White Papers RPS and RECs – Managing an Increasing Regulations | Page 4

RPS and RECs – Managing an Increasing Regulatory Burden

A ComTech Advisory Whitepaper

The type of renewable generator that produced the power
The date it was created (its vintage)
The date the generator was first put into service or its vintage
The physical location of that generation unit
Once created, that REC becomes a tradable commodity and can, as previously noted, can be sold with the physical
power or separated for sale in the RECs trading markets. Some states do allow RECs that were produced in other
states to be utilized to meet their RPS programs requirements, though the eligibility will vary greatly and does impact
the growth of liquidity in the RECs markets. While there is some exchange-based trading of RECs occurring, primarily
on the Intercontinental Exchange, most RECs are traded bilaterally or over the counter (OTC), and generally on a
periodic basis. In fact, most RECs are purchased in bulk, with the regulated load serving utilities purchasing the
majority directly from renewable energy generators in order to meet their RPS requirements. Other RECs are
purchased by electric cooperatives; smaller utilities that operate primarily in rural areas. Brokers and aggregators
also operate in this market, servicing utilities, industrial consumers and power marketers who purchase the
certificates to service their green energy programs.

A Look at one State’s Program
North Carolina established a mandatory renewable standard in 2008, becoming the first (and still the only) state in
the Southeast to adopt a Renewable Energy and Energy Efficiency Portfolio Standard (REPS). Under the new law,
investor-owned, load serving utilities in North Carolina are required to meet up to 12.5% of their energy needs
through renewable energy resources or energy efficiency measures. The smaller rural electric cooperatives and
municipal electric suppliers are subject to a 10% REPS requirement.
In order to ensure compliance and proper management of the REPS, the North Carolina Utility Commission
established the Renewable Energy Certificate Tracking System or NC-RETS in 2010. The NC-RETS function is to issue
and track renewable energy certificates and energy efficiency certificates (EECs) created within the state. Registered
renewable energy producers use NC-RETS to create RECs (in digital form) that meet the requirements of North
Carolina’s portfolio standard; and the state’s electric utilities use the system track their activities related to, and
demonstrate compliance with, the renewable energy portfolio standard. Ultimately, the NC-RETS will integrate with
all other renewable energy certificate tracking systems in the United States to allow for the import and export of
RECs to and from North Carolina.

Meeting the Compliance and Tracking Challenge
With the new renewables standards, North Carolina power utilities and cooperatives were faced with a significant
compliance burden – a burden that the cooperatives were particularly unprepared and understaffed to meet. In
response, the board of directors of 23 of the state’s electric cooperatives formed a green services company, GreenCo

Copyright 2014, Commodity Technology Advisory LLC

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