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Green Energy Certificates Throughout New England there is a growing understanding of the benefits of renewable energy. You may have noticed that you are paying each month a renewable energy charge as part of your electricity bill. State regulators recognize that a higher percentage of the regional energy mix needs to come from energy sources that cannot be cut off (e.g. imported oil and gas). There is a new initiative to reduce New England's regional dependence on depletable fossil fuels and to switch the region to sustainable energy that minimized environmental impacts. This has economic implications for intra-regional energy markets, foremost among this is "commoditization" of non-polluting green attributes associated with renewable energy generation. The low environmental impact of wind generators, hydro turbines, fuel cells, landfill gas-fueled diesel engines and certain technologies for combusting biomass emit very limited, if any, pollutants. They are fueled from resources that cannot be depleted. Each renewable project is registered in the Generation Information System (GIS) where these renewable "green" attributes are monitored by the environmental protection agencies. So, not only will low impact technologies be rewarded by increased demand for their "green" characteristics, but "brown" technologies that violate emission standards will be penalized, using the same GIS accounting system.
For the first time these environmental externalities will be included in the economic cost of electricity as it is marketed to retail customers. A system for trading these renewable attributes is being established under the auspices of the New England Power Pool (NEPOOL). The GIS not only records the monthly production data for each generator, capacity availability, outages, etc. but the monthly emission data for each generation unit also must be recorded by the generators registered with the GIS. These renewable attributes are "unbundled" from the generation (e.g. energy and capacity) attributes and will be denominated by "green certificates" that are traded independently from energy and capacity sales to Load Serving Entities ("LSE" - a new name of your local electric distribution utility). Each state in New England has or is in the process of setting up requirements for LSE's to supply their customers with an increasing minimum percentage of their electricity from renewable resources. A Renewable Portfolio Standard (RPS) defines the renewable energy types that are acceptable in each state and the percent of the energy mix that these technologies must be by a specific date. Connecticut, Maine and Massachusetts all have RPS and require LSE's to achieve compliance using certificates from generation sources anywhere on the NEPOOL grid. They may also be purchased from an adjacent power pool, provided that the power flows into the NEPOOL grid. LSE's that have an insufficient number of green tags (another word for certificates) will be required to pay a costly penalty for each month that they remain out of compliance. In Maine, the renewable share of an LSE's portfolio must be 30% and renewable energy sources include hydro, biomass, wind, landfill gas, fuel cells and selected solid waste technologies. Certificate prices are likely to be depressed in Maine because there is an overabundance of hydropower and biomass-fueled powerplants interconnected to its grid. In Massachusetts, the LSE's must have 4% of their energy resource mix contracted from renewable generators by 2005. The regulators have gone to lengths to encourage new technologies in Massachusetts. Thus, the regulators excluded hydropower, certain solid waste combustion technologies and other types of biomass fuels in order to create a market for emerging renewable technologies such as solar, wind, ocean/wave/tidal, fuel cells, landfill methane and low emission biomass. Vermont and Connecticut are setting their RPS percentages and defining what technologies qualify as new renewable power sources. At this time Massachusetts hydro plants may sell their attributes to meet the RPS of Connecticut, Vermont and even to New York State (once its market is developed). It is ironic that these states have substantially more hydropower stations than exists in Massachusetts (a state that seems to take hydropower's economic existence for granted). Swift River Company has registered all of its operating hydro facilities in the GIS. See <http://www.nepoolgis.com/> for lists of all the renewable energy projects registered in the GIS accounting system. In the NEPOOL GIS, certificates for generation are created each month, one certificate for every MWH of generation. However, these certificates are only traded on a quarterly basis. In addition, there is a lag of approximately two months before the GIS makes its inventory of certificates available for trading. This is like having a half year float delaying payment behind the sale of power from these renewable facilities. As of this date, the first year of trading has been completed and the first year of compliance when the LSE's were required to fulfill their green certificate quotas. Green certificate futures were trading between $22 and $43 per MWH during the first trading year in Massachusetts.
Pepperell's frozen wooden penstock doesn't look green in winter, but its energy is renewable Connecticut's DPUC set standards for run-of-river hydro plants to sell green tags in two categories: Class I RECs are given to "new" hydro plants that are repowered at existing dams after July 1, 2003 or to hydro projects that previously cycled the river flows up and down in order to store water for process use or for peak-hour generation. These plants will qualify for Class I RECs when FERC issues an amendment to the project's license confirming that the plant now operates in a "run-of-river" mode. This means that the instantaneous rate of outflow from the turbines and fish passage facility plus discharge into the bypass reach is just equal to the rate of inflow into the impoundment above the dam. There are many complicated definitions for determining when a hydro project has a "new commercial on-line date." Of Swift River's six projects, Sebec, Pepperell, Turners Falls and Indian River have all been classified for Class I REC generation. Woronoco Hydro's rehabbed T-1 and T-2 turbines will generate Class I RECs, but T-3 which had a new on-line date before July 2003 only qualifies as a generator of Class II RECs. Similarly, Collins Hydro also is a Class II REC generator because it came on line in 1984 and has operated as a run-of-river hydro plant since it was commissioned.
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