RECs and the Market Maker
Renewable Energy Certificates (REC's) are starting to buzz more often in my ears, so I figured that it was time to begin understanding what will someday become the "alternative" market for trading.
Renewable Electricity Certificates or Tradable Renewable Certificates (TRCs) is viewed as the solution that will help states meet their Renewable Portfolio Standard (RPS) sooner, if not more aggressively. To simplify how the process works, here's my take:
1. Grid-tied producer of electricity (solar, wind...pick your flavor) produces a) electricity and b) the REC.
2. Once the renewable-based electricity is created and sent to the grid, there is no way of distinguishing between electricity generated from other sources. ("Come on! I swear my 1-panel system is powering Grand Central Station.")
3. The solution is to give the point of generation 1 REC for every megawatt of electricity contributed to the grid.
4. This gives you the two products (electricity and REC)...and bragging rights if your home is pumping out that much juice.
5. The REC can then be sold and the owner of the REC can claim to have purchased renewable energy.
Let me link you to Wikipedia's definition of RECs.
As I mentioned earlier, the idea of REC is becoming popular. If applied correctly, it is believed that RECs can help states meet RPS objectives by balancing financial attractiveness and costs associated with pubic and rate payer funds. However, after all the bells and whistles, I found myself shaking my head at one of the beliefs that "a properly designed Renewable Energy Credit program can achieve that balance effectively, by letting the market decide a fair value incentive level."
Now I've spent my time following the market and one thing is for certain. There is always a market maker. What I hope the REC does not succumb to is the same type of influence seen in the stock market. I obviously will need to do more research, but I have a feeling that all it takes is a power player to influence the purchasing prices of the REC.
If it's not controlled correctly, it's possible to see the pricing of RECs trickle down to the home owner in the form of more expensive systems.
On the other hand, if renewable energy becomes the commodity trade of choice, consider the industry secured and here for the long haul.
As an intern, go ahead and weigh the pros and cons of an REC, but your main objective should be to understand the influences in your renewable energy generation industry.
~Michael
Renewable Electricity Certificates or Tradable Renewable Certificates (TRCs) is viewed as the solution that will help states meet their Renewable Portfolio Standard (RPS) sooner, if not more aggressively. To simplify how the process works, here's my take:
1. Grid-tied producer of electricity (solar, wind...pick your flavor) produces a) electricity and b) the REC.
2. Once the renewable-based electricity is created and sent to the grid, there is no way of distinguishing between electricity generated from other sources. ("Come on! I swear my 1-panel system is powering Grand Central Station.")
3. The solution is to give the point of generation 1 REC for every megawatt of electricity contributed to the grid.
4. This gives you the two products (electricity and REC)...and bragging rights if your home is pumping out that much juice.
5. The REC can then be sold and the owner of the REC can claim to have purchased renewable energy.
Let me link you to Wikipedia's definition of RECs.
As I mentioned earlier, the idea of REC is becoming popular. If applied correctly, it is believed that RECs can help states meet RPS objectives by balancing financial attractiveness and costs associated with pubic and rate payer funds. However, after all the bells and whistles, I found myself shaking my head at one of the beliefs that "a properly designed Renewable Energy Credit program can achieve that balance effectively, by letting the market decide a fair value incentive level."
Now I've spent my time following the market and one thing is for certain. There is always a market maker. What I hope the REC does not succumb to is the same type of influence seen in the stock market. I obviously will need to do more research, but I have a feeling that all it takes is a power player to influence the purchasing prices of the REC.
If it's not controlled correctly, it's possible to see the pricing of RECs trickle down to the home owner in the form of more expensive systems.
On the other hand, if renewable energy becomes the commodity trade of choice, consider the industry secured and here for the long haul.
As an intern, go ahead and weigh the pros and cons of an REC, but your main objective should be to understand the influences in your renewable energy generation industry.
~Michael
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