ARTICLE: Ownership of RECs may be clarified by states in US April 13, 2006 8:25 AM
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ARTICLE from : http://www.sparksdata.co.uk/refocus/redesign/showdoc.asp?docid=6193179&accnum=1
Ownership of RECs may be clarified by states in US
BERKELEY, California, US, April 12, 2006 (Refocus Weekly) The issue of ownership of Renewable Energy Certificates in the United States may diminish over the longer term, concludes a report from Lawrence Berkeley National Laboratory.
A number of states have started to clarify who owns a REC in contracts for green power, explains ‘Who Owns Renewable Energy Certificates: An Exploration of Policy Options & Practice.’ The report summarizes state and federal actions on REC ownership for qualifying facility contracts under the federal PURPA law, net metering and distributed generation agreements, and state or utility financial incentives for small generators.
“Renewable energy certificates are increasingly important, especially in states that accept them as evidence of compliance with renewables portfolio standards,” it notes. “The emergence of RECs as a tradable commodity has made utilities, generators and regulators increasingly aware of the need to specify who owns the RECs in energy transactions.”
Sixteen states have taken a position on the ownership of RECs from QF (qualifying facility) contracts, and most states conclude that the power utility that purchases the green power will also receive the RECs, at least under older contracts where REC ownership was not explicitly addressed. For newer contracts, a number of states have concluded that the generator will retain the RECs.
“Sorting out who owns RECs under QF contracts is important because these RECs may have significant economic value,” says co-author Ryan Wiser. "The earlier FERC ruling on the issue of QF REC ownership was not altogether clear, so states have stepped into the void and are providing greater clarity on the subject.”
As a result, the ownership issue may diminish over the longer term because newer QF contracts, net metering arrangements and incentive agreements are more likely to clearly specify REC disposition, it explains. The number of QF contracts is also likely to diminish with the passage of the Energy Policy Act of 2005, “resulting in less tension and conflict.”
“In the meantime, some degree of confusion and uncertainty will remain,” the report warns. “Absent further clarification from FERC on the issue of QF REC ownership, states may wish to clarify REC ownership through state legislation.”
Regulatory action has been the more common approach to determining REC ownership, but some of those decisions have been appealed to the courts and state legislative action could reduce such appeals.
A petition to FERC asked for a declaratory judgment on the question of REC ownership, and that agency ruled that it is up to the states to decide. “Far from resolving the issue, these seemingly contradictory statements by FERC have instead led to further disputes over REC ownership,” and contenders on both sides often cite the FERC Order to bolster their cases.
“The existence of state RPS policies also appears to be a driver in clarifying REC ownership in net metering agreements,” it explains. “All states that have addressed this issue so far allow customers to retain ownership for all or a majority of the RECs for generation used on site, though two states require some sharing of these RECs and there are at least three cases where RECs from net excess generation are conveyed to the utility.”
Few states have explicitly addressed the question of REC ownership when financial incentives are given by a utility or a fund to a green power project but, where states have not been explicit, RECs generally will be retained by the project owner, it notes. “Some states may allow generators to retain RECs so that public incentives can be reduced over time” but where RECs are required to be transferred to the incentive provider, it often has been done within the context of incentives targeting systems whose RECs are needed for the purpose of RPS compliance.”
“Forty states have net metering policies that require utilities to interconnect small customer-owned facilities, but ownership of RECs in these cases is often not spelled out," explains co-author Mark Bolinger. “Most of them award the RECs to the customer-owners of the renewable projects. No state has yet assigned all or even a majority of the RECs from customer-sited distributed generation to the utility.”
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