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Renewable Energy Certificates: A Detailed Overview Dan Lieberman Center for Resource Solutions www.resource-solutions.org www.green-e.org NARUC August 1, 2006 San Francisco, CA Presentation Overview RECs 101 Voluntary vs. Compliance Markets Oversight of RECs: Voluntary Certification

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Renewable Energy Certificates:A Detailed Overview

Dan Lieberman

Center for Resource Solutions

www.resource-solutions.org

www.green-e.org

NARUC

August 1, 2006

San Francisco, CA


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Presentation Overview

  • RECs 101

  • Voluntary vs. Compliance Markets

  • Oversight of RECs:

    • Voluntary Certification

    • Tracking

  • Key Regulatory Issues


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Who is the Center for Resource Solutions?

  • CRS is an NGO located at the Presidio in San Francisco

  • Focus on environmental issues, renewable energy and energy efficiency policy

  • We work in the US and internationally

Wind turbine in Nan’ao, Guangdong


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Introduction to RECs

Production of

Renewable Energy

REC (Environmental Benefits)

Commodity Electricity

  • Certificates represent the contractual right to claim the environmental and other attributes associated with electricity generated from a renewable energy facility

  • May be traded independently of energy markets


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A Simple View of RECs

Green Power

Green

Power


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What’s in a Name

  • RECs: Renewable Energy Certificates

    • AKA: Green Tags, Green Tickets, Tradable Renewable Certificates (TRCs), T-RECS

  • Renewable Credits: Used in regulatory context

  • Unbundling: The financial separation of RECs from the underlying electricity

  • Disaggregation: The separation of specific attributes from a REC


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Uses of RECs

  • Substantiating compliance with RPS

  • Supply for green pricing programs

  • Choice for customers with no green power option

  • Meeting emissions reduction goals

  • Greening of events, products, services


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Size of the REC Market

Source: NREL Energy Analysis Office


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Where RECs are Used as RPS Implementation Tool

  • 13 states have a certificate-based RPS compliance mechanism

    • ME, MA, CT, RI, NV, AZ, WI, NJ, PA, MD, TX, CO, DC

  • 5 states likely to use certificates once regional tracking system is operational

    • CA, MN, NM, MT, IL

  • 3 states undecided or have other methods to show compliance

    • NY, HI, IA


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The Voluntary RE Market

By “voluntary renewable energy market” we mean purchase or use by retail customers (residential and non-residential) of renewable energy, renewable energy certificates, or the use of energy from an on-site renewable generation unit.


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The Voluntary RE Market

  • 2004 supporting 2,233 MW of new renewable capacity

  • Increasingly non-residential

  • Largest single purchaser (U.S. Air Force) buying > 1 million MWhs/yr

  • EPA Green Power Partnership

    • Over 650 members

    • 5.3 million MWh of green power annually

    • purchasing enough RE to power >400,000 American homes each year

  • Xcel, Austin wind products cheaper than fossil


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Certification and Verification

  • Certification

    • What you purchase is certified by an independent third party to meet specific standards

  • Verification

    • Independent third party checks that what was promised to you was delivered


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Types of Certification

  • Product Certification

    • Focus on established product standard and transfer of renewable energy product (RECS or renewable energy) from generator to end-use customer.

    • Green-e is industry leader

  • Project/Facility Certification

    • Certifies generation project, but does not follow the contract path to the end user

    • Examples: Low Impact Hydro Institute, Terrachoice (Canada), some state programs


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Sample Green-e Criteria

  • Verification audits

    • Customer sales records

    • Sales of renewables- quantity and type

    • Sources of supply- clear chain of custody and no double claims

  • Consistency with National Association of Attorney Generals and US FTC guidelines

  • Purchase is additional

  • Each kWh is only sold once

  • All environmental attributes (e.g. carbon reduction) are included in customer’s purchase

  • Certification tied to real electricity production


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What is Tracking?

  • Each unit of generation assigned a unique ID that includes its attributes:

    • Date generated

    • Facility location

    • Date facility went online

    • Type of renewable

    • Emissions profile

    • Eligibility for programs (RPS, Green-e)

  • Electronic system tracks each unit from “birth” to retirement (like online banking)

  • Technology and policy neutral


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    Role of Tracking Systems

    • Issue RECs to Generators

    • Verify generator characteristics

    • Verify generation amount

    • Provide permanent retirement mechanism for certificates

    • Protect against double-selling

    • Verify deliverability requirements

    • Provide for banking functionality


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    REC Tracking

    • Canada: British Columbia and Alberta are participating in WREGIS, and Manitoba is participating in the northern Midwest system.

    • Mexico: northern Baja is participating in the WREGIS system.


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    Regional Tracking Programs

    • ERCOT RECs Program (2001)

    • NEPOOL GIS (2002)

    • WI RRC Program (2003)

    • PJM Gats (2005)

    • NJ SRECS (2005)

    • WREGIS (western states, Operational mid-2007)

    • M-RETS (upper midwest, Operational ?)

    • New York State

    • NAAIB Coordinating Body


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    North American Association of Issuing Bodies (NAAIB)

    • Ensure compatibility among systems

    • Registering generators

    • Issuing certificates

    • Transferring ownership of RECs

    • Recording information in the Central Registration Database

    • Verifying generation

    • Investigating requests for changes to the Basic Commitment rules

    • Mediating disputes


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    Implications for Utility Regulators

    • REC purchases and sales by regulated utilities may:

    • Influence rate-setting policies,

    • Affect ratepayer value,

    • Affect the success of renewable programs to meet their goals, such as RPS or incentive programs paid for through system benefits charges,

    • Overlap with environmental regulation,

    • Overlap with state or Federal renewable energy programs such as an RPS, green pricing programs, or competitive renewable electricity markets

    • Create legal issues related to the property rights of renewables, both with new contracts held by utilities and existing PURPA contracts.


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    Key Issue: Double Counting

    • How to prevent unwanted cases of:

    • Double Sale

      • Selling part or whole REC to two or more parties concurrently

    • Double Use

      • Single MWh used for more than one purpose

    • Double Claiming

      • Two or more parties claiming ownership or benefits of single MWh, e.g. on disclosure label


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    Key Issue: Ownership

    • Are utilities entitled to any of the RECs associated with net metered facilities?

    • How should regulators treat RECs from PURPA facilities when the contact is silent on RECs?


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    Key Issue: Emissions Values

    • There are SOx, NOx and Carbon markets

      • SOx is always capped and traded

      • NOx is sometimes capped and traded

      • Carbon is not currently capped and traded

    • Renewables have been left out of Sox C&T

    • Renewables may have access to NOx set aside

    • If carbon dioxide emissions are capped/traded and renewables are not assigned credits, then renewable energy will provide zero carbon emission reductions.


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    Resources

    • CRS “Regulators Handbook on TRCs”

      www.resource-solutions.org/RegulatorHandbook.htm

    • Green-e standards and REC product lists

      www.green-e.org

    • NREL: “Emerging Markets for Renewable Energy Certificates: Opportunities and Challenges”

      www.eere.energy.gov/greenpower


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    Contact information

    Dr. Jan Hamrin, President

    Center for Resource Solutions

    San Francisco, CA

    415/561-2100

    Email: [email protected]

    www.resource-solutions.org


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