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California Agrees to Allow Out-of-State Renewable Energy Credits

Utilities Were Struggling to Meet Aggressive Renewable Electricity Standard

By Amy Westervelt

Mar 12, 2010

California utilities can now purchase some of the benefits of renewable energy without actually purchasing the energy itself.

That’s the gist of a move yesterday by the California Public Utilities Commission to allow utilities to use tradable renewable energy credits (TRECs) to meet the state’s ambitious renewable portfolio standard.

The state’s utilities had previously been allowed to use renewable energy credits (RECs), but those RECs had to be bundled with renewable energy generation. Tradable RECs, on the other hand, can be unbundled from renewable energy generation.

It’s an important distinction.

California’s mandates that the state utilities increase the amount of power they get from renewable sources to 20 percent by 2010 and 30 percent by 2020. However, by 2009, it had become clear that the state’s utilities were not going to meet the 2010 goal. According to the Public Utilities Commission, Southern California Edison had increased its supplies from renewable sources by 16.8 percent, Pacific Gas & Electric had increased renewables by 14.4 percent, and San Diego Gas & Electric increased renewables by 10.5 percent.

The commission believes the new on TRECs will give utilities the flexibility they needed to comply with the standard.

Upsides and Downsides

On the positive side, unbundling RECs from generation opens up California’s utilities and its renewable portfolio standard to include smaller renewable energy projects, including residential and commercial rooftop solar projects. If homeowners can earn money off rooftop solar installations by selling RECs to their local utility, the cost of such systems becomes less of an obstacle.

The downside of TRECs is that they can be purchased from outside of the state, which runs counter to the original intentions of the renewable portfolio standard: to encourage innovation and the generation of renewable energy within California. The TRECs are still limited to only those states included in the Western Electricity Coordinating Council, so they won’t be coming from halfway around the world, but neither do they have to come from California.

California’s Division of Ratepayer Advocates has been the plan to unbundle RECs since the idea was first proposed in 2008. In its written position on TRECs, the division states:

“While unbundled or tradable RECs may help utilities meet their fast approaching RPS obligations in 2010, they endanger the credibility of the RPS when the unbundled or tradable RECs from out-of-state renewable energy facilities are attached to electricity imports from coal power plants.”

Renewable energy credits work similarly to carbon offsets. The credits relate to the general benefit of renewable energy generation — reduced emissions and pollution that benefits everyone, whether they’re using the clean energy themselves or not. Allowing TRECs allows utilities to buy power from wherever they like so long as they pay for the benefits created by renewable energy production elsewhere.

Renewable energy producers are on the Public Utilities Commission’s decision. The Solar Alliance and the California Solar Energy Industries Association both have an issue with the the commission has initially placed on RECs. Given that the market for TRECs is new, their consensus is that demand will outpace supply, at least for the first year or two. Not wanting utilities to be price-gouged for RECs, the commission has added a price cap of $50 per credit.

Transmission and Wind

Great Approach!!

Hey that'a a great news for california.One of the most important benefits of renewable energy is the fact that it’s non-polluting. And of course as the name tells us it is renewable and does not use resources that can never be replaced. Renewable energy has a much lower environmental impact than conventional sources of energy. But there are other advantages to using renewable sources of energy.


Thanks for sharing this informative article. I was really wondering and i get here and get amazed by the article. Hope that we will get more ahead.


It is a little strange that California would set their sights so high when they had to realize they didn't have enough wind to create that amount of renewable energy. I hope this new deal works out.

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Western Regional Greenhouse Gas Initiative... please explain what this is? Did you mean WECC, WCI?


Thank you for the note. That should have been the Western Electricity Coordinating Council (WECC). It has been fixed in the article.
-The Managing Editor

As of December 31, 2009,

As of December 31, 2009, wind capacity has grown to nearly 35,000 MW. That’s the equivalent of more than 9.7 million homes. The U.S. wind industry currently directly employs more than 2,000 people. Wind, solar, biofuels, nuclear, renewable and conventional: all are part of a complete energy portfolio that America desperately needs! The government needs to take the necessary steps to promote a future focused on energy security, job creation, and prosperity for America.

I absolutely agree with you

I absolutely agree with you CEA. America must use more wind, solar and nuclear energy. The thing is that these types of renewable energy will be the main after 10 or 20 years. Those countries which will turn their economical strategy to renewable types of energy now, will definitely win in the future. I would even say that huge companies must take and develop some new technologies which would take energy from wind or sun because it can turn to some nice business plan after 10 years. However this is only my own opinion. By the way those renewable energy credits are very useful and I think that it is a great idea for the future development. Thanks for the interesting article too.

California Agrees to Allow

It is very odd that California have set their sights so high when they had to realize they didn't have enough wind to create that amount of renewable energy. , but i do really hope it works out for them though as it is vital that we find ways to harness renewable energy for the future.

I agree with you

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"it’s really more that

"it’s really more that California actually doesn’t have great wind resources, he says."

We have more than enough solar resources though

NREL's estimates of potential for solar thermal plants in California

Premium 61.6 GW 134,942 GWh
Excellent 14.8 GW 29,189 GWh
Good 21.7 GW 38,093 GWh
Total 98.1 GW 202,224 GWh

And Arizona has almost three times that much potential.

NREL defines premium solar resource as over 7 kWh/square meter
excellent as 6.5-7 kWh/square meter
good as 6-6.5 kWh/square meter

Total current generating capacity from all sources in California 58 GW

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