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