Renewable energy certificate trading from the Windicator

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In Britain, the demise of Atlantic Electric & Gas (AEG) made little impact on the final outcome of the third period of the UK's Renewables Obligation (RO), other than serving as a stark reminder of the potential effects on the certificates market of a company failing to pay its share of the buy-out monies. Electricity market regulator Ofgem reported a 30.3% shortfall in the number of renewable obligation certificates (ROCs) submitted for compliance, with the England & Wales RO to be made up with buy-out payments of £31.39 per missing certificate. The resulting buy-out fund, totalling £136,169,919, means the recycle payment for the third RO compliance period (CP3) in England & Wales was £13.66 to give a total CP3 ROC value in the order of £45, in line with forecasts. In Scotland, there was a 38.8% shortfall in ROCs submitted, with the final buy-out fund to be redistributed by Ofgem to suppliers totalling £17,667,494, resulting in a recycle payment of £19.99 and final overall ROC value of £51. The impact of AEG's demise -- leaving the buy-out funds short by £699,055 in England & Wales and £15,067 in Scotland -- translated to a loss of just £0.07 on the England and Wales recycle payment value. The third period ran from April 1, 2004 to March 31, 2005 and set suppliers a mandatory renewables target of 4.9% of electricity sales.

In Sweden prices for electricity certificates slipped further to around SEK 180. The market is long on certificates, largely due to the unlimited banking rule within the Swedish system, which allows retailers to buy certificates and sit on them for an unlimited period, using them for compliance in any year.

In the United States, interest in the North Eastern renewable energy certificate (REC) markets is strong. RECs eligible for the Massachusetts renewables portfolio standard (RPS) remain in particularly short supply for the 2005 period and pricing continues to flirt with the price cap, with bids currently $50 and offers running at $52. Interest has grown in New Jersey RECs, the result of increasing speculation that an extension of an aggressive renewable portfolio standard will be announced. Connecticut Class 1 REC prices have fallen steeply with some aggressive sellers, particularly short sellers, active in a market with a few patient buyers. Prices had been around $35/REC as recently as July, but in November and December they were trading at around just $3-6/REC. With modifications to the authorising legislation and regulatory implementation, it is now seems clear a large influx of imported RECs will not occur.

Prices for generic RECs from facilities around the US without a local RPS have fallen overall, as increased installations and awareness of REC value among existing generators continues to spread. While growing at a rapid rate, voluntary buyers, who are the usual off-taker for these RECs, have not kept pace with supply.

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