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Green Power
Green tags' market status
The REC market today appears to be a mess of
ever-changing buyers, traders, and market rules.
It’s much less confusing, however, if
you break it down into the two major REC markets:
regulatory (also known as compliance) and voluntary.
For more information on REC's go to:
The Regulatory/Compliance Market The
regulatory/compliance market for RECs is
driven by renewable portfolio standards (RPS):
requirements that electricity retailers obtain
a minimum percentage of their electricity
from renewables. For more information on
states with RPS go to:
The Voluntary Market The second
major source of demand for RECs
is the voluntary market-meeting demand from
those who choose to buy renewable energy, primarily
because of its reduced environmental impact
relative to fossil-fuel based electricity. The
voluntary demand for RECs is a subset of that
for “green
electricity.” The two differ in that green
electricity consists of both
renewable electricity attributes and the renewable
electricity itself, bundled together, while
RECs are just the attributes.
REC Marketers Most REC trades
in the voluntary markets are
not direct deals between generators
and end users, but instead involve
REC marketers and/or brokers.
The numbers change as companies
get into and exit the business,
see the latest list of Green
Marketers. Some of these are
small, not very active, or working only in a
small geographic area, but several have become
major players in the REC industry.
REC marketers typically purchase RECs from
renewable generators and then
resell them to utilities or end
users (a few have their own generation as well).
Some are active only at the wholesale level
(that is, they sell only to utilities and to
large end users), whereas others are largely
retail vendors. Some marketers are nonprofits,
some are utility subsidiaries, and some are
for-profit startups. Many of these marketers
are partnering with utilities to offer retail
green products of various types.
REC Brokers REC brokers, in
contrast to REC marketers, generally do
not take ownership of the RECs
at any point; rather, they act
as matchmakers between sellers and buyers.
For example, Evolution
Markets’ Web site lists
offer and bid prices for various
types of RECs-differentiated
by geographic location, generation
type, and vintage (age). For example, in August
2003, at its Web site, one generator was selling
77,000 MWh of new biomass RECs for $3/MWh, while
a buyer was offering $3/MWh for 3,000 MWh of
new wind in Western Electricity Coordinating
Council.
Pros and Cons of Using RECs in Your Green Pricing Program
PROS
• Quick and simple. You simply purchase them from a REC marketer.
• Low risk. No need for long-term contracts.
• Flexible. You buy only as many as you need. Should your green pricing program grow, you simply buy more.
• Credibility. If you buy RECs from a nonprofit, you may bring environmental credibility to your green pricing program.
• Can simplify the certification process.
• Avoids the complexities in integrating renewable electricity into your generation system.
• Could sell more popular resources such as wind and solar, even if they aren’t available in your power pool.
CONS
• Price volatility exposure. If the price of RECs goes up, you’ll have to pay it.
• Green pricing product may be less attractive to potential buyers. RECs are a fuzzier concept; the actual generation is likely to be located farther away, and therefore the perceived link between the green purchase and the renewable generation is weaker.
• You may get less “credit” (in the political/public perception sense) than if you actually built your own renewable generation.
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