Renewable Energy Certificates

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Renewable Energy Certificates (REC), also called Renewable Energy Credits, represent the environmental attributes of the power produced from renewable energy projects and are sold separate from commodity electricity.[1]

RECs are generated when renewable energy is sent onto the electrical grid and are used to verify that utilities are meeting their renewable obligations. For every REC purchased, one megawatt-hour (MWh, or 1000 kilowatt-hours) of renewable electricity is generated and delivered to the power grid.[2]

Some renewable energy sources that can generate RECs are:[3]

  • Solar hot water
  • Photovoltaics (grid connect)
  • Photovoltaics (stand-alone power supply systems)
  • Wind
  • Hydro
  • Biomass

RECs are traded over-the-counter via brokers and between parties, and are also traded as futures on the Intercontinental Exchange and Nodal Exchange.

Background

US states created REC markets out of so-called Renewable Portfolio Standards or RPS, which were mandates set by individual states to provide cleaner power and greater diversity of power sources and new jobs. The first state to require a RPS was Iowa, which required electricity utilities to purchase a minimum amount of renewable power in 1983. By early 2019, a total of 29 US states, Washington D.C, and three territories have an established RPS system, with another eight states and one territory setting renewable energy goals.[4]

Texas was one of the first states to create RECs to track the renewable energy that is generated and most states now have REC registries for compliance.[5]

Contracts are traded by corresponding states. Futures for example, are offered on New Jersey Solar RECs.[6]

Exchange Trade of RECs

Nord Pool ASA was the world’s first international commodity exchange for electricity, green certificates and European Union Allowances (EUAs).[7]

In Europe, RECs are generally referred to as a Guarantee of Origin, as a method of tracking renewable energy attributes but no mandatory, or compliance, markets exist for such certificates.

The former Green Exchange - a venture among market players including NYMEX, CME Group, Constellation Energy, Credit Suisse, Evolution Markets, Goldman Sachs, ICAP Energy, J.P. Ventures Energy Corporation, Morgan Stanley, RNK Capital, Spectron, TFS Energy, Tudor Investment Corporation and Vitol SA, acquired by CME Group in 2012 - offered environmental-related contracts including contracts for national Green-e, or certified voluntary Renewable Energy Certificates.[8][9][10]

Association of REC Market Players

The association RECS International is a non-profit European organization registered in Brussels. Its members are renewable energy producers, traders, suppliers and brokers in mostly Europe (also in South Africa, US and Canada) who either wish to have a RECS account at their national issuing body and/or wish to influence policy on governmental and system level concerning certificate trading. RECS International acts as the representative of market players towards national and European governmental authorities and facilitates all possible events and activities that enhance the RECS mission statement.[11]

References

  1. Green Power Markets: Renewable Energy Certificates. U.S. Department of Energy.
  2. Renewable Energy Certificates (RECs). 3 Degrees.
  3. Renewable Energy Certificates. Queensland Government.
  4. State Renewable Portfolio Standards and Goals. NCSL.
  5. Interaction of Compliance and Voluntary Renewable Energy Markets. NREL.
  6. Nodal Products: Environmental. Nodal.
  7. Press Release. Nord Pool.
  8. Welcome To Green-e. Green-e.
  9. Green Power Network: News. U.S. Department of Energy.
  10. [investor.cmegroup.com/news-releases/news-release-details/cme-group-acquires-greenx-holdings-llc?ReleaseID=661397 CME Group Acquires GreenX Holdings LLC]. CME Group.
  11. Renewable Energy Certificate System: the RECS International Assocation. RECS.
Last modified on 28 March 2019, at 11:09