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Overview of Renewable Energy Certificate REC Markets

What is a REC?. What is a REC? Represents the attributes of renewable energySold separately from commodity electricityRECs are also known as:Green tags, green tickets, renewable energy credits, tradable renewable energy certificates (TRCs). REC Markets. Compliance marketsRECs can be used for R

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Overview of Renewable Energy Certificate REC Markets

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    1. Overview of Renewable Energy Certificate (REC) Markets Lori Bird Webinar: Markets for Renewable Energy Credits October 11, 2006

    2. What is a REC? What is a REC? Represents the attributes of renewable energy Sold separately from commodity electricity RECs are also known as: Green tags, green tickets, renewable energy credits, tradable renewable energy certificates (TRCs)

    3. REC Markets Compliance markets RECs can be used for RPS compliance in many states At least 15 states allow use of RECs for RPS Voluntary markets (sold to retail consumers) Large nonresidential consumers are purchasing RECs, driving growth in REC markets Federal agencies, Fortune 500 companies, local and state governments, universities, etc. RECs are increasingly being used to supply utility green pricing programs

    4. Opportunities for Munis and Coops Offer green power option to your customers Sell RECs from renewable energy projects to others for RPS compliance Probably need to satisfy RPS rules regarding geographic eligibility and deliverability requirements Sell RECs directly to federal or local govt. agencies, businesses, universities, others Involves direct marketing EPACT 2005 sets goal for federal agencies to increase RE purchases to 5% by 2010 and 7.5% by 2013 Sell RECs through brokers No marketing necessary on utilitys part Sell RECs to other utilities offering green pricing programs

    5. Why Provide a Green Power Option? Generally not a profit maker Provide service options to customers Diversify fuel mix Environmental benefits Improve public relations and image Local economic development opportunities Gain experience with new technologies State green pricing mandates

    6. Top Utility Green Pricing Programs: Participation Rates (2005)

    7. Examples of Successful Green Pricing Programs City of Palo Alto Teams with 3 Phases Energy to market product Customers sign up for 100% of their electricity use Price premium of 1.5/kWh for wind, solar Moorhead (MN) Built wind turbines within community Customers sign up for 100% of use/or 1000 kWh Premium of 0.5/kWh (1.5/kWh for wind)

    8. Recent REC Purchases Wells Fargo 550,000 MWh Whole Foods 450,000 MWh Vail Resorts 150,000 MWh Starbucks 185,000 MWh U.S. Air Force I million MWh EPA Green Power Partnership purchases now exceed 7 million MWh annually Up from 4 million in December 2005 http://www.epa.gov/greenpower/partners

    9. Estimated REC Market Size

    10. Voluntary Markets REC Prices

    11. Compliance Market REC Prices

    12. Drivers of REC Market Prices Factors affecting REC prices: Compliance Markets Supply and demand (RPS target, availability of cost-effective resources, ability to site new projects, etc.) RPS Rules (geographic eligibility, banking, penalties) Voluntary Markets Supply and demand (competition from RPS markets, consumer demand for local resources) Type and location of resource New versus existing Volume purchased

    14. Certification Because RECs are separate from electricity and not regulated, certification is important Certification ensures RECs are sold only once Leading certifiers: Green-e http://www.green-e.org/ Environmental Resources Trust http://www.ert.net/ecopower/index.html

    15. Issues and Challenges Uncertain REC ownership in some instances REC tracking systems are not operational in all regions of the country Ability to finance projects with RECs May need guarantee of REC sales to include in financing Definition of a REC are all attributes included? Whether REC attributes (i.e., NOx allowances) can be disaggregated and sold into different markets? Difficulty in communicating the concept of RECs in simple advertising language to retail customers May not be necessary if supplying retail customers with electricity also, unless sourced from outside of the region

    16. Additional Resources Green Power Network http://www.eere.energy.gov/greenpower Bird and Swezey, 2005. Green Power Marketing in the United States: A Status Report (Eighth Edition), NREL/TP-620-38994 http://www.eere.energy.gov/greenpower/resources/pdfs/38994.pdf Holt and Bird, 2005. Emerging Markets for Renewable Energy Certificates: Opportunities and Challenges, NREL/TP-620-37388 http://www.eere.energy.gov/greenpower/resources/pdfs/37388.pdf

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