Renewable Energy Certificate Market

           US - Energy News

Renewable Energy Certificates (RECs) are tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.

An obstacle to understanding this market is the fact there there is not a singular national market but one comprised of a voluntary market and renewable portfolio standard (RPS) compliance markets that are dictated by individual states with their own rules, regulations and prices. Voluntary green power markets are those in which consumers and institutions voluntarily purchase renewable energy or RECS to match their electricity needs. Voluntary action provides a revenue stream for renewable energy projects and raises consumer awareness of the benefits of renewable energy.

Some states have particular RECS markets for a certain type of renewable energy production such as wind or solar. In these markets all suppliers must meet a particular renewable percentage requirement in certain years with the percentage generally increasing over time. If a supplier has not secured enough renewable electricity in its portfolio supply mix in a certain year then they are able to purchase RECS (within the rules of the particular area they are operating) as a substitute. They can also pay a pre-determined penalty known as an Alternative Compliance Penalty (ACP). One of the economic constraints of this approach is that the ACP works as a ceiling to RECS prices in a particular compliance markets.

In order to ensure that Renewable credits are not counted twice there have been many certificate registry systems introduced that “track and retire” the certificate after is has been used by a particular entity. PJM GATS (Generation Attribute Tracking System) is a system that tracks many of the certificates generated for RPS markets in states where PJM operates. For voluntary markets, there are several registries which will retire RECS but it is important to highlight that for the voluntary market, Green E Certification by an organization called the Center for Resource Solutions has become the standard and most customers who voluntarily buy RECS want their certificates to be Green E Certified.

Regarding the pricing of voluntary credits, we have seen low prices for several years but at the current prices of approximately .1- .15 cents per kwh for certified credits, it does seem a good time to “green up” an entity’s electricity consumption if they are so inclined.

Alfa Energy Group

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