# Presentation: 883091

## Renewable Energy Certificates and Energy Efficiency Certificates

- Meredith Wingate
- Center for Resource Solutions
- www.resource-solutions.org
- NREL Energy Analysis Forum
- November 9, 2004

## Overview

- State of REC markets
- Key market drivers and trends
- Barriers and challenges
- Energy efficiency certificates

## RECs Today

- Fastest growing part of voluntary RE market
- ~ 10.5 Million MWh RECs were contracted in the US in 2003
- 1.8 Million MWh Green-e certified RECs in 2003
- 1100% increase from 2002
- Primary tool for substantiating compliance with mandatory market programs

## Bringing RECs to Market

- 20 retail marketers and 14 wholesale marketers selling unbundled RECs (not electricity)
- Generators via brokers
- Generator-marketers
- Numerous utilities and marketers selling REC-based bundled products
- Most RE transactions involve RECs on some level

**Notes:**
20 retail marketers selling unbundled RECs (not electricity)
14 wholesale marketers selling unbundled RECs (not electricity)
Generators via brokers
Numerous utilities and marketers selling REC-based bundled products
Most RE transactions involve RECs on some level

## October 2004 SampleWholesale REC Prices (MWh)

| Fuel Type | REC Type | Location | Price |
| --- | --- | --- | --- |
| New Wind | Voluntary | WECC | $1.50 |
| New Wind | Voluntary | Central | $2.50 |
| New Solar | Voluntary | WECC | $35.00 |
| Any new | Compliance | MA | $39-$49 |
| Any REC | Compliance | Texas | $11-$13 |
| New Solar | Compliance | New Jersey | $175.00 |

**Source: Evolution Markets LLC**
**	****  ****www.evomarkets.com/mmu**

## Why the Price Disparity?

- Geography of low-cost renewables
- Supply/demand
- Volume of purchase
- Voluntary vs. compliance markets
- Regulatory (e.g. penalties for non-compliance with RPS)
- Type & vintage of renewables
- Solar set-aside in RPS

## Sample 2004 Retail REC Prices

| Supplier | Type 
(all 100% new) | Price/
MWh |
| --- | --- | --- |
| BEF | 100% Wind | $20 |
| Community Energy | 100% Wind | $25 |
| Mainstay | 100% Solar | $200 |
| Renewable Choice | 100% Wind | $20 |
| Sterling Planet | 5% Solar
45% Wind
50% Bioenergy | $16 |

## Key Drivers for REC Markets

- Green-Pricing Programs
- Voluntary Purchases:
- Non-residential demand
- Govt. procurement
- Mandates and RPS
- Future - Emissions Markets?

## Trends: RECs in Green Pricing

- RECs increasingly used in green pricing programs
- Represent 33% of green pricing sales, up from 11% in 2002
- Green pricing sales overall grew by 44% in 2003

*Source: Lori Bird, Presentation at 9**th** National Green Power Marketing Conference Oct. 4, 2004*

## Trends: Non-Residential Demand

- 95% of Green-e certified RECs were purchased by non-residential customers
- 332,033 MWhs in 2003
- Nearly 400 customers
- EPA Green Power Partnership participants purchased 540,000 MWhs RECs annually
- WRI Green Market Development Group

## Trends: Non-Residential Demand (cont.)

- Government procurement is major driver
- Rhode Island State House 1650 MWhs/year for 5 years
- GSA Great Lakes Region 60,000 MWhs post-1990 RECs
- Five EPA facilities in WAPA area for 17,375 MWh
- GSA Mid-Atlantic Region 20,000 to 50,000 MWhs/year

## Trends: RECS in Mandatory Programs

- Of 17 states with RPS or other RE mandate, 12 currently allow unbundled RECs as method for satisfying requirement
- 14 states allow out-of-state RECs to satisfy requirement  with in-state delivery
- 8 states allow out-of-state RECs without in-state delivery requirement

**Notes:**
Most of these 8 states do have a regional requirement, but in general we’ve seen an evolution in thinking about the use of RECs to satisfy mandates. RECS have helped mandatory markets become more regional in nature.

	Caused by 3 factors: 
		more RPS- reciprocity
		better tracking systems
		more comfortable with RECs as trading/compliance tool
Expect this to expand with the development of import/export capabilities between tracking systems. 

