By: Leaf Exchange Staff, 11/22/11

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The California Public Utilities Commission (CPUC) is scheduled to vote on the Portfolio Content Category (aka “bucket status”) of in-state generators of unbundled Renewable Energy Credits (RECs) on December 1^st, among a number of issues.  This decision will go a long way towards shaping the California REC market for the next decade, and what role in-state REC generators will play in it.

We have written extensively about this issue in previous blogs.  In our view, the significance of this decision cannot be overstated.  There are 2 possible outcomes: one would be very good (bucket #1 classification), the other would be very bad (bucket #3 classification) for in-state REC generators.

The Good Outcome: unbundled RECs produced from in-state facilities (i.e. residential solar systems) are classified as ‘bucket 1′.  Bucket 1 is defined as being located in California, or having a first point of interconnection with a California Balancing Authority.  There is no volume cap on this bucket, and it is a separate category from out-of-state RECs.

The Bad Outcome: instate RECs are classified as ‘bucket 3′ and are lumped in with RECs created from anywhere within the WREGIS territory (includes parts of 14 western states, and 2 Canadian Provinces).  This bucket has a 25% initial cap that progressively declines to 10% in 2020.  The considerable supply of these types of RECs, coupled with limited demand will severely marginalize the value of in-state RECs. Recent pricing indications for ‘bucket 3’ RECs are in the $3 to $8/REC range.

This issue has been a fiercely debated in formal comments submitted to the CPUC.  By our count, over 30 parties have filed comments with the considerable majority arguing in favor of bucket 1 inclusion.   This group consists of a diverse cross section of parties, including PG&E, SoCal Edison, SDG&E, LADWP, Sanitation Districts, Calpine, Duke Energy, Shell, Solar Alliance, and CalSEIA to name a few.  Leaf Exchange also submitted formal comments in support of inclusion into bucket 1.

The public comment period has passed, and this decision is now in the hands of the five voting CPUC commissioners.  The final vote is expected on December 1^st, with SB 2X scheduled to go into effect on December 10^th.

How does this effect small scale solar generators?
Assuming in-state unbundled RECs are granted bucket 1 status, we would expect RECs to play a key role in incentivizing and financing retail solar projects in the state for the next decade.  We believe the vast majority of eligible generators would seek registration and to participate in this program.  Conversely, if classified into bucket 3, there is a strong possibility that it would not make financial sense for small generators to participate.  The low REC values would not justify the administrative time and cost of registration, certification and ongoing reporting.

About Leaf Exchange:
Leaf Exchange is a Renewable Energy Credit brokerage & exchange service for California solar system owners. We provide REC market education, certification services, and a venue for system owners to sell their Certificates. Leaf Exchange registers systems into WREGIS for no cost, so system owners can start banking their RECs to sell at a later date.