The most competitive groups for Renewable Energy Certificates (RECs) are the retail and wholesale marketers and the brokers. Because demand for renewable energy is growing rapidly, the facility developers do not have much competition. Only one consumer protection agency dominates, indicating there is little to no competition within that stakeholder group.
Two Distinct Markets for Renewable Energy Certificates
The two markets for RECs are: the voluntary market and the compliance market. The voluntary market is fed by companies, institutions, organizations, and individuals who choose to demonstrate their environmental stewardship through the voluntary purchase of RECs. Approximately 84 percent of the voluntary RECs are certified by Green-e, a labeling and verification program managed by the Center for Resource Solutions (CRS).
Closely tracked to avoid double-counting, the Green-e label provides assurance to voluntary REC buyers that their purchase has value. Mandating covered utilities to use a certain percentage of renewable energy in their electricity mix, state-legislated policies currently affect thirty-one states. Each state has a unique policy created to meet its needs and support the development of its renewable energy industry. For example, in Colorado, utilities must source 20 percent of their electricity from renewable sources by 2020.
Regional Tracking Registries
Each certificate tracking registry covers a specific territory, virtually eliminating competition. The REC marketers, both retail and wholesale, compete with one another to win the business of the companies and utilities that purchase RECs in the voluntary market. Approximately 115 retail and wholesale companies operate in the REC marketplace to help their customers form relationships with facility developers.
By purchasing and holding RECs before certificates are sold to voluntary buyers, marketers take on the risk that others cannot. Typically, the utilities are able to source RECs from facility owners, which reduces costs by cutting out the middleman. Brokers, unlike marketers, never take possession of RECs, instead, they work with buyers and sellers of RECs to create markets. While there are some brokers who only participate in the environmental markets, others trade all types of energy products.
There are nine different regional tracking registries in the United States, each of which covers a specific regional area; some registries track many states, while others track just one. Created specifically for the REC markets, the registries help load-serving utilities keep track of the certificates they purchase and ensure that the RECs are retired after they are used to meet state policy requirements. The primary feature of the regional tracking systems is to prevent double-counting. However, they also track all trades within the Renewable Energy Certificates region as well as information on numerous generating facilities, providing facilities with extensive data.
Pricing of Renewable Energy Certificates
One of the least transparent aspects of the REC market is the pricing of a certificate. Many factors influence the cost of a certificate, including:
- Where it originated
- What resource was used to generate the megawatt hour
- When the facility was built
- What the certification of the facility is
- How much demand for a particular type of REC is generated by Renewable Portfolio Standards.
Although certificates in the voluntary market are typically much less expensive than those in the compliance market, the price in both markets has dropped significantly in the past year and a half. Currently, an REC is priced between $1and $650.
Source:
Duane Sharp - I am a retired professional engineer (electronics), with over 40 years of writing experience in technology topics, with a focus on the IT ...
