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California regulator allows RECs in RPS

The California Public Utilities Commission will allow tradable renewable energy credits (TRECs) to be used in the state’s Renewables Portfolio Standard (RPS).

The Commission’s Renewables Portfolio Standard requires investor-owned utilities, energy service providers and community choice aggregators operating in California to obtain 20% of their retail sales from renewable energy sources by 2010. The decision establishes the structure and rules for a market for tradable renewable energy credits.

The use of tradable renewable energy credits for Renewables Portfolio Standard compliance will provide more options and flexibility for Renewables Portfolio Standard-obligated electricity sellers to comply with RPS mandates in both the near and longer term, the Commission ruled. Over time, it will also provide additional resources and incentives for the development of Renewables Portfolio Standard-eligible generation.

Prior to this decision, utilities were required to procure exclusively bundled contracts for both the renewable energy and their renewable energy credits. The new framework allows them to buy renewable energy credits which are separate from the association energy.

Separation will increase efficiency of Renewables Portfolio Standard

Allowing the two elements to be sold as separate commodities, with each commanding a price in the market that accurately reflects its value, should increase the efficiency of the Renewables Portfolio Standard programme, the Commission explains.

The decision will improve the ability of electricity sellers in California to meet the state’s goals for renewable energy, while reducing some of the risk associated with procuring renewable energy. In the longer term, it will provide additional flexibility and incentives for the development of Renewables Portfolio Standard-eligible generation by supplying useful revenue options for generation developers.

The ability to sell renewable energy credits associated with distributed generation will provide incentives for greater rooftop solar and other distributed generation.

Framework will support renewable energy credits market in long-term

“Although the tradable REC market may be modest in the next two or three years, the market rules put in place in this decision will both allow this new market to develop and provide robust rules as the tradable REC market matures,” explains Michael Peevey of the Commission. “The essential elements of this framework are intended to support this market well into the future.”

The new rules create a market in which the use of tradable renewable energy credits for Renewables Portfolio Standard compliance is initially limited to 25% of  a given investor-owned utility’s annual procurement obligation. This limitation expires at the end of next year and will allow both the Commission and the market to understand the implications of renewable energy credits trading before opening the market to unfettered use of unbundled renewable energy credits.

Contract approved for power from 230 MW solar system

The Commission also approved a renewable energy contract for Pacific Gas & Electric (PG&E) to purchase green power from the 230 MW AV Solar Ranch One solar photovoltaic (PV) facility being developed in Antelope Valley. PG&E will receive 590 GWh of power per year beginning in 2014.

The Commission also approved 8 grants totalilng US$9.3 million in funding for the California Solar Initiative RD&D (research, development, deployment, and demonstration) programme’s first solicitation, which focused on integration of solar PV into the utility grid. The 8 grant recipients will bring US$6m in matching funding to their projects from other funding sources.

The programme will invest US$50m to fund solar research and demonstration projects that will “measurably reduce the cost and accelerate the installation of solar and other distributed technologies” which could use solar for generation, storage, or reduce the use of natural gas.

A second round of CSI grant solicitation in November 2009 focused on improved solar PV production technologies and innovative business models. Proposals submitted under the second solicitation are currently under review, and awardees are expected to be announced in mid-2010.

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Photovoltaics (PV)  •  Policy, investment and markets