable Energy Credits ("RECs") also called green tags work:

First, it is important to understand that there are no economically viable renewable energy sources, that don't involve building nuclear reactors, or I guess dams. The fact is the technology has gotten much much better and will continue to become more efficient, and hypothetically fossil fuel feedstock prices will continue to climb in a way that in the mid-term to long-term future wind power or solar power generation facilities may become economically viable. But they aren't now.

However, people do recognize that burning coal or natural gas to produce power creates green house gas emissions could in the long term be disastrous to all of us. In economic terms there is an externality associated with power generation from fossil fuels. There are a number of ways this eternality could be accounted for:

The US government supports the creation of renewable power sources through a variety of tax credits (the Production Tax Credit for wind, and the Investment Tax Credit for solar), which investors (usually corporations) can utilize to offset there federal income tax. Essentially, the government is subsidizing the price that a utility pays for the energy that it is buying by issuing these credits which can be sold to raise equity to build the project. So instead of cash over time used to pay down debt, the project can issue tax credits over time to provide a return on investment to the equity investor. Ultimately the cost of these tax credits are born by US citizens as the federal government has reduced tax proceeds from corporations that invest in these projects.

22 states have passed Renewable Portfolio Standards, which is legislation requiring that utilities operating in those states are statutorily required to have a certain percentage of the energy that they buy from production facilities be from renewable sources. In these states there is an "involuntary market" for the RECs (not to be confused with tax credits). A utility then pays a certain amount per KWh for the energy it buys, and a certain amount for the REC. If they don't buy enough RECS then they incur penalties. The cost of these RECs are then ultimately passed on to the consumer who buys electricity from the Utility, as the overall cost of energy is higher per KWh then would be from a new coal burning production facility. This is again recognized as necessary if we want to have a reduced emissions and ultimately mitigate the environmental effect of burning coal. I'm not going to argue whether global warming is "real", suffice to say people feel it is necessary to deal with the cost of pollution as well as the cost of the actual power.

So this is where the REC market comes from, but what if you live in a state that has not adopted a portfolio standard? If a developer of a wind farm wanted to build in one of those states he would have to compete to sell the power from that wind farm with the prevailing energy rate that could be provided by a new fossil fuel burning production plant. Ultimately, the cost of putting up the turbines is prohibitively expensive to build wind farms under that scenario. So a solution has been found where by you can use the RECs to strip the "green" from Green Energy. Essentially the wind farm sells the energy to the utility at the prevailing rate, and sells the RECs to the "voluntary market". This money is utilized to pay down the debt that is in turn utilized to build the project in the first place. With out that money you would have no project, and your world (or your kids) would be a little dirtier place. And maybe a little smaller (as sea level rises) and al little more dangerous (as the delicate world weather balance gets skewed by the carbon we are throwing up into the atmosphere).

So when a company decides for SOCIAL reasons that they want to be good corporate citizens they have access to this VOLUNTARY REC. Example being when VAIL MOUNTAIN said that they wanted to be a zero emission corporation

( http://www.rockymountainnews.com/drmn/other_business/article/0,2777,DRMN_23916_4887201,00.html )

They are not actually buying power from a wind farm directly (which there is no transmission for), but are rather buying RECs which offset the energy that they were already buying from the grid.

BUT, what about an individual? Many utilities have enacted programs to allow people to voluntarily pay more for the energy they buy from the utility, and the utility then goes and buys the RECs in the "voluntary market," and offsets the non-renewable energy that they are selling. Directly passing the cost to the consumer. However, if you drive a car, and wanted to offset the carbon associated with that, there is no real market that would allow you to support green energy!

Hence you have these cards. (WHICH I'M NOT ASSOICATED WITH IN ANY WAY). Which allow an individual to feel good about offsetting the carbon they are responsible for putting in the air.

Clearly, the company that creates these cards may be fraudulent. AND clearly this may not be your cup of tea, but to suggest that these cards are not "real" or to think that they are in some fashion batteries where you could go and get "energy" is just ignorant.

You are buying the "green" which has been striped from the "green energy" of a wind project that is selling the actual energy part of the "green energy" at a lower price then it would nominally be able to operate at, and that money is used to pay down the loan that was taken out to buy the turbine, or land, or substation, or road. This isn't charity,.. this is people finding a way to pay what they think should be the real price for the energy they use. I say real because it includes the externality of the social cost of pollution, and not just the actual energy that comes out of the wall.

It took me a long time to type this, so I hop you read it, and feel free to email me back if you have more questions.

Gari says:

I have mixed feelings about Renewable Energy Choice. My main concern is that it is impossible to borrrow money to build wind farms against their receipt of renewable energy certificates (RECs), only aginst the electricity they produce, so it would be better if wind producers could get contracts from utilities or other large-scale buyers to buy power (and renewable energy certificates at the same time). Utilities are obligated to buy RECs to meet their renewable energy targets under the various REC regimes. So the buyers of these certiciates should be PG&E, or ConEd and so forth, and while you will be llikely to pay a little bit more on your utility bill to meet their costs in buying wind power, this spreads the burden a little more equitably than relying on the generosity of passing Whole Foods shoppers. The one advantage I can think of is that Renewable Choice Energy might bid up the price of RECs, and thus allow wind power producers to get a better price for the RECs than if they were dealing with utilties alone. But in general, this seems to be a stopgap and relatively ineffective way of making a market which is slowly taking shape anyway. Still, every little helps and all that .