Posts Tagged ‘TREC’

TRECs approved by California Public Utilities Commission

Posted January 18th, 2011 by SRECTrade.

A segment of the California solar industry got a small boost last week as the CPUC approved the TREC program in California. This was essentially a re-affirmation of the original TREC order in March, 2010.

Unfortunately, the TREC market is geared towards large solar farms and not accessible to the rest of the solar industry. The biggest problem is that TRECs can only be produced by “RPS-Eligible” facilities and California currently excludes “Distributed Generation” from RPS Eligibility. The rules are loosely written to define Distributed Generation as coming from facilities where the energy is used close to the source. This pretty much limits the TREC market to solar farms and the companies that build a business out of creating more utility companies (the solar kind). This is somewhat counter-intuitive to the benefits that tradable REC markets bring to promoting local, distributed generation, a reduced reliance on the grid, and the safety of distributed power sources – not to mention all the small businesses that pop-up to support the growth. Either way, this is a decision for the California Energy Commission (CEC).

In addition to the RPS-Eligibility issue, a couple things need to change prior to this having a substantial impact on the solar industry in general. First, the $50/MWh cap on the price of TRECs will not be effective in promoting small-scale solar. The relatively minimal amount of energy generated by rooftop facilities and the amount of effort required to register and sell the TRECs makes it difficult to justify the benefits. The good news is that this cap will be removed in 2014.

The second issue with the legislation is that it creates a generic REC market where solar competes with wind, hydro and other renewable technologies that operate on a scale that is unmatched by solar. This makes it very difficult for the small players looking for access to this market in order to finance solar projects. The only “REC” markets that have been successful in promoting retail residential and commercial solar is an “SREC” market.

As with many states before it, California is taking a cautious approach to implementing TRECs. Hopefully by 2014, the state will make the necessary changes to make this a market that can serve as the foundation of the entire California solar industry. In doing so, it will take a step towards keeping pace with the SREC states on the East Coast. The 33% target in California is aggressive and if solar is going to be a big part of the mix, then the state will need to find a market-based, sustainable solution beyond the budget of the CSI and the pitfalls of the FiT mechanisms so often promoted by industry advocacy groups.

Meanwhile, California solar owners should keep an eye on the other SREC markets. North Carolina in particular is an open market that takes SRECs from out-of-state. The only issue is that, since it is open to everyone, it has gotten oversubscribed pretty quickly. Either way, the takeaway is that opportunities will develop, even if it is outside California, so it does make sense to register if you have a facility in the ground already.

Here is some more information on the most recent decision:

The TREC legislation had been held up by a joint petition of the utility companies essentially lobbying to allow them to procure the RECs from out-of-state, presumably at a cheaper cost. That petition has now been denied and California is back to implementing a TREC program, after a 9 months delay.

The new TREC order of January, 2011. includes the following rules:

1. TRECs can be created by RPS-Eligible facilities (Distributed Generation is excluded)

2. TREC trading begins on the effective date of the decision: January 13, 2011

3. TRECs can be created dating back to the beginning of 2008

4. TRECs have a 3-year life, so the 2008 TRECs will expire

5. All TRECs must be created and tracked in WREGIS

6. If your facility is in a bundled contract, you can unbundle the electricity and trade your RECs separately unless your contract was signed prior to 2005 with California RPS-obligated LSEs (unless stated otherwise in the contract) or if your contract is associated with RPS-eligible energy pursuant to the Federal PURPA Act.

7. TRECs have a 3-year life, inclusive of the year in which it was created

8. LSEs can procure up to 25% of their obligation from TRECs, the rest must come from bundled electricity sales from within their territory. This cap will remain in place until 2014

9. There is a $50 price cap on TREC purchases until 2014

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California TRECs – Making a Comeback

Posted September 13th, 2010 by SRECTrade.

TRECs in CA

On August 25th, the California Public Utilities Commission (CPUC) issued a Proposed Decision (PD) to lift the moratorium on Investor Owned Utilities (IOUs) utilizing Tradable Renewable Energy Credits (TRECs) to meet California’s Renewable Portfolio Standard (RPS). In addition to allowing IOUs to use TRECs for RPS compliance purposes, the CPUC’s PD increased the initial 25% TREC limit to 40%. Based on the petitions submitted by the IOUs and the Independent Energy Producers Association (IEP), the CPUC decided to take the IOUs’ points into consideration and increase the cap to 40% of the annual procurement targets. The utilities argument for increasing the cap was based on the thought that accessing a larger market for renewables will lead to a reduced overall cost.

The CPUC has maintained a December 31, 2011 expiration date for the 40% cap. Additionally, the temporary $50 limit of payments for TRECs is to remain in place through the same time period. The CPUC notes that at this point in time both the cap and the price limit are set to expire unless the CPUC takes action to extend or modify it.

Timing

The Proposed Decision will not be on the CPUC’s voting meeting agenda for at least 30 days from the date the PD was issued.

