History of California REC market

To date, RECs produced by Distributed Generation (DG) solar system owners in California have only had value in a voluntary market.  And while voluntary (Green-e certified) solar RECs have historically traded premium over other renewable technology types, the value still is not very meaningful.  Prices recently have been quoted in the $1 to $5/REC range.  Considering the time, effort and cost required to obtain Green-e certification, it does not make financial sense for small generators to participate.

The CA Renewable Portfolio Standard (RPS) market has been a long time coming, and taken a number of legislative twists and turns dating back to 2002.  The end of the tunnel is in sight for DG generators and it is widely expected that starting in early 2012 in-state DG will be able to sell their unbundled RECs into the California RPS market.  The timeline below summarizes the major legislative and policy rulings along the way:
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April 12, 2011 California Gov. Jerry Brown signs Senate Bill X1-2:

After several earlier attempts to get a bill through the state legislature, Gov. Brown signs Senate Bill X1-2 into law.  This bill supersedes the 33% by 2020 RPS, created by Executive Order S-14-08 that Gov. Arnold Schwarzenegger previously signed.  A number of significant changes are made in SBX1-2:

  • Mandates all electric retailers in the state, including municipal and public owned utilities, and community choice aggregators.
  • Creates 3 compliance periods of 20% by 2013, 25% by 2016, 33% by 2020.
  • Creates 3 Portfolio Content Categories or buckets, with minimum and maximum requirements.
  • Maintained $50/REC price cap.

January 13, 2011 CPUC decision:

Ten months after the initial authorizing of TRECs, the CPUC lifted their moratorium. The decision maintained all of the major stipulations from the 3/11/10 decision.  The only material change is that the CPUC extended the expiration cap deadline from 12/31/11 until 12/31/13.

May 6, 2010 CPUC stay decision:

Before the dust settled on the landmark 3/11/10 decision, the CPUC abruptly reversed course and votes to suspend their earlier decision, placing a temporary stay on all TREC transactions.

The CPUC received negative feedback and petitions for modification, most notably from the 3 large IOUs.  The utilities sought modification on the usage caps and how a ‘bundled transaction’ was defined.  Basically they argued the proposed framework would make it prohibitive for them to meet their RPS requirement.

March 11, 2010 CPUC decision:

The California Public Utilities Commission (CPUC) formally approves the framework for a Tradable Renewable Energy Credit (TREC) market.  The key provisions in the CPUC decision:

  • Allows big-3 CA IOU utilities procure unbundled TRECs to satisfy up to 25% of their RPS requirement.
  • TRECs can be purchased from eligible renewable technologies within the WECC territory.
  • Sets an interim price cap of $50/REC.
  • Both the price cap and 25% max procurement cap expire at the end of 2011.
  • TRECs registered with WREGIS will have a 3-year tradable life from the date they are created.

2006, Senate Bill 107:

Accelerated the CA RPS to 20% by 2010, and makes it into law.

2002, Senate Bill 1078:

Establishes the California RPS, with a stated goal of 20% by 2017.