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Utilities Could Buy Credits to Meet Renewable Energy Minimums

California's Renewables Portfolio Standard requires utilities to obtain 20 percent of their power from renewable sources by 2010. The California Public Utilities Commission is examining the potential use of renewable energy credits for compliance with the RPS.

Almost half the states have passed an RPS of some kind. Should utilities be allowed to buy RECs from other regions to meet their RPS, rather than build renewable energy sources in the state?

RECs are offsets generated when a renewable energy source (such as a wind farm) generates power. The RECs can be sold, somewhat like stocks, except that they ultimately are "retired" by a buyer who gets credit for the clean power generated. (Read "Green Tags in a Nutshell" for more about RECs.)

Importing power across state lines is a common practice and generally accepted as a way to meet RPSs. Buying a REC does not entitle the buyer to the power, only to the clean component. The California Public Utilities Code gives the CPUC the discretion to authorize the use of RECs to meet the RPS. That could allow utilities to build fossil-fueled power plants and buy RECs to satisfy the renewable energy law.

The CPUC has previously explored the use of these tradeable credits for compliance with the RPS, but has not implemented a system for it.

A recent CPUC white paper, "Renewable Energy Certificates and the California Renewables Portfolio Standard Program," provides an analysis of the use of RECs to meet the RPS.

The CPUC will hold a conference on REC trading September 5, 2007, and has solicited a single round of comments, deadline August 17.

Thanks for the team at Stoel Rives for contributing data for this article.