Posts Tagged ‘TRECs’

California TRECs – Making a Comeback

Posted September 13th, 2010 by SRECTrade.


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.


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

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


California TRECs – Will They Ever Materialize?

Posted August 25th, 2010 by SRECTrade.

Every now and then we come across an explanation of an aspect of the SREC market that could not be described in any better way.  The most enlightening piece on the California TREC market to date was authored by San Francisco Attorney David Niebauer. It was originally posted on the CleanTech blog and with the author’s permission, we have copied the post below for our readers.

Our brief summary is that California has passed legislation allowing for the creation of a Tradable REC or TREC market. This market is not specific to solar and will likely be dominated by wind and hydro RECs. However, we are optimistic that this is a precursor to an SREC market in California, especially considering FERC’s recent ruling against Feed-In Tariffs. It seems that the legislation passed earlier this spring has been held up over one issue: the importing of RECs from out-of-state.  Utilities want to be able to purchase RECs from out of state as it increases the available supply and will lower the cost of the RECs. The California Energy Commission, in the interest of promoting an in-state renewable energy industry, wants to limit REC purchases to in-state facilities. There are benefits to both sides of this issue and it really comes down to balancing the goal of cheap renewables with the goal of supporting a California renewable energy industry. Either way we hope the parties come to an agreement soon so that the TREC market can commence and we can begin to focus on how to bring an SREC market to California!

California Tradable RECs – Will they ever materialize?
by David Niebauer

California has led the nation in solar development on many fronts for a number of years, but there is one area where California has lagged significantly – the implementation of tradable renewable energy certificates (or TRECs).

As of this writing, there are five regional renewable energy tracking systems operating in North America, one national registry and three state systems. As early as June 2007, the California Energy Commission launched the Western Renewable Energy Generation Information System (WREGIS), which was designed to track renewable energy generation and create and track renewable energy certificates (RECs) for that generation. TRECs are an important tool for utilities in other states striving to meet their renewable portfolio standard (RPS) goals and help developers finance renewable energy projects in other parts of the country where TRECs are available. So why not in California?

The Basics

In California RECs are not yet tradable – all electric utility renewable energy purchases are “bundled” transactions. That is, the environmental attributes (e.g., RECs) are tied to, or bundled with, the energy itself. Therefore, the only way for utilities to comply with RPS requirements is to purchase renewable energy in bundled transactions from a qualifying renewable energy facility.

In States with unbundled or tradable RECs, electric utilities have two ways to meet with RPS goals: purchase renewable energy in bundled transactions (like in California) or purchase RECs on the open market. In States with TRECs the REC has been “stripped” from the energy and is traded separately. The energy is sold separately and is still supplied to the grid. The utility purchasing the REC may be and likely is completely different than the purchaser of the energy. Only the REC purchaser can count that energy toward its RPS goals.

Proponents of tradable RECs point out that the scheme will assist the State in achieving its RPS goal by balancing out geographical and transmission constraint differences from utility to utility. In California, for example, the State as a whole has considerable renewable resources, from geothermal to wind to solar – but these resources are not evenly distributed geographically throughout the State. Further, some areas with strong renewable resources have significant transmission constraints, making grid connection prohibitively expensive. A tradable REC regime would allow resources to be developed where cost and fit are most appropriate, and allow the environmental attributes (the RECs) to be traded among the utilities (and through intermediaries) to balance out these geographical and transmission constraint issues. As stated in the April 2006 California Public Utilities Commission (CPUC) Staff White Paper: “Importantly, under an unbundled and/or tradable REC framework, [a utility] can purchase RECs from renewable facilities largely irrespective of where those facilities are located or where the energy is ultimately delivered.”

From the energy developer’s perspective, RECs can provide an advantage for developing renewable energy sources. The ability to sell RECs in an unbundled transaction would mean that a developer would be able to negotiate with any utility or other buyer of RECs, rather than negotiating with only one utility in a bundled transaction. In states with TREC developers contract with one utility to provide energy at a relatively low cost and then sell the RECs to another utility or other buyer to enable his project to be economically viable. Where the developers must sell the energy and the REC to the same utility, the price of the energy might be too low to justify development. For this reason, tradable RECs can be a way to speed the development of renewable generation.

The California Log Jam
California has been taking slow, halting strides in the direction of permitting tradable RECs. In 2006 the California legislature passed Senate Bill (SB) 107, which gave the CPUC express authority to allow the use of tradable RECs for RPS compliance.
Three and half years later on March 11 2010 the CPUC issued a decision authorizing TRECs for RPS compliance in California (Decision10-030-021). The proposed scheme had a number of limitations but appeared to be a workable model. Most notable of the limitations was a maximum cap for IOUs of 25% of RPS compliance targets that could be met with TRECs. This limitation was to last only until the end of 2011 and was intended as a way to monitor the program before allowing unfettered use of TRECs. The other significant limitation was a price cap of $50 per REC. Again, this limitation was scheduled to expire at the end of 2011 unless the CPUC determined to extend the cap at that time based on further market studies.

