The California Public Utilities Commission (CPUC) voted today on the Portfolio Content Category (aka ‘bucket status’) issue, and the result was not good for in-state generators of unbundled Renewable Energy Credits (RECs). In a 5-to-0 vote the CPUC approved the Proposed Decision in its current form, which classifies in-state unbundled RECs into ‘bucket 3’. As we have written previously, this basically lumps in-state REC generators in together with RECs created from anywhere within the WECC territory, which includes all or potions of 14 western states, 2 Canadian Provinces, and Baja California.
President Michael Peevey, who had been a supporter of classifying in-state RECs into ‘bucket 1’ (the in-state CA bucket) was reluctant to confirm this vote. He stated that the statute was ambiguous, and that this decision would increase the cost of compliance. A couple of the other Commissioners also acknowledged that this ruling was not perfect, but stated that they believe they are “fulfilling the legislatures’ intent.” As a reminder, SBX1-2 (the 33% by 2020 RPS bill) was approved by the California state legislature, and signed into law by Gov. Jerry Brown in April of 2011. The CPUC’s role is to interpret and implement the rules set forth by the bill. There was pressure for this vote to get finalized today, considering SBX1-2 officially went into effect 5 days ago on December 10, 2011.
How much are Bucket 3 RECs worth?
‘Bucket 3’ RECs are currently trading in the $2 per REC range (for calendar year 2011). As abysmal as that sounds, the longer term pricing prospects are even worse considering the increasingly supply of ‘bucket 3’ RECs, coupled with the declining cap:
2011 – 2013 No more than 25% can come from bucket 3
2014 – 2016 No more than 15% can come from bucket 3
2017 – 2020 No more than 10% can come from bucket 3
At this low price it will not make financial sense for small generators (i.e. rooftop solar systems) to participate in the California RPS market. The revenue gained by selling RECs will not overcome the administrative cost of registration, certification and ongoing reporting. Most likely the only players that can cover these transaction costs will be large utility-scale projects that produce large amounts of RECs to sell.
It is ironic that the most localized of all renewable energy sources: Distributed Generation (DG) is excluded from participating in the California RPS. Especially considering SBX1-2 was written with a strong preference for in-state projects. We strongly believe that it was not the intent of the state legislature to exclude the in-state DG category, which has effectively happened. The one prospect of hope mentioned by President Peevey would be a revised bill by the legislature that clarifies terms in SBX1-2, which would have to be taken up next year.