What this means for CA SRECs

Although the implementation of a TREC market in California is a step in the right direction for SRECs, it does not provide the same market dynamics created by a RPS solar carve out as implemented in the other SREC states. Typically, in a general REC program, as structured by the CPUC, larger capacity renewable energy projects, such as wind, dominate the market. Additionally, the current guidelines instituted by the California Energy Commission (CEC) and CPUC on RPS project eligibility do not include customer-side distributed generation (i.e. the majority of residential and commercial rooftop solar systems).

The CEC RPS eligibility guidebook states that both the CEC and CPUC play a role in determining RPS implementation for renewable distributed generation (DG) facilities. The good news is that both the CPUC and CEC allow system owners to retain 100% of the RECs associated with the energy produced even if the owner has participated in a ratepayer-funded program such as the CPUC’s California Solar Initiative (CSI) or the CEC’s New Solar Homes Partnership program. The bad news is that these systems are considered DG facilities and are not RPS eligible unless the CPUC authorizes TRECs to be applied to the RPS.

Now you might be thinking that the proposed decision issued by the CPUC is good news for distributed generation solar, but unfortunately like a lot of things in the REC world it isn’t that clear cut. The PD issued by the CPUC states that, “although there are technologies that can be used for customer-side renewable DG, most current installations are not in fact RPS-eligible because they have not been certified by the CEC.” Seems like a circular argument, but this is what the most recent documents state. The PD goes on to provide similar detail as the CEC that states, “in anticipation of the eventual use of customer-side DG for RPS compliance” the system owner will maintain full control over the RECs associated with their renewable energy generation.

Based on both the PD issued by the CPUC and the revised CEC RPS eligibility guidebook it appears that the groups intend to incorporate distributed generation into the RPS compliance program, but are not ready to make the commitment at this point in time. This appears to follow in line with the process California has taken in implementing a REC market. As indicated by our guest blogger, David Niebauer, California has taken its time in launching a REC program; SB 107 was passed in 2006 and gave the CPUC express authority to use TRECs for RPS compliance. It appears that the CPUC and CEC want to get a feel for how the existing structure of the TREC market will play out before approving DG projects or potentially creating a DG/Solar carve out.

Implementing a CA SREC Program

But couldn’t the CPUC and CEC approve distributed generation projects, create a carve out for these technologies, and slowly increase or reevaluate the requirements over time? From our perspective this would be great and act as a catalyst to continue pushing residential and commercial solar in the state of California. Not only would a solar carve out help increase the generation of renewable electricity, New Jersey is second to California in solar installations, but it would help push a strong solar economy in California. In the PD, the Alliance for Retail Energy Markets (AReM) states that, “…CSI will have provided incentives for approximately 1,100 GWh by 2011.” Based on 2008 electricity figures, 1,100 GWh equates to approximately 0.4% of California’s total electricity sales. This is 0.4% that will not be counted towards meeting California’s RPS targets. Hopefully the CPUC and CEC will consider the implementation of a solar/distributed generation carve out and help drive a strong solar industry in California while achieving the RPS requirements CA’s IOUs are required to meet.

CA RPS Eligible Solar

Solar systems that do not fall into the customer-side DG category may be RPS eligible and could be qualified to participate in the CA TREC market.

We are constantly staying on top of developments in the CA market and are currently working on solutions for both CA RPS eligible and ineligible solar generating units. For more information please contact us at 877-466-4606 or customerservice@srectrade.com.

For access to the CPUC Proposed Decision click here. For access to the revised, draft CEC Renewables Portfolio Standard Eligibility guidebook click here.

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California SRECs (TRECs) coming soon!

Posted March 12th, 2010 by SRECTrade.

The California TREC market is here!

Yesterday California passed legislation to allow for a Tradable Renewable Energy Credit (TREC) market. This essentially means that utilities in California can now buy SRECs unbundled from the electricity. Prior to this ruling, any SRECs used to comply with the state’s Renewable Portfolio Standard had to be purchased with the electricity itself, i.e. the SRECs had to be bundled with the electricity and sold to the utility together.  The reason behind this ruling is that the utilities are not able to meet the growing requirement from projects sited within their territories and this new rule allows them to get credit for renewable energy produced elsewhere by purchasing the SRECs (or TRECs as the state calls them) from generators outside their territories.  The Alternative Compliance Payment (ACP) will start at $50, creating a cap, but that cap and other restrictions around the use of RECs is planned to be lifted after 2011 after the state has had time to get more comfortable with the program.  In the early stages, this means that TREC values will be significantly lower than values in other states where the Solar ACP (SACP) is anywhere from $250-$700. Currently TRECs include all forms of Renewable Energy, however, it is unclear if there will be a market in the future that places a distinction on Solar RECs, SRECs in the California market place. With this legislation, SRECs carry the same value as any other RECs.

We see this being an important opportunity for generators outside California who are now able to help the state meet its renewable energy goals by purchasing RECs. The RECs must be registered in WREGIS in order to be eligible.  SRECTrade will have more information regarding the online market place for California TRECs soon.