The CPUC decision was made after conducting numerous workshops and receiving comments from interested parties. However, the entities that would have been most impacted by the Decision were not at all happy with the final outcome. Notably, the State’s IOUs and the Independent Energy Producers Association (IEP), whose members make up most of the merchant power producers in the State, filed objections and forceful motions to stay the decision. Prior to its implementation on May 6, only a few weeks after issuing the Decision, the CPUC granted an indefinite stay of Decision 10-03-021. This stay in still in effect.

The reasons for the stay, and the larger implications, are not at all clear. On its face, the stay was implemented in order to resolve objections raised by the IOUs and the IEP. Neither party liked the 25% limitation on use of TRECs to meet RPS requirements. Further, the IOUs, in particular, argued that the CPUC’s definition of a REC-only transaction would limit access to most out-of-state renewable resources, making implementation the TREC scheme unworkable.

Commissioner Grueneich’s Dissent

Commissioner Dian M. Grueneich filed a dissent to the stay that may shed some light on what is really going on. Commissioner Grueneich focused on the motion by the IOUs and claimed that the modifications urged by the IOUs would cause the “outsourcing of California’s renewable economy.” She points out that nothing had changed in the 60 days or so between the Decision and the Stay other than “the relentless lobbying by the utilities at this Commission and in Sacramento to overturn a decision they dislike.”

She continues:

“Since the RPS mandate was first signed into law, one message that has been repeated again and again from developers, from investors and from members of this Commission itself, is that market players need certainty and consistency in decision making in … order to make long term investments in California. This decision will disrupt renewable energy markets, threaten financing for existing and future projects, and compromise the careful work of the Governor’s office to ensure that renewable energy projects obtain their CEC permits and break ground expediently.”


Perhaps this is the (cynical) goal of the IOUs: to entangle the entire RPS movement in delay and uncertainty so that their own foot-dragging can be explained away and excused. Without clear guidance on a TREC program, the argument might go, how can they be expected to meet the State’s aggressive RPS goals? The IOUs have a long way to go to even comply with the 2010 RPS requirement of 20% renewable generation. In 2009, the IOUs collectively served 15.4% of their load with renewable energy. The CPUC estimates that the IOUs are expected to be at about 18% in 2010 and 21% in 2011 – assuming that existing contracts can be converted into operating facilities within that timeframe.

Or it may just be a bureaucratic quagmire that still requires time to work out. After all, the IOU’s fundamental argument in support of the stay, that out of state bundled transactions should not be defined as REC-only transactions and counted toward the 25% cap, makes sense.

California needs to get this right. Whatever system gets developed in California will be followed by other states, especially those in the WREGIS System, so a region-wide system must be supported by the final CPUC decision. We need a workable final decision soon so that we can move forward on the larger goal of lowering greenhouse gas emissions and building a truly sustainable energy infrastructure.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies.

California TREC Market Held Up

Posted June 29th, 2010 by SRECTrade.

On May 6, 2010, the California Public Utilities Commission (CPUC) released its decision to stay the prior decision authorizing the use of tradable renewable energy certificates (TRECs) for compliance with the state’s renewable portfolio standard (RPS) program. This decision came after the April 23, 2010 workshop presentations, in which California’s IOUs discussed the valuation components and calculation of REC pricing.

The decision will be stayed pending resolutions of two petitions 1) the joint petition filed by Southern California Edison Company, Pacific Gas and Electric Company, and San Diego Gas & Electric Company (the utility petition) and 2) the petition filed by the Independent Energy Producers Association (IEP).

As outlined in the CPUC’s decision, the petitions filed look to address the following points:

The utility petition seeks to:

  • Revise the criteria for what transactions are bundled and what can be unbundled for TREC trading
  • Apply the criteria only to contracts submitted for approval after the effective date of the decision
  • Eliminate the temporary limit on TRECs for compliance with the RPS by the large utilities
  • Expand the rules for “earmarking” TREC contracts to address current short-fall with future generation

The IEP petition seeks to:

  • Revise the criteria for bundled and unbundled transactions with revisions different from the utility’s petition
  • Expand the review of the least-cost best-fit methodology for RPS bid evaluation and set a time for its completion

In addition to the subjects the petitions seek to address, the decision also included the concurrences and dissents of the CPUCs commissioners. The full document can be viewed here.

SRECTrade will continue to watch the CPUC’s decision making process and provide updates as they become available.  We will maintain everything we know about it on our California SREC page.

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.