Navigating Legal Frameworks: Unraveling the Foundation of Renewable Energy Certificates

There are 2 major standards out there regarding renewable and clean energy use. It's important to note that generally most of the green energy regulations sit in the hands of the state, meaning they vary across the country.

1. CES - Clean Energy Standard

The "Clean Energy Standard" was created to enforce state mandates on how much clean energy entities have to use. Clean means something is produced carbon free.

2. RPS - Renewable Portfolio Standard

The "Renewable Portfolio Standard" says different entities need to allocate a % of their energy production to be renewable, so it needs to have the ability to be reused. Similar to CES, but in this case the RPS is the blueprint for everything relating to Renewable Energy Certificates (RECs) and production that isn't solely emitting carbon like electricity generation.

We'll focus on the RPS since it relates to Innovo's use case: RECs. Out of the 50 states, 38 of them have recognized RECs and have implemented them into their state laws. Because RECs are state offered assets, each state has their own tracking system, the state registry. In Texas, it's the ERCOT, and New York it's the NYGATS for reference.

Unbundled RECs create a Gray Area

One of the more dominant arguments is whether unbundled RECs should be accepted by states. An unbundled REC is a certificate that represents 1 MWh, just like a regular REC, except when you purchase it, you aren't buying any renewable energy. You are simply buying the claim to the renewable energy. The FERC, EPA, and PURPA all recognize unbundled RECs as valid instruments to trade, while the FTC has been against them.

Unbundled RECs introduced a powerful concept - transferring RECs as a standalone financial asset, a "nonfinancial commodity" as CFTC defines them. We do, however, have to ensure there isn't any double counting of RECs. Thankfully, the Green-e Energy Program and other efforts have been put in place to verify where renewable energy is travelling, and protect buyers against the problem of buying non-renewable energy thinking it was renewable. As corporations continue to adopt renewable and clean energy standards, we expect to see a continual increase in REC adoption at the state level. Innovo's mission is to make the transfer of RECs easier amongst parties, all while increasing the legitimacy of the contracts.

‍

Learn More:

Legal Basis for Renewable Energy Certificates - CRS

‍

Give Innovo Markets a follow on LinkedIn to stay updated, and please reach out if you have any questions!

‍