Renewable Energy Credits Workshop Chicago Illinois November RECs Overview

Document Sample
Renewable Energy Credits Workshop Chicago Illinois November RECs Overview Powered By Docstoc
					Renewable Energy Credits Workshop Chicago, Illinois 7 November 2002

RECs 101--Overview of Renewable Energy Certificates
28 Headland Road Harpswell, ME 04079 Tel. 207.798.4588 Fax 207.798.4589 edholt@igc.org

RECs 101 Syllabus
n n n n n n

Concepts and definition Applications Benefits Creating, tracking and trading RECs International activity Barriers There will be a quiz at the end of the course!
Ed Holt & Associates, Inc.

n

RECs Concept
n

RECs are separated (unbundled) from the underlying energy that gave rise to them
Environmental & Other Attributes Commodity Electricity

Renewable Energy Generation

n

RECs trade independently of energy markets
Ed Holt & Associates, Inc.

Examples of Attributes
n

Primary - Facts
ä ä ä ä

n

Secondary - Derived
ä ä

fuel source location of generator vintage of generator emissions (e.g., SO2, NOx, CO2)

ä

ä

avoided emissions eligibility for emission reduction credits or offsets eligibility for certification, RPS, or other programs price stability

Ed Holt & Associates, Inc.

RECs Similar to Green Power
n

n

Both provide financial support to the chosen generation; neither delivers those green electrons to the customer Green power not delivered in real time
ä

true up over a year (usually)

n

Green power is created by rebundling renewable generation attributes with delivered electricity, and calling it renewable, without acknowledging that the separation and rebundling of attributes has occurred
Ed Holt & Associates, Inc.

RECs Different from Green Power
n

RECs may be generated outside the grid that serves the customer
ä

ä

clean air benefits could occur outside the customer’s airshed, counter to expectation greenhouse gas reductions benefit the planet, so location may not matter

n

RECs could, in fact, be generated on the other side of the world

Ed Holt & Associates, Inc.

RECs Are International
Woodward II, Texas Certificates sold by www.worldwidegreen.com The Netherlands

Audited by Oeko-Institut Germany
Ed Singleton, NSW Australia 200 kWHolt & Associates, Inc.

Rebundling RECs with Power
n n

RECs may be sold without electricity, or RECs may be rebundled with system power and sold as green power, however:
ä

ä

they must be generated in the same region (power pool) as the electricity sale, or an equal amount of electricity must be transmitted from the region where the REC was created into the region where it is ultimately sold

n

Why? Green power must offset generation in the region where it is sold, with the intent of making the overall mix cleaner
Ed Holt & Associates, Inc.

Definition
n

RECs are the embodiment of all attributes of renewable energy generation in an instrument that can be bought and sold, and that conveys a contractual right to claim those attributes
ä

contract may be express or implied
Texas: A REC is a tradable instrument that represents all of the renewable attributes associated with one MWh of production from a certified renewable generator

n

Specific programs may have other definitions
ä

n

Different names are used--credits, certificates, tickets, tags, TRCs, T-RECs, TGCs, etc.
Ed Holt & Associates, Inc.

Applications
n n n

n

RPS compliance verification Disclosure (electricity labels) substantiation Generation performance (emission) standards compliance verification Emission reduction credits or offsets
ä

but not for cap and trade programs unless expressly allowed

n n

Voluntary retail markets for green power Voluntary sale of naked certificates
Ed Holt & Associates, Inc.

Examples
n

Texas RPS
ä

RECs required to demonstrate compliance conversion transactions rebundle RECs and energy may use energy credits (not just RECs) from NEPOOL Generation Information System rebundled RECs for green power sales stand-alone sales marketed via Internet
Ed Holt & Associates, Inc.

n

New York green power and disclosure
ä

n

New England states for disclosure
ä

n

Green Mountain Energy
ä

n

Sterling Planet
ä

Applications Illustrated
RECs sold stand-alone

Used either for
RECs purchase Energy program compliance
• RPS • disclosure verification • consumer sales

Or for
Environmental program compliance
• CO2 offsets • emissions offsets (if eligible)

RECs rebundled RECs purchase Commodity energy purchase Bundled renewable product Uses
• green power sales--if RECs & commodity are in same region

+

=

Ed Holt & Associates, Inc.

Benefits of RECs
n

Relies on market forces to distribute benefits to those who value them most
ä

efficient way to reduce pollution (so does green power)

n

Monetizes the value of attributes
ä

n

Cost-effective way to verify green marketing claims or compliance with RPS
ä

may be useful for verifying disclosure (electricity labels) if all generation attributes are tracked
Ed Holt & Associates, Inc.

