1

Renewable Energy CreditsShehzad Wadalawala

2

Topics

What is a Renewable Energy Credit (REC)? What are they used for? Who uses them? How is REC ownership tracked? What is the Renewable Portfolio Standard

(RPS) in CA? What is the interaction between a REC

and GHG emissions? Who gets the RECs for Distributed

Generation?

3

What is a REC? A Renewable Energy Credit (REC) represents the environmental and renewable

attributes of renewable electricity. A REC can be sold either "bundled" with the underlying energy or "unbundled", as a separate commodity from the energy itself, into a separate REC trading market.

California law (Public Utilities Code §399.12[f]) defines a REC as:

"a certificate of proof, issued through the accounting system established by the Energy Commission… that one unit of electricity was generated and delivered by an eligible renewable energy resource.

‘Renewable energy credit’ includes all renewable and environmental attributes associated with the production of electricity from the eligible renewable energy resource, except for an emissions reduction credit issued pursuant to Section 40709 of the Health and Safety Code and any credits or payments associated with the reduction of solid waste and treatment benefits created by the utilization of biomass or biogas fuels.”

The CPUC further defined the attributes, including the avoided greenhouse gas (GHG) attributes, associated with a REC in D.08-08-028. Pursuant to this decision, the GHG attributes associated with the RPS energy generation are transferred to the buyer of the REC.

4

What are RECs used for?

In California, RECs are used to show compliance with the RPS, and they can be traded in voluntary markets.

In the voluntary market, any company (e.g. a grocery store chain) that is not regulated by the state to buy green power can buy RECs to make claims that it is powered by clean energy.

5

Who uses RECs?

Load Serving Entities Renewable Generators Business Entities Marketers Individuals

6

How is REC ownership tracked? In the Western region of the U.S., RECs (both

voluntary and compliance) are tracked using the Western Renewable Energy Generation Information System (WREGIS). WREGIS was launched in mid-2007.

The Western Renewable Energy Generation Information System (WREGIS) is an independent, renewable energy tracking system for the region covered by the Western Electricity Coordinating Council (WECC). WREGIS tracks renewable energy generation from units that register in the system by using verifiable data and creating renewable energy certificates (REC) for this generation.

7

What is RPS? For the RPS, electric retail sellers must buy

eligible renewable energy and its associated RECs to comply with the state RPS requirements. The California Energy Commission (CEC) tracks the RECs, and at the end of a compliance year, verifies how many RECs each retail seller has procured for compliance with the RPS. The CEC provides that information in an annual verification report to the CPUC, and then the CPUC determines whether a retail seller is in compliance with the RPS.

8

RPS Requirements

9

RPS Requirements

10

RPS Requirements• There are three RPS Categories (also

referred to as Buckets) that can be used to meet RPS Requirements

• Category 3 is the most restricted and least valuable category (market value < $5/MWh)

11

What is the interaction between RECs and GHG? Greenhouse House Gas (GHG) emission reduction benefits

depend on displacement of non renewable energy by renewable energy

Location and timing of renewable resource generation can impact what type of resource is displaced

Renewable resource generation variability can create challenges for integration and balancing supply and demand resulting in less efficient operation of conventional power plants

Precise calculation of GHG emission reduction from a renewable resource is complicated. What is a good proxy? What GHG emission factor should be assumed if the REC is unbundled from the energy and sold?

12

Who gets the RECs for Distributed Generation? In D.07-01-018, the CPUC determined that

facilities that serve onsite load (e.g. facilities receiving incentives from the California Solar Initiative or Self-Generation Incentive Program) own their RECs. In other words, the facility owner owns the RECs, and they are not transferred to the utility. That means that a facility owner can either make green claims (e.g. “our company is powered by solar”) if it retains the RECs, or the owner can seller the RECs so another entity can make green claims. The CPUC does not regulate who the facility owner sells its RECs to.

13

Questions?