California Adopts Tradeable Renewable Energy Credits
Following the example led by New Jersey and a few other states, the California Public Utilities Commission (CPUC) has approved the trading of renewable energy credits. The move could make owners of small photovoltaic arrays hundreds of dollars per year. The market approved by the CPUC will not be as generous as New Jersey’s, but will provide another avenue for solar home and business owners to annually recoup at least a small portion of the cost of their system.
Renewable energy credits, or RECs, are certificates that designate a certain amount of renewable electricity generated. 29 states have mandatory renewable portfolio standards requiring utilities to create a set percentage of their electricity from renewable sources by a specific year in time. These RPSs create a demand for RECs, which those utilities can purchase to offset fossil fuel generation and contribute to their renewable goals.
RECs are sold in 1,000 kilowatt-hour (1 megawatt-hour) blocks. According to Sunpluggers, the average 5-kW solar system in California produces about 7,000 kWh of solar electricity each year. That should be good for about seven renewable energy credits. But there is a temporary $50 cap on RECs purchased by the state’s three investor-owned utilities. So even if a solar homeowner sent all their solar electricity into the electric grid, they would stand to make only $350 per year.
It is important to understand that RECs must be used by another party; the generating home or business cannot use that energy itself. So in reality, only excess solar energy created would count towards RECs. That number can be significant given that solar systems produce all of their energy during hours of peak demand, and may produce well in excess of energy consumed, depending on consumption by the residence in question. But I would be surprised if any California home made more than one or two hundred bucks, although the $50 cap is only in place through 2011 and only applies to the three investor-owned utilities.
I’ve talked to a few homeowners in Oregon that have sold RECs, typically through Northwest Solar Cooperative, a regional collective that pools residential solar power into RECs on behalf of a group of homeowners. Those individual homeowners made roughly $30 in a year (although this was only a couple homeowners and in no way a significant sampling). According to the NW Solar Coop website, prices for RECs range on average from 2-10 cents per kWh.
In New Jersey, prices for a 1-MWh REC have reached as high $600, according to Sunpluggers. So it may be interesting to see what happens when the California cap expires in 2011. RECs also make figuring the end-costs and/or savings of home solar power systems more complicated for homeowners researching the idea, as REC markets are individual markets with their own rules and regulations.
Whether RECs pan out for owners of small systems remains to be seen, but they do open a new window for converting that solar energy into cash, especially given the decades of clean energy that solar power provides.
Sources: Sunpluggers & Wikipedia
Photo Credit: Sustainablog
Posted on March 25th in Solar News by Dan.