More Benefits
n

Overcomes geographic constraints
ä

green power is available anywhere in the US transmission still needed to get electricity to market, but not to get electricity to the REC buyer

n

May reduce transmission costs
ä

n

Eliminates temporal mismatch between generation profile and demand profile because RECs are separated from electricity
ä

intermittent resources must still be integrated with grid, but RECs can be sold anytime within the period in which the RECs remain valid
Ed Holt & Associates, Inc.

Who Creates RECs?
n

Implicit
ä ä ä

renewable energy generators generator-marketer interface sometimes they are not formally created, but the attributes are auditable via contracts

n

Explicit Issuing Bodies
ä

ä

NEPOOL GIS (energy credits, not just renewable energy credits) ERCOT
Ed Holt & Associates, Inc.

Who Buys RECs?
n

Load serving entities (LSEs) with obligations
ä

RPS, mandates

n n

LSEs with disclosure requirements Green power marketers
ä

support marketing claims proof of support and benefits satisfy corporate goals (emission reductions, PR) support renewables, greenhouse gas reductions
Ed Holt & Associates, Inc.

n

Certificate-only providers
ä

n

Large customers
ä

n

Small customers
ä

Who Tracks RECs?
n

Using electronic database
ä ä ä

NEPOOL GIS ERCOT others planned (WI, NY, Western Interconnect)

n

Using audits
ä ä ä

Green-e Environmental Resources Trust maybe others
Ed Holt & Associates, Inc.

The Tracking Challenge
Some Tracking System Decisions
n n n n n n n n n

Certificate size (1 MWh) Information content Certificate lifetime Tracking database Who pays Issuing Body Who can trade How to track trades Redeeming certificates

n n n n

n n

Trading markets Trade facilitation Market transparency Banking and borrowing certificates Access to data Public reports

Ed Holt & Associates, Inc.

Where Are RECs Traded?
n

Bilateral contracts
ä

often sold with the energy announce interest in buying or selling lead to bilateral deals

n

Bulletin boards
ä ä

n n

Private brokers APX - California

Ed Holt & Associates, Inc.

RECs in Europe
n

Association of Issuing Bodies operates under a standard protocol for issuing, transferring and redeeming certificates
ä

7 registries

n

RECS: European platform for trading renewable attributes separate from energy
ä

15 countries, 173 RECS members 61 trading accounts 12 TWh issued, 5 TWh transferred and redeemed
Ed Holt & Associates, Inc.

n

Test phase completed this year
ä ä

RECs in Australia
n

12.5% RPS by 2010, fulfilled by ownership of RECs, which must be surrendered
ä ä

1100 GWh target in 2002 9500 GWh target in 2010

n n

Central registry of RECs Trading is done privately, e.g. the Green Electricity Market™, an Internet-based portfolio management and trading platform for environmental instruments
Ed Holt & Associates, Inc.

Coordination Efforts
n

TRECKIN (Tradable Renewable Certificate Know-how & Initiatives Network)
ä

ä ä
n

global network of tradable renewable energy certificates linking existing systems and stimulating new ones funded 60% by European Commission regional and RTO plans

American Association of Issuing Bodies
ä

Ed Holt & Associates, Inc.

Barriers to RECs
n

Insufficient tracking and verification systems
ä

tracking systems non-existent or not standardized some markets are state-wide only, and small lack of price transparency to drive cost down some state RPS and voluntary demand

n

Lack of liquidity in REC markets
ä ä

n

Inconsistent drivers (no national RPS)
ä

n

n

Lack of understanding and protocols for use in cross-over (environmental) markets Constraints on eligibility for cap-and-trade programs
Ed Holt & Associates, Inc.

More Barriers
n

Disclosure requirements
ä

“Consumers should be informed, by clear and prominent disclosure, if a claim states or implies an environmental ...benefit which actually occurs or exists outside the geographic area in which the environmental marketing claim is being made.” NAAG

n n

Consumer education is challenging NAAG green power marketing guidelines
ä

Marketing claims should be accompanied by a “clear and prominent disclosure” of the use of certificates, and should not imply that the supplier has actually purchased the power itself, as opposed to the environmental attributes
Ed Holt & Associates, Inc.

RECs Caution!
n

n

When selling or buying renewable energy, be explicit about ownership of attributes Net metering offers credit for the energy, but does not pay for the value of attributes
ä

Utilities must pay ‘fair and just compensation’ for attributes

n

Separate agreement should govern ownership of and payment for attributes

Ed Holt & Associates, Inc.

Summary
n

Attributes can be unbundled from energy and sold separately
ä ä ä

used to support public policies rebundled for green power marketing sold naked to consumers

n n n

n

RECs are more like green power than not Multiple benefits, multiple applications Challenge--RECs are not created and tracked systematically Poor understanding of how RECs cross over from energy to environmental markets
Ed Holt & Associates, Inc.