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Tradable Renewable Tradable Renewable Energy CreditsEnergy Credits

Robin B. DavidovRobin B. Davidov

Executive DirectorExecutive Director

Northeast Maryland Waste Northeast Maryland Waste Disposal AuthorityDisposal Authority

Rdavidov@nmwda.orgRdavidov@nmwda.org

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What if each State What if each State established a definition of established a definition of “Renewable Food”“Renewable Food”• Example of Renewable Foods:Example of Renewable Foods:

– Wisconsin: Wisconsin: Cheese Logs Cheese Logs – California: California: Veggie Burgers Veggie Burgers – Maryland: Maryland: Corn Fritters and Corn Fritters and

CrabcakesCrabcakes– Texas: Texas: HamburgersHamburgers

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Federal Government Federal Government decides to buy decides to buy

“Renewable Food” for “Renewable Food” for inmatesinmates

• Feds adopt the standard of the Feds adopt the standard of the “Green Veggi-e” group“Green Veggi-e” group– Inmates eat veggie burgers and corn Inmates eat veggie burgers and corn

fritters: Vegetable Farmers winfritters: Vegetable Farmers win– Cattleman, Waterman and Dairy Cattleman, Waterman and Dairy

Farmers looseFarmers loose

• Inmates revoltInmates revolt

• Feds make up new definitionFeds make up new definition

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Renewable Energy CreditsRenewable Energy Credits

• A credit is a tradable certificate of proof A credit is a tradable certificate of proof that 1 kWh of electricity has been that 1 kWh of electricity has been generated by a renewable-fueled resourcegenerated by a renewable-fueled resource

• RECs provide a cost efficient renewable RECs provide a cost efficient renewable energy systemenergy system

• RECs spur competitive technology to RECs spur competitive technology to generate renewable energygenerate renewable energy

• RECs can be used to reduce greenhouse RECs can be used to reduce greenhouse gas intensitygas intensity

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Renewable Portfolio Renewable Portfolio StandardsStandards

• 15 States have RPS15 States have RPS

• 4 States allow RECs to be unbundled 4 States allow RECs to be unbundled from energyfrom energy

• RPS requirement is 15% in Nevada, RPS requirement is 15% in Nevada, 30% in Maine, and 25% in New York 30% in Maine, and 25% in New York (3,700 MW’s)(3,700 MW’s)

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Every State adopts a Every State adopts a different definition of different definition of “Renewable Energy”“Renewable Energy”

• Texas includes solar, wind geothermal, Texas includes solar, wind geothermal, hydro, wave, biomass, and landfill gashydro, wave, biomass, and landfill gas

• Mass. includes solar, wind, clean biomass Mass. includes solar, wind, clean biomass but not hydro or municipal solid wastebut not hydro or municipal solid waste

• N.J., Md. and Ct. have two tiers. N.J., Md. and Ct. have two tiers. – Generally, solar, wind, landfill gas on top tier, Generally, solar, wind, landfill gas on top tier,

hydro and MSW on bottom tierhydro and MSW on bottom tier

• N.Y. includes hydro but not MSWN.Y. includes hydro but not MSW• In Pa., hydro is non-renewable In Pa., hydro is non-renewable

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Who Buys RECs?Who Buys RECs?

• Residential customers opting for a “green Residential customers opting for a “green pricing” program offered by local utility or pricing” program offered by local utility or distant utility (Bonneville Power website)distant utility (Bonneville Power website)

• Organization buying RECs to make a Organization buying RECs to make a specific event “emission free”specific event “emission free”

• Company deciding to purchase a quantity Company deciding to purchase a quantity of RECs equivalent to a certain percentage of RECs equivalent to a certain percentage of electricity consumption.of electricity consumption.

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How much do RPS cost How much do RPS cost consumers?consumers?

• N.Y. Estimates that over 5 years:N.Y. Estimates that over 5 years:– Residential customers -0.9 to +1.68%Residential customers -0.9 to +1.68%– Commercial customers -.78 to +1.79%Commercial customers -.78 to +1.79%– Industrial customers –1.54 to +2.2%Industrial customers –1.54 to +2.2%

• Austin (Texas) Energy sold 250,000 Austin (Texas) Energy sold 250,000 MWh of green energy to its MWh of green energy to its customers in 2003customers in 2003

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REC Markets August 2004REC Markets August 2004Evolution Markets LLCEvolution Markets LLC www.evomarkets.comwww.evomarkets.com

• COMPLIANCE RECsCOMPLIANCE RECs– NJ Class I NJ Class I $7.50$7.50– NJ Class IINJ Class II $4.35$4.35

• VOLUNTARYVOLUNTARY– Existing SolarExisting Solar $40.00$40.00– New WindNew Wind $2.50$2.50– Existing BiomassExisting Biomass $5.00$5.00

