World Energy Prepares for Nation’s First Carbon-Allowance Auctions

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voluntary: polluters in RGGI states who aren’t able to reduce their own emissions must either buy emissions credits or pay big fines.

But Adams believes World Energy won the contract to run the auctions because of its experience in the world of voluntary carbon offsets. “They wanted somebody who knows procurement and contracting, somebody who knows auctions, and somebody who knows green,” says Adams. “We know all three—but my guess is that knowing how to talk green was the most important.”

Unlike the company’s other auctions, the point of the RGGI’s emissions trading scheme won’t necessarily be to optimize the price of the commodity for either buyers or sellers, but rather to reduce overall carbon emissions in the region. To do that, RGGI still has to work out a number of questions—including how to minimize “emissions leakage,” the possibility that RGGI’s scheme will actually lead to increased emissions outside of the RGGI states as power customers within the region turn to outside suppliers who can offer lower prices because they aren’t bound by the carbon cap-and-trade rules.

“They’ve got economists at the University of Virginia and elsewhere wrestling with the final design—questions like what are the right prices, and how this all should work,” says Adams. “While RGGI is thinking about the public policy questions, our main job is to structure the whole process in a fair and transparent way—getting the bidding process organized, making sure everyone’s paperwork is online, making sure nobody corners the market, transferring certificates—the whole back end.”

While World Energy is the only auction company working with RGGI, it doesn’t have the electronic energy auction market to itself. Boston’s EnerNOC is moving aggressively into the energy procurement services market, and has developed its own reverse-auction system, called the EnerNOC Exchange. “We’ve used World Energy’s online auction platform in the past, before we developed our own,” EnerNOC CEO Tim Healy. “We think they’ve got an impressive platform.”

But Healy believes EnerNOC’s consulting services and its direct relationships with commercial and industrial electrical consumers, many of whom participate in its demand-response pools, may give it an edge. “I would call World Energy a tools provider, whereas we’ve decided from day one to be a tools and service provider,” Healy says. “You can’t do one without the other.”

Or maybe you can: World Energy reported last week that its first-quarter revenues in 2008, $3.1 million, were double those of the same quarter in 2007. “RGGI is our big, important, market-validating contract,” says Adams. “This emerging green market looks a lot like energy markets. It’s information-rich, but opaque and not that liquid. We’ll see what happens when we apply our processes.”

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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