RECs should be divided into commercial and residential

Let’s take look at the use and intent of Renewable Energy Credits (REC). RECs are intended to make polluting energy producers pay a surcharge for continuing to operate in the manner that they do, the charge is undoubtedly passed on to the consumer of that energy. The money is later used to help pay down the cost of Solar panels, Wind Turbines and in some cases Geothermal and other clean energy methods. This is the most prevalent system in America.

SRECs in PA have crashed
over the last few years
( source - srectrade.com)



Every time your Renewable Energy system makes 1,000 kilowatt hours, it makes 1 SREC (the “S” is for solar in this case). You then sell the REC to the polluter and everyone wins. That is if the price of the REC is high. The RECs are traded in an open market, which in turn make them unstable.

In Europe they prefer feed-in tariffs, a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, usually based on the cost of generation of each different technology.

The first form of feed-in tariff believe it or not, was implemented in the US in 1978 under President Jimmy Carter, who signed the National Energy Act. This Act included five separate Acts, one of which was the Public Utility Regulatory Policies Act. The purpose of the National Energy Act was to encourage energy conservation and the development of new energy resources, including renewable energy such as wind, solar and geothermal power.

Which system is better depends on who you ask and maybe even what political flavor they enjoy. The feed-in tariff is a policy that says we are going to do this and we are going to pay for it, for the good of our society. Germany has taken this approach and no one can argue that they are doing a great job with this system.

The REC market is different in that depending on what the credit is worth at the time of the energy systems sale and installation has a direct bearing on the sale itself. In other words when the price of RECs is down, the renewable energy system becomes more expensive.

It also stands to reason that this unstable market system has the ability to delay the nations conversion to renewable energy, because by making the consumer pay a higher cost today than yesterday is never a good idea and sends the wrong message. This is what happened in Pennsylvania. Unless of course that is what the intent was from the start.

One big flaw with the REC market system as it exists is that it does not differentiate between residential and commercial installations. In a commercial installation the amount of RECs that are made available to the owner, be it a renewable energy plant or a large commercial application is higher and quickly floods the market with REC paper. This in turn brings the value of RECs down and hinders the ability to buy and sell residential installations. The residential market could account for the biggest amount of installations in the US and also in the amount of jobs that could be created if allowed to flourish.

So it would seem to make sense to split RECs into two or more categories or maybe make the residential RECs worth a set amount across the entire US and make the mandatory percentage higher or unlimited. Another way is to make residential credit worth two or more times that of its commercial counterpart or make it so the commercial credits do not go towards the quota but are worth the same amount as the residential. The renewable energy industry is new and it needs to get proper support to continue to grow. This support must come from strong leadership and this is one suggestion that could help sustain the industry.

by George Lopez