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Montgomery County WTEMontgomery County WTE

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Montgomery County WTEMontgomery County WTE

• Facility came on line in 1995 with 20 year energy Facility came on line in 1995 with 20 year energy contract (no capacity)contract (no capacity)

• 1997 Sold capacity through utility1997 Sold capacity through utility

• 2001 Utility sold contract, Negotiated three year 2001 Utility sold contract, Negotiated three year contract with Mirant, including Energy and Capacitycontract with Mirant, including Energy and Capacity

• 2003 RECs sold to Mirant under 2001 contract2003 RECs sold to Mirant under 2001 contract

• 2004 Conducted competitive procurement for energy, 2004 Conducted competitive procurement for energy, capacity and RECs, signed 3 year contract with Mirantcapacity and RECs, signed 3 year contract with Mirant

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How to Sell Energy, Capacity How to Sell Energy, Capacity and REC’sand REC’s

• Suppliers are sent a form of contract and operating history Suppliers are sent a form of contract and operating history 2 weeks prior to pricing date.2 weeks prior to pricing date.

• Suppliers submit pricing by 10:00 a.m. on the pricing date. Suppliers submit pricing by 10:00 a.m. on the pricing date. • Suppliers offer fixed and time of use (TOU) full Suppliers offer fixed and time of use (TOU) full

requirements pricing for 6, 12 and 18 month term lengths requirements pricing for 6, 12 and 18 month term lengths

• Consultant arrives at Buyer’s offices between 12:30 – 1:00 Consultant arrives at Buyer’s offices between 12:30 – 1:00 p.m. with pricing offers, pricing comparisons, cost analysis p.m. with pricing offers, pricing comparisons, cost analysis (POLR vs. Market, % and $ increases etc.) and (POLR vs. Market, % and $ increases etc.) and recommendations. recommendations.

  • Buyer needs to be Buyer needs to be prepared prepared to execute a contract before to execute a contract before

2:00 p.m. on that day. 2:00 p.m. on that day. All supplier contract issues will All supplier contract issues will need to be resolved prior to the pricing dateneed to be resolved prior to the pricing date

  • While pricing is requested on the pricing date, this does While pricing is requested on the pricing date, this does

not mean Buyer will have to enter into a contract on that not mean Buyer will have to enter into a contract on that day.  day.  

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Energy, Capacity and RECs Energy, Capacity and RECs SalesSales

ENERGY CAPACITY RECS Total

1995-1996 $ 1,420,933 $ - $ - $ 1,420,933

1996-1997 $ 1,524,720 $ - $ - $ 1,524,720

1997-1998 $ 1,464,755 $ 291,440 $ - $ 1,756,195

1998-1999 $ 2,051,849 $ 722,970 $ - $ 2,774,819

1999-2000 $ 2,321,066 $ 871,794 $ - $ 3,192,860

2000-2001 $ 8,415,678 $ 753,929 $ - $ 9,169,607

2001-2002 $ 10,675,525 $ 1,285,357 $ - $ 11,960,882

2002-2003 $ 12,621,359 $ 1,303,761 $ 49,129 $ 13,974,248

2003-2004 $ 14,248,980 $ 662,924 $ 339,823 $ 15,251,727

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RecommendationsRecommendations

• If your State does not have an RPS get If your State does not have an RPS get one adoptedone adopted

• Do not allow special interest groups to Do not allow special interest groups to define “Renewable”, build a consensusdefine “Renewable”, build a consensus

• Make sure State/Regional/Local energy Make sure State/Regional/Local energy procurements do not adopt a special procurements do not adopt a special interest group’s definition of renewableinterest group’s definition of renewable

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Recommendations cont’dRecommendations cont’d

• Before signing any contract to sell Before signing any contract to sell credits, make sure that ownership of credits, make sure that ownership of RECs and Emissions Credits are RECs and Emissions Credits are clearly definedclearly defined

• Buy Brown…Sell GreenBuy Brown…Sell Green

• Sources of RECs: landfill gas, sewage Sources of RECs: landfill gas, sewage sludge digesters, composting, WTEsludge digesters, composting, WTE

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SourcesSources

– ““Gains from an integrated market for Gains from an integrated market for tradable renewable energy credits”, tradable renewable energy credits”, Pallab Mozumder and Achla MarathePallab Mozumder and Achla Marathe

– ““On the track of green certificates”, On the track of green certificates”, Anna Giovinetto, Evolution MarketsAnna Giovinetto, Evolution Markets

– ““PSC Votes to Adopt Aggressive PSC Votes to Adopt Aggressive Renewable Energy Policy for NY State” Renewable Energy Policy for NY State” NY PSCNY PSC