## Mandatory REC MarketsSale Volume

- ERCOT
- 2002 – 2.8 million MWhs
- 2003 – 2.9 million MWhs
- NEPOOL/GIS
- 2002 – 4.4 million MWhs
- 2003 – 5.8 million MWhs

## Trends: RECS as a Compliance Tool

- Participation in a REC tracking system is likely to be a requirement of 15 of the 17 states with a mandate when the three tracking systems in development are operational

## Trend: Development of Regional REC Tracking Programs

- ERCOT RECs Program (2001)
- NEPOOL GIS (2002)
- WREGIS (WECC states)
- M-RETS (Upper Midwest states)
- PJM Gats (PJM and expanded region)
- NAAIB Coordinating Body

**Notes:**
Verify Type of Generator
Generator registration/verification
Issue TRCs to Generators
How many TRCs were purchased?
Verify property rights and amount in specific accounts
Verify types of TRCs in accounts
Was there any double counting?
Good within tracking system boundaries
Cooperative agreements with other tracking systems

## Slide 16

## Trends: POP Tags

- “Mini-tags” or “Point of Purchase (POP) Tags”
- Example: Green Mountain and BEF have sold 100 kWh blocks of wind RECs at ski resorts so customers can offset their ski lifts energy use.
- Potential uses: offsetting emissions from airline travel, grocery store purchases, rental car usage, etc.

**Notes:**
-- Small quantities of RE attributes sold at point-of-purchase to offset the consumer’s energy use and/or emissions from a particular activity.
Not likely to be a big part of the market, but interesting for two distinguishing characteristics-  (1) Point of purchase aspect increases consumer awareness of air quality impacts of activities like driving, energy use from operating ski lifts etc., and (2) links RE with offsetting air impacts

## Trends: RECs Use in Emissions Markets

- RECs are the tool that allow RE to play in emissions markets
- Tracking and verification critical
- Will RE be assigned CO2 value in future Cap & Trade schemes?

**Notes:**
We will be seeing the link a lot more between RE and carbon and other air markets, and RECs are the tool that can translate RE into air quality offsets. Tracking systems are the critical link that enable RE to play in air markets.

## Challenges

- Need accurate and verifiable generation data
- Need a credible mechanism for issuing certificates
- Need a method for tracking certificate ownership
- Need to know what certificate represents
- Need to protect against double counting

## Solutions

- Tracking/Accounting Systems
- Regulatory Oversight
- Certification/Registration
- Verification

## Energy Efficiency Certificates

- Known as EECs, or white certificates (WhCs)
- Used as implementation tool for energy efficiency and DSM programs

## US EEC Activity

- CO, WA, and PA have looked into the used of EECs, primarily as implementation and verification tool of DSM programs

## European EEC Activity

- IEA has convened European DSM experts to:
- Explore use of EECs with practitioners
- Investigate applications, costs, implementation details, potential conflicts with other DSM programs
- Share knowledge and actual experience with EECs
- 18 month study 3/04-9/05

**Notes:**
First meeting Nov 8th 2004

## European EEC Activity

- UK has implemented white certificates trading scheme
- France and Italy intend to employ EECs in DSM programs

## Issues with EECs

- EECs do not have the same market benefits that RECs provide to RE
- RECs overcome market barriers, physical limitations of RE
- EE doesn’t have the location and market access issues that RE does
- EE is cost-effective by itself-not clear what advantage would be gained by having individuals or non-residential customers purchase EECs

## Issues with EECs (cont)

- REC problems of double-counting and verification still exist with EECs  AND
- Usual concerns of EE in DSM Programs are amplified:
- Additionality,
- Setting baseline,
- Persistence, etc.

## Trends for EECs

- Primary benefit of EECs will most likely be as an implementation and tracking mechanism for DSM programs
- Don’t anticipate EECs sold at retail in same way that RECs are

## For More Information

**www.resource-solutions.org**
**TRC and Green-e Certification:**
- Gabe Petlin, _[gpetlin@resource-solutions.org](mailto:gpetlin@resource-solutions.org)_
- _[www.green-e.org](http://www.green-e.org/)_
**NAAIB, Regulatory Handbook, and National TRC Tracking Initiatives:**
- Meredith Wingate, _[mwingate@resource-solutions.org](mailto:mwingate@resource-solutions.org)_
**WREGIS: **_www.westgov.org/wieb/wregis/_