White Papers RPS and RECs – Managing an Increasing Regulations

RPS and RECs – Managing an Increasing Regulatory Burden A ComTech Advisory Whitepaper “While the use of Renewable Energy Certificates, or RECs, is an effective method of allocating the cost of Renewable Portfolio Standards (RPS) across the breadth of the market, the tracking and administration of those certificates places a significant burden on power suppliers, particularly smaller utilities such as municipals and cooperatives. As these standards increase in scope and amount of renewables mandated, the burdens increase proportionally, leaving many of these companies unable to effectively manage their business and regulatory requirements on spreadsheets.” Introduction Renewable energy certificates or ‘RECs’ have become the currency of the renewable or green power industry, allowing power providers to expand their product offerings and offer ‘green’ power irrespective of whether or not they can physically generate it. Consumers can also be assured that should they choose to buy renewable power, in support of the renewables suppliers servicing the market, that the power they use has either come directly from a renewable generator, or if a renewable generator is not servicing their facility, that it is offset in the market by power from a renewable source, such as wind, solar or hydro, in another geographic area. Essentially, as described by the US EPA, a “REC represents the property rights to the environmental, social, and other nonpower qualities of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source.”1 It is the separatability from the underlying physical electricity that actually creates the value and benefits for both the producer of green power, whose investment is supported by selling RECs, and consumers who wish to enjoy the benefits of green power but who may not have direct access to renewable power due to their physical locations. The driving force behind the development of the REC and its underlying market has been the development of state level renewable portfolio standards or RPS. These either 1) mandate a certain level of electricity servicing the markets in that adopting state be from renewable sources, or 2) set voluntary goals for electricity sold in the states 1 http://www.epa.gov/greenpower/gpmarket/rec.htm Copyright 2014, Commodity Technology Advisory LLC 2

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