New Study Examines the Role of Renewable Energy Certificates in State Renewables Portfolio Standards; Finds that Definitions and Rules Could be More Clear

 

Berkeley, California (April 26, 2007)

Many states that have adopted renewables portfolio standards (RPS) have decided to use unbundled renewable energy certificates (RECs) to track RPS compliance, and an increasing number of regions are developing web-based REC tracking systems, according to a report released today by Lawrence Berkeley National Laboratory. Nonetheless, the Berkeley Lab report also concludes that, in some areas associated with RECs, states are ambiguous in their definitions and rules, and that greater clarity should be sought.

The report examines legislation and regulatory rules from each of the 22 RPS policies currently in place in the U.S., with a particular emphasis on certain issues associated with RECs. “It’s evident that certificate tracking systems increase the confidence of legislators and regulators when it comes to allowing RECs to be traded separately from electricity,” says report co-author Edward Holt. Even so, states have a wide variety of REC definitions and rules, and these rules are not always precise. “Clarifying definitions would help remove uncertainty in the market, and would benefit the renewable energy industry and consumers,” adds co-author Ryan Wiser.

The report specifically evaluates how states treat air emissions reduction credits or emissions allowances under RPS policies, if those allowances are available to renewable generators. Although several states have been explicit about this (reaching different conclusions), most states do not directly and clearly address the question, which is becoming increasingly important as states adopt emissions cap-and-trade programs. “It may be beneficial if states were able to further standardize their treatment of emissions allowances under state RPS policies in order to encourage less fragmentation in the emerging RECs market,” says Holt.

Another area on which the study focuses is whether renewable energy or RECs sold through voluntary customer-driven green power transactions may count towards state RPS obligations. In this area, the report finds more consistency. Twelve states and the District of Columbia prohibit the use of voluntary green power sales for RPS compliance, instead requiring that voluntary green power sales add to RPS-driven renewable energy requirements. A few states permit voluntary sales of differentiated green power products to count towards their RPS requirements. Six states have not yet addressed this question - again, bringing clarity, if not consistency, into the relationship between voluntary and mandatory renewable energy markets would be beneficial.

Wiser concludes, “We hope that this report provides a source of information for states considering RPS policies, and that it also draws attention to certain policy issues that arise when renewable attributes and RECs are used for RPS compliance. Even states that have already adopted rules could benefit from greater clarity.”

The report “The Treatment of Renewable Energy Certificates, Emissions Allowances, and Green Power Programs in State Renewables Portfolio Standards,” can be downloaded from http://eetd.lbl.gov/ea/ems/re-pubs.html . A PowerPoint presentation summarizing key findings from the study can be found at: http://eetd.lbl.gov/ea/ems/emp-ppt.html . For more information on the report, contact Ryan Wiser (RHWiser@lbl.gov, 510-486-5474)