1

Renewable Energy Certificates

Presented by

Janice Moore, Partner

jmoore@mcguirewoods.com (202-857-1752)

2

Renewable Energy Certificates

• Represent attributes of electricity generated from renewable energy sources

• Also called “green tags”• Unbundled from the physical electricity• Currency of renewable energy markets

3

Renewable Energy Certificates

• Flexible enough to make attributes a commodity• Not subject to geographic or physical limitations

of electricity• Certificates are used to

– Show compliance with regulatory requirements

– Supply end-use costumers with renewable energy products

4

REC Challenges

5

Issues to be Resolved

• REC substantiation and verification• National REC Markets• Ownership uncertainty• Emissions markets• REC definition

6

Tracking and Verification

• Bilateral contract between buyer and seller with affidavit as to source, ownership and exclusive sale

• Third-party entity that issues certificates

7

EPA’s SO2 Program – Obstacles

• Emissions allowances primarily granted to fossil plants, with limited amount set aside for renewables; optimal allocation is difficult

• Program limits participation to utilities; renewable energy developers may participate only if join with a utility

• So2 capped by federal law; allowances allocated only to polluting plants

8

REC Tracking Systems

• Verify compliance with renewable energy definitions

• Substantiate voluntary marketing claims• Provide protection against trading abuses

9

REC Tracking Systems

• Issue an electronic certificate • Record changes of certificate ownership• Retire certificates when used for different

purposes

10

PJM’s GATS

Generation Attributes Tracking System

11

GATS

• PJM Market (Pennsylvania, New Jersey, Maryland)

• Motivated by state requirements for distributing emissions information to customers

• See: http://www.pjm-eis.com and http://www.pjm.com/committees/working-groups/dsrwg/downloads/20050921-item-6-gats-update.pdf

12

NEPOOL/ERCOT/PJM REC Tracking Systems Comparison

NEPOOL ERCOT PJM

All generation in or delivered to area

Existing and new renewable generation

All generation in PJM control area

Lifespan 1 quarter to one year, depending on issue date

Lifespan 3 calendar years Lifespan undecided

Annual membership fee ERCOT fees Subscription fee and volumetric fees

6 New England States Texas only 13 states, including PA, MD, NJ

13

NEPOOL/ERCOT/PJM REC Tracking Systems Comparison

NEPOOL ERCOT PJMUnit-specific imports or exports must be physically delivered to/from NEPOOL system

Imports under certain circumstances

Imports only from regions offering reciprocal treatment of PJM RECs

Mandatory participation for all generators and LSEs

Mandatory participation for competitive retail suppliers that must meet RPS

Mandatory participation for all generators and LSEs

14

NEPOOL/ERCOT/PJM REC Tracking Systems Comparison

NEPOOL ERCOT PJM

System administered by APX, sharing some responsibilities with NE regulators

System administered by ERCOT, sharing some responsibilities with PUCT

System administered by PJM, sharing some responsibilities with regulators

End of RPS compliance period: RECs retired after used for compliance; unsold certificates assigned to residual mix

End of RPS compliance period: RECs retired after used for compliance; unused certificates remain in REC account until retired

End of RPS compliance period: RECs retired after used for compliance; unsold certificates assigned to residual mix

15

THE END

Commercial Litigation | Corporate Services | Financial Services | Health Care Labor & Employment | Complex Products Liability &

Mass Tort LitigationReal Estate & Environmental | Taxation & Employee Benefits

ATLANTA • BALTIMORE • CHARLOTTE • CHARLOTTESVILLE • CHICAGO • JACKSONVILLENEW YORK • NORFOLK • PITTSBURGH • RICHMOND • TYSONS CORNER • WASHINGTON, D.C.

ALMATY, KAZAKHSTAN | BRUSSELS, BELGIUM

www.mcguirewoods.com