1 Tradable Renewable Energy Credits Robin B. Davidov Robin B. Davidov Executive Director Northeast Maryland Waste Disposal Authority

2 What if each State established a definition of “Renewable Food” Example of Renewable Foods: Example of Renewable Foods: –Wisconsin: Cheese Logs –California: Veggie Burgers –Maryland: Corn Fritters and Crabcakes –Texas: Hamburgers

3 Federal Government decides to buy “Renewable Food” for inmates Feds adopt the standard of the “Green Veggi-e” group Feds adopt the standard of the “Green Veggi-e” group –Inmates eat veggie burgers and corn fritters: Vegetable Farmers win –Cattleman, Waterman and Dairy Farmers loose Inmates revolt Inmates revolt Feds make up new definition Feds make up new definition

4 Renewable Energy Credits A credit is a tradable certificate of proof that 1 kWh of electricity has been generated by a renewable-fueled resource A credit is a tradable certificate of proof that 1 kWh of electricity has been generated by a renewable-fueled resource RECs provide a cost efficient renewable energy system RECs provide a cost efficient renewable energy system RECs spur competitive technology to generate renewable energy RECs spur competitive technology to generate renewable energy RECs can be used to reduce greenhouse gas intensity RECs can be used to reduce greenhouse gas intensity

5 Renewable Portfolio Standards 15 States have RPS 15 States have RPS 4 States allow RECs to be unbundled from energy 4 States allow RECs to be unbundled from energy RPS requirement is 15% in Nevada, 30% in Maine, and 25% in New York (3,700 MW’s) RPS requirement is 15% in Nevada, 30% in Maine, and 25% in New York (3,700 MW’s)

6 Every State adopts a different definition of “Renewable Energy” Texas includes solar, wind geothermal, hydro, wave, biomass, and landfill gas Texas includes solar, wind geothermal, hydro, wave, biomass, and landfill gas Mass. includes solar, wind, clean biomass but not hydro or municipal solid waste Mass. includes solar, wind, clean biomass but not hydro or municipal solid waste N.J., Md. and Ct. have two tiers. N.J., Md. and Ct. have two tiers. –Generally, solar, wind, landfill gas on top tier, hydro and MSW on bottom tier N.Y. includes hydro but not MSW N.Y. includes hydro but not MSW In Pa., hydro is non-renewable In Pa., hydro is non-renewable

7 Who Buys RECs? Residential customers opting for a “green pricing” program offered by local utility or distant utility (Bonneville Power website) Residential customers opting for a “green pricing” program offered by local utility or distant utility (Bonneville Power website) Organization buying RECs to make a specific event “emission free” Organization buying RECs to make a specific event “emission free” Company deciding to purchase a quantity of RECs equivalent to a certain percentage of electricity consumption. Company deciding to purchase a quantity of RECs equivalent to a certain percentage of electricity consumption.

8 How much do RPS cost consumers? N.Y. Estimates that over 5 years: N.Y. Estimates that over 5 years: –Residential customers -0.9 to +1.68% –Commercial customers -.78 to +1.79% –Industrial customers –1.54 to +2.2% Austin (Texas) Energy sold 250,000 MWh of green energy to its customers in 2003 Austin (Texas) Energy sold 250,000 MWh of green energy to its customers in 2003

9 REC Markets August 2004 Evolution Markets LLCwww.evomarkets.com COMPLIANCE RECs COMPLIANCE RECs –NJ Class I $7.50 –NJ Class II$4.35 VOLUNTARY VOLUNTARY –Existing Solar$40.00 –New Wind$2.50 –Existing Biomass$5.00

10 Montgomery County WTE

11 Montgomery County WTE Facility came on line in 1995 with 20 year energy contract (no capacity) Facility came on line in 1995 with 20 year energy contract (no capacity) 1997 Sold capacity through utility 1997 Sold capacity through utility 2001 Utility sold contract, Negotiated three year contract with Mirant, including Energy and Capacity 2001 Utility sold contract, Negotiated three year contract with Mirant, including Energy and Capacity 2003 RECs sold to Mirant under 2001 contract 2003 RECs sold to Mirant under 2001 contract 2004 Conducted competitive procurement for energy, capacity and RECs, signed 3 year contract with Mirant 2004 Conducted competitive procurement for energy, capacity and RECs, signed 3 year contract with Mirant

12 How to Sell Energy, Capacity and REC’s Suppliers are sent a form of contract and operating history 2 weeks prior to pricing date. Suppliers are sent a form of contract and operating history 2 weeks prior to pricing date. Suppliers submit pricing by 10:00 a.m. on the pricing date. Suppliers submit pricing by 10:00 a.m. on the pricing date. Suppliers offer fixed and time of use (TOU) full requirements pricing for 6, 12 and 18 month term lengths Suppliers offer fixed and time of use (TOU) full requirements pricing for 6, 12 and 18 month term lengths Consultant arrives at Buyer’s offices between 12:30 – 1:00 p.m. with pricing offers, pricing comparisons, cost analysis (POLR vs. Market, % and $ increases etc.) and recommendations. Consultant arrives at Buyer’s offices between 12:30 – 1:00 p.m. with pricing offers, pricing comparisons, cost analysis (POLR vs. Market, % and $ increases etc.) and recommendations. Buyer needs to be prepared to execute a contract before 2:00 p.m. on that day. All supplier contract issues will need to be resolved prior to the pricing date Buyer needs to be prepared to execute a contract before 2:00 p.m. on that day. All supplier contract issues will need to be resolved prior to the pricing date While pricing is requested on the pricing date, this does not mean Buyer will have to enter into a contract on that day. While pricing is requested on the pricing date, this does not mean Buyer will have to enter into a contract on that day.

13 Energy, Capacity and RECs Sales ENERGYCAPACITYRECSTotal $ 1,420,933 $ - $ 1,420, $ 1,524,720 $ - $ 1,524, $ 1,464,755 $ 291,440 $ - $ 1,756, $ 2,051,849 $ 722,970 $ - $ 2,774, $ 2,321,066 $ 871,794 $ - $ 3,192, $ 8,415,678 $ 753,929 $ - $ 9,169, $ 10,675,525 $ 1,285,357 $ - $ 11,960, $ 12,621,359 $ 1,303,761 $ 49,129 $ 13,974, $ 14,248,980 $ 662,924 $ 339,823 $ 15,251,727

14 Recommendations If your State does not have an RPS get one adopted If your State does not have an RPS get one adopted Do not allow special interest groups to define “Renewable”, build a consensus Do not allow special interest groups to define “Renewable”, build a consensus Make sure State/Regional/Local energy procurements do not adopt a special interest group’s definition of renewable Make sure State/Regional/Local energy procurements do not adopt a special interest group’s definition of renewable

15 Recommendations cont’d Before signing any contract to sell credits, make sure that ownership of RECs and Emissions Credits are clearly defined Before signing any contract to sell credits, make sure that ownership of RECs and Emissions Credits are clearly defined Buy Brown…Sell Green Buy Brown…Sell Green Sources of RECs: landfill gas, sewage sludge digesters, composting, WTE Sources of RECs: landfill gas, sewage sludge digesters, composting, WTE

16 Sources –“Gains from an integrated market for tradable renewable energy credits”, Pallab Mozumder and Achla Marathe –“On the track of green certificates”, Anna Giovinetto, Evolution Markets –“PSC Votes to Adopt Aggressive Renewable Energy Policy for NY State” NY PSC