Renewable Energy Certificates: A Patchwork Approach To Deploying Clean Technologies

Journal of World Energy Law and Business, Vol. 5 Issue 1 pp.1

February 1, 2012

By David P. Yaffe

Describing the challenging regulatory framework for the promotion of electricity from renewable energy sources in the United States, the article addresses the evolving patchwork approach to renewable energy promotion through Renewable Portfolio Standards (RPS) of widely divergent ambition, and based on disparate definitions and legal concepts, which fails to create the robust incentives and long-term certainty desired by investors in renewable energy ventures.

"As demand for energy in the United States will inevitably rise along with a projected population increase of over 100 million by mid-century, new electricity generation will be built throughout the country. With increased scrutiny and mandates for fossil fuel facilities at the state and federal levels, renewable energy generation such as wind, solar and geothermal are picking up pace in the US.

The deployment of these low-carbon technologies is incentivized, in part, by state regimes creating a new type of commodity called Renewable Energy Certificates (RECs). These certificates are used for the purpose of establishing compliance with state requirements for power producers to achieve a certain level of electricity generation from renewable resources. The term ‘‘REC’’ is typically referred to as a general concept, and this article explores important nuances in approximately 30 different REC markets across the US and explains how these differences are an impediment to the successful ramping-up of renewable energy technologies.

Although the sun shines less than half the days of the year in New Jersey, the state is second only to California in total installed solar photovoltaic (PV) capacity with 293MW, 14 per cent of the US total. Colorado, the third-ranking state in USA, has less than half of New Jersey’s installed solar PV, just 103 MW—only 5 per cent of the national solar market. The driver behind New Jersey’s robust solar industry has been the state’s Solar Renewable Energy Certificate (SREC) program, which has garnered prices over $600 per megawatt-hour (MWh). While SRECs in New Jersey can be sold within the state, they have little-to-no bearing on REC prices elsewhere in USA because the fungibility of RECs is inhibited by jurisdictional inconsistencies within the country..."

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