TRECs import curb raises concerns

UNITED STATES: California's new regulatory plan to establish a market for tradable renewable energy credits (TRECs) has opened a debate on the effect the measure will have on the state's wind power development and on developers in nearby states.

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January's decision by the California Public Utilities Commission limits the number of TRECs that can be used to less than 25% of the state's renewable portfolio standard (RPS) requirements. California, home to nearly 40 million people and one of the world's largest energy economies, has an RPS that requires utilities to produce 20% of their energy from renewables by 2020.

Some see the ruling as an effective way to kick-start a much-needed development of wind and other renewables in California. Inadequate transmission and severe permitting hurdles have produced a sluggish market, while at the same time newly elected governor Jerry Brown struggles with a $40 billion budget deficit.

However, there are fears that the flourishing wind power markets in Oregon, Washington and several other states will no longer have California as a major customer.

The new rule creates a clear distinction between bundled transactions, where energy and renewable energy credits are sold together, and unbundled transactions where energy and their associated credits are separate items. The rule also redefines bundled contracts for out-of-state renewable energy. It now requires that the first point of delivery for renewable electricity produced in neighbouring states must be to a substation within California. Long-distance projects are unlikely to meet that qualifier.

Legal action

Speaking about the new policy, Iberdrola said: "We remain very concerned about the discriminatory treatment of renewable energy delivered to California from outside the state. The commission has a comprehensive record on which to base a decision to add real-time deliveries on firm transmission to the bundled category but it has yet to act."

Relief could come in the form of legal action over whether the ruling breaks interstate commerce laws in the US Constitution.

"The commerce clause of the Constitution says that states can't say no to interstate commerce," says John Audley, deputy director of Renewable Northwest Project, an Oregon-based advocacy. "Is power any different than beef, just because its route is a transmission line and not the freeway?"

The rule, which puts a $50 ceiling on TRECs, extends through to the end of 2013. One interim fix might be an increase in California's RPS, which would effectively raise the state's overall need for megawatts from renewable generation. "California can change the state's RPS and make this issue moot," Audley says. "We'll see whether or not the legislators have an appetite for it."

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