Yesterday California passed legislation to allow for a Tradable Renewable Energy Credit (TREC) market. This essentially means that utilities in California can now buy SRECs unbundled from the electricity. Prior to this ruling, any SRECs used to comply with the state’s Renewable Portfolio Standard had to be purchased with the electricity itself, i.e. the SRECs had to be bundled with the electricity and sold to the utility together.

The reason behind this ruling is that the utilities are not able to meet the growing requirement from projects sited within their territories and this new rule allows them to get credit for renewable energy produced elsewhere by purchasing the SRECs (or TRECs as the state calls them) from generators outside their territories.  The Alternative Compliance Payment (ACP) will start at $50, creating a cap, but that cap and other restrictions around the use of RECs is planned to be lifted after 2011 after the state has had time to get more comfortable with the program.  In the early stages, this means that TREC values will be significantly lower than values in other states where the Solar ACP (SACP) is anywhere from $250-$700. Currently TRECs include all forms of Renewable Energy, however, it is unclear if there will be a market in the future that places a distinction on Solar RECs, SRECs in the California market place. With this legislation, SRECs carry the same value as any other RECs.

We see this being an important opportunity for generators outside California who are now able to help the state meet its renewable energy goals by purchasing RECs. The RECs must be registered in WREGIS in order to be eligible.  SRECTrade will have more information regarding the online market place for California TRECs soon.