Have Solar Panels? Sell Your Carbon Offsets!

Your solar panels can provide verifiable carbon offsets that can be worth money to you. But what does that really mean?

In the world of greenhouse gasses (GHG) and carbon emissions, you find two terms used interchangeably. You have carbon credits and carbon offsets, sometimes called carbon offset credits. Unfortunately, this terminology often leads to confusion.

Profitably selling your carbon offsets requires that you understand a lot of information. First, there’s the difference between carbon offsets and carbon credits.

Then, you must understand voluntary markets for buying and selling your carbon offsets.

Finally, you’ll need to know whether your carbon offsets qualify for validation. In other words, are your offsets sellable?

We’ll review all this in this article to help you understand how the carbon market functions and how you can participate.

Ready to find out if selling your carbon offsets is feasible and possible? Read on.

What Are Carbon Credits vs. Carbon Offsets?

One carbon credit equals one carbon offset, which equals one metric ton of carbon dioxide (CO2) or equivalent greenhouse gas (GHG) emissions.

Regulatory bodies cap the emissions an entity in a given industry can produce. 

If an entity produces less than the cap allows, it creates credits. It can sell those credits to other entities with more emissions than regulations permit. Or it can retain those credits against future potential emissions.

Conversely, carbon offsets are validated certificates that substantiate the amount of emissions an entity (or individual) avoids creating by using an energy source that doesn’t produce emissions.

Another way of obtaining offsets is to create or improve a carbon sink. Carbon sink is the term used to describe the natural environments that remove more carbon emissions from the atmosphere than they emit. Reforestation projects, wetland restoration, and soil management improve natural carbon sinks.

There are also projects under development for carbon and methane recapture that could qualify for carbon offset validation.

Verifiable Carbon Offsets

Before selling your carbon offsets, you must prove that they offset a given amount of carbon dioxide emissions. 

Carbon offsets are verified independently using established standards such as Verified Carbon Standard (VCS), Gold Standard, and American Carbon Registry (ACR).

Remember, a carbon offset represents one metric ton of greenhouse gas (GHG) emissions not being emitted into the atmosphere. 

Understand that there is no real governmental oversight in the voluntary carbon market. The system is purely independent. Standards produced by the third-party organizations mentioned above are not regulations. 

Although verification means meeting specific regulatory requirements, it is also about ensuring that consumers receive the proper value for their money.

The market rates applied to different types of carbon offsets reflect the variables inherent in the verification systems.

 

How Selling Carbon Offsets Works

While it can be difficult for an individual residential solar installation to create enough carbon offset to represent an entire metric ton of GHG, that doesn’t mean you should give up the idea.

A homeowner can sell verified carbon offsets on the voluntary carbon market by pooling with other valid sources to create a one-ton carbon offset value. The proceeds are distributed based on the contribution percentage when the pool sells its combined carbon offsets.

For example, a homeowner with a solar installation contributes ½ a metric ton of emissions avoidance to the pool. The pool sells the accumulated carbon offsets. The homeowner receives payment equivalent to half the sale price for one carbon offset.

Why Is There A Market For Selling Your Offsets?

With various global climate accords (the Kyoto Protocol of 1997 & the Paris Agreement of 2015) determining the international emissions goals, companies must find ways to reduce the carbon dioxide and other greenhouse gasses they produce.

Unfortunately, some industries will never be able to reduce their carbon emissions to zero in their daily product or service production.

With this in mind, these international agreements included a way for these companies to offset their emissions in cases where reduction is not possible.

These companies invest in renewable energy and emissions storage projects worldwide by buying offset credits, thus providing necessary funding.

Entities (like homeowners with solar panels or wind turbines) sell carbon offsets to entities producing more emissions than their allotment of credits allows, just like carbon credits.

Carbon Markets for Selling Your Carbon Offsets

American Carbon Registry, APX Inc., Markit, and Verra are the main markets in North America for registering your carbon offsets for sale.

Some markets only list offsets for sale that participate in their in-house verification systems. Others will take offsets from projects with any of the verifications.

These markets are like the stock market in providing a platform for buyers and sellers of carbon offsets.

When pooling your offsets with others, ensuring that all participating offsets are appropriately verified and preferably a similar vintage is vital. 

And yes, that term has virtually the same meaning as in wine. The year the offset was created is the vintage.

However, opposite the wine industry, carbon offsets lose value as they age because many buyers of offsets want current vintages.

