Page 308 - Fluid Power Engineering

274 Chapter Thirteen

charge and reactive power charge should also be taken into account.
This is particularly true for industrial and business customers that
may have a demand charge that is greater than the charge for energy
(kilowatt-hour ).

Renewable Energy Credits and Carbon Credits
In addition to revenue from selling electricity, there is revenue from
selling renewable energy credits, which can take the form of renew-
able energy certificates (REC), carbon credits, and other tradable cer-
tificates. In the United States, REC is a proof of 1 MWh of renewable
energy generation. It is also called green tags or tradable renewable
certificates. In states with renewable portfolio standards (RPS), RECs
are the method of accounting for RPS obligations and verifying if
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the RPS is achieved. RECs have become a tradable commodity and
when trading occurs in the RPS context, it is called the REC compli-
ance market. The REC compliance market is state-specific. Voluntary
REC market is where RECs trade in the green power market on a
voluntary basis and the voluntary buyers are businesses and house-
holds. Renewable energy generators in non-RPS states sell RECs into
this market. There are two voluntary markets: National and West.
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In the eastern states, in January 2009, the RECs traded in the com-
pliance market for about $14 in New Jersey, about $28 in Connecticut,
about $33 in Massachusetts, and about $45 in Rhode Island (all prices
are per megawatts-hour). These states are considered the high-price
market. In the low-price market, in January 2009, the price of RECs
was little over $1 in Texas, about $3 in the national voluntary, and
about $7.50 in the west voluntary market. Overall, the prices have a
high degree of variability.
In a significant fraction of the cases, a PPA defines a bundled price
for the energy and the REC. In this case the buyer of energy owns
the REC and when renewable attributes are claimed to meet the RPS
then the buyer (through a REC tracking system) retires the RECs. In
cases of unbundling of REC, there is a potential for “double counting”
whereby both entities (buyer of REC and buyer of electricity) claim
the renewable energy attributes.
Carbon credit is the other major mechanism for monetizing
through tradable renewable energy credits. This is applicable in coun-
tries that have ratified the Kyoto protocol. One carbon credit is equiva-
lent to 1 ton of CO 2 or equivalent gases. Kyoto protocol defines caps or
quotas on greenhouse gas (GHG) emissions for a country. The coun-
try, in turn, assigns the quotas to utilities and businesses that produce
GHG. If the business emits less than the assigned quota, then it can
sell the credit; on the other hand, if a business emits more than the as-
signed quota, it then buys credits. This provides a monetary incentive
to a utility or business to invest in renewable energy projects.
In developing countries, which have ratified the Kyoto protocol,
renewable energy generators can create credits that can be monetized.