Fraudulent Carbon Offsets

Research into carbon offsets and carbon markets indicates that the validation process of certain types of offsets might be intrinsically impossible to measure or simply riddled with fraud. 

In a bombshell article, The Guardian revealed that many (up to 90%) carbon offsets issued for rainforests were virtually worthless.

Determining accurate carbon offsets from efforts to reduce deforestation is inherently tricky. But the attempt to do so isn’t necessarily fraudulent.

Much of the controversy surrounding these issues stems from the natural storage of carbon emissions using trees and plants that convert CO2 into oxygen through photosynthesis.

Solar installations, by contrast, can be objectively measured to reduce carbon emissions by the amount of power substituted through emission-less processes.

So, although there is controversy in the industry about the effectiveness of carbon offsets related to these natural storage issues, there is nothing shaky about offsets created by verifiable energy alternatives.

Additionality of Carbon Offsets

Part of the validation process includes an additionality verification.

In this context, additionality means that the reduction of emissions would not have occurred without the project.

Solar panels generally pass the additionality test because the installation reduces or eliminates the dependence on fossil fuel energy production.

However, it is essential to note that adding solar panels to an already energy-efficient building may make it harder to prove the additionality requirement.

Net-Metering vs. Offsets

Photo by ALTEREDSNAPS

Net-metering is the easiest way to see the financial benefits of installing solar panels on your home.

When you install solar, you upgrade your electric meter to a two-way version. This two-way meter tracks the energy from the grid and the power out to the grid.

Your solar panels supply energy for use in your home. If they produce more energy than you use, the meter routes the excess back onto the power grid. Your electric company records the amount of energy you send them and “banks” it on your behalf.

If you need energy when the solar panels are not supplying enough, the meter routes power from the grid to your home. Your electric company then makes a withdrawal from your banked supply.

Generally, your power company will settle up your bank at the end of the year. They will send you a check if your bank has a positive balance. They will bill you for your usage if your banked balance is negative.

While this is a simple method to receive payment for the excess power your panels generate, the power company can pay out your bank at wholesale rates, which means you’re likely not getting the best price.

This process relates to the amount of power your solar panels supply to your home, your in-home storage systems (batteries), and out through the meter to the grid.

Net-metering doesn’t relate to the carbon offset your solar panels generate by avoiding GHG emissions.

Selling your carbon offsets and reducing or eliminating your electricity bill is still possible.

Renewable Energy Credits vs. Offsets

Renewable energy credits (RECs) allow for the purchase of green energy, also known as renewable energy. A REC is equivalent to 1 MWh (1,000 KWh) of electricity.

Purchasing sufficient RECs to ensure that your project uses only renewable, non-fossil fuel-generated energy is possible.

REC purchase does not ensure that the energy you buy is the result of offsetting GHG emissions from other entities. So you cannot say that because you purchased a REC, you have participated in reducing GHG emissions.

Due to their validation standards, carbon offsets can ensure that the energy you purchase results from GHG-reducing activity.

SRECs vs. Net-Metering vs. Offsets

SRECs are the same as RECs, with the caveat that solar panels produce them. 

Companies use solar renewable energy credits with carbon offsets to offset their GHG emissions and utilize renewable energy production sources.

With their source being solar power, SRECs can offset GHG emissions like carbon offsets.

Selling your SRECs does not negate any benefit from a net-metering agreement with your power company.

The downside is that there are only a handful of states in the US that have an SREC market.

Registering Your Carbon Offsets

To sell carbon offsets your solar system produces, you must verify them against standards and register that validation with an appropriate market.

The best option for this process is to have your system verified at the time of installation. Your broker or installation company can help you with these arrangements.

The offset credits will be issued once the rigorous process has been completed and reviewed by third-party evaluators. 

Place the offsets on the market of your choice. Prices vary significantly according to the quality of the offsets. Remember that residential offsets are best marketed through a pool to ensure a large enough quantity to attract buyers.

Have Your Solar System Evaluated Now

If you own a solar system and haven’t already had your system validated, you should do it soon.

Some evaluators won’t give offset credits to older installations, claiming they do not meet the additionality requirement since they are already in place.

If you have an older system, consider expanding it before seeking verification.

In any case, if you have or plan to install a solar system in your home, consider that selling your carbon offsets could help you pay for the system as it reduces or eliminates your electricity bill.

Work with a knowledgeable solar broker who will guide you through the process to ensure you get the most benefit possible from your system.