Oregon Hydro Work Group Renewable Energy Certificates Background & Use

1. Oregon Hydro Work GroupRenewable Energy CertificatesBackground & Use Kip Pheil Oregon Department of Energy October 30, 2009

2. Topics • Electricity Grid & Oregon’s Mix * • REC Form & Function • REC Markets & Roles • Sources, Contacts, Etc. * - WECC/WREGIS focus

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4. A. Western Grid Western Renewable Energy Generation Information System WREGIS tracks renewable generation & operates within WECC. Western Electricity Coordinating Council WECC manages grid via North Am. Electric Reliability Corporation (NERC) via FERC. BC AB MT SD WY NE UT CO AZ NM TX BJ (BC)

5. Oregon Electricity Oregon’s Mix *, 2007. 49.3 million MWh 10%>2005 * REC transactions ignored.

6. B. REC Form & Function • REC ‘contents’ • REC & a WREGIS Oregon Cert ID # • REC viz-a-viz Energy • REC genesis (“Necessity is the …”) • REC sample (WREGIS version)

7. REC – what’s inside? Renewable Energy Certificate/Credits * (an electron’s diploma) 1 MWh => 1 REC • Energy source • Generation/Conversion Technology • Plant Location, Capacity (MW) • Generator Commercial Operation date • Facility Ownership • Energy Generation Vintage (Mo/Yr) (* Green Tag, Tradable Renewable Certificate)

8. Oregon RPS – REC is… … a unique representation of the environmental, economic, and social benefits associated with the generation of electricity from renewable energy sources that produce Qualifying Electricity. … While a Certificate is always directly associated with the generation of one MWh of electricity, transactions for Certificates may be conducted independently of transactions for the associated electricity. [OAR 330-160-0015(8)]

9. Oregon Certified REC • Oregon Utilities need Oregon-certified, WREGIS-issued REC for Oregon’s RPS * • To Earn an OR RPS Qualified REC • Become an Account Holder • Register Generating Unit (GU) • Secure “OR Cert ID #” • Report Generation (MWh) • REC - bundled, unbundled (tradable) (* but not for Green Option programs)

10. Energy (MWh) Energy (MWh) Generic GU Generating Unit (GU), RR * REC Energy (MWh) REC relation to Energy * Renewable Resource (determined by Compliance or Voluntary Program Rules)

11. Energy (MWh) Energy (MWh) GU, RR REC Why develop the REC? $ $ REC represents value beyond Energy; REC creates fungible cash flow; REC revenue improves pro forma.

12. Yea, but… What’s a REC, really? If done well, a REC provides: • Transparent • Precise • Proof (of what you – or someone – wants)

13. REC-like commodities Other labels of interest in a modern world: • Oregon Tilth Certified Organic • Shade-grown (coffee) • Indicazione Geographica Tipica (vino) Would You Only Buy the Label? (please say “yes”)

14. WREGIS REC - sample A A REC is too large for this view! B C [Source: PacifiCorp]

15. WREGIS REC – cont. A

16. WREGIS REC – cont. B1

17. WREGIS REC – cont. B2

18. WREGIS REC – cont. C Oregon Certification # (sample) 08wnd003wy

19. C. REC Roles & Markets • Ownership, content, Oregon Cert ID # • U.S. REC Markets • Voluntary Programs • Compliance Programs • Volatility • Oregon RPS

20. Ownership Function If the Hydro & Wind folks sell REC output to the Coal & Gas folks, it isn’t going to be a 100% ‘green’ world. Coal Hydro Natural Gas Wind A Simple, Imaginary, (unlikely) World If you don’t own the REC, don’t make the claim.

21. REC – what’s inside? Renewable Energy Certificate * 1 MWh => 1 REC • Energy source • Generation/Conversion Technology • Plant Location, Capacity (MW) • Generator Commercial Operation date • Facility Ownership • Energy Generation Vintage (Mo/Yr)

22. REC Markets… • More than 60 RPS (compliance) REC products • Almost 40 RPS (and ~ 10 voluntary) REC products actively traded • A Dozen (active) Brokers

23. REC Markets… • Chicago Climate Futures Exchange • NJ Class I • MA Class I • CT Class 1 • voluntary • REC price range: $0.10 - $690.00

24. REC Markets • Accounts by Registry (Sep 2009) • GATS 3,350 • M-RETS 110 • NEPOOL GIS 360 • NAR 10 • ERCOT 310 • WREGIS 280 • WREGIS GU stats (28 Oct 2009) 1,218 registered GU = 23,240 MW

25. Pac-NW WREGIS ERCOT MRO TX: 1 : 8% b GATS/MRETS NC NC: 2 # of actively traded REC Products MI: 1 IL: 2 OH: 4 NJ: 3 NH: 4 MA: 2 ME: 2 CT: 3 RI: 2 MD: 3 DE: 3 PA: 3 DC: 3 CONFIDENTIAL NEPOOL GIS

26. Voluntary - Oregon • PGE – Green Source (= use) or Clean Wind (@ 200 kWh/unit) • Pacific Power – Blue Sky Usage or Block (@ 100 kWh/unit) • BPA option – Environmentally Preferred Power (e.g. No. Wasco “Pure Power”) • All Oregon utilities must offer Green Options [SB 838, 2007] – ergo, a ‘mandatory voluntary’ program

27. Voluntary – Nat’l (e.g.) • Green-E Energy (green-e.org) • Used for Pac’s Blue Sky option • GU option to certify in WREGIS • Direct purchase options BUT… • Residential - OR produced REC not available • Sterling Planet (sterlingplanet.com) • Sterling Wind national offer • Bonneville Env. Foundation (b-e-f.org) • Carbon offsets (another ‘REC-like’ product)

28. Compliance • Compliance (i.e., Mandatory) programs via due to Regulation: State, local jurisdiction… perhaps Federal? • CA RPS drives WECC/WREGIS REC prices

29. National RPS Programs [Renewable Electricity Standards Toolkit, ucsusa.org]

30. National RPS Details [Ryan Wiser LBL Aug 2008]

31. ■ Regulatory Change: Eligibility change in New Jersey for Behind the Meter Generation caused a significant decrease in prices over a short time period Regulatory Uncertainty – California’s delay in finalizing the eligibility of unbundled RECs has led to a significant decrease in WREGIS trading volume PJM - How will the proposed changes to the NJ BGS affect the market? NEPOOL –The market is trading options awaiting the CT Class III ruling BPU Ruling

32. Political / Regulatory Risk ofRelying on Short-Term RECs • August 2, 2005: Connecticut DPUC finds that existing Maine biomass plants, and new gas pipeline expansion (pressure reduction) turbines, qualify as Class I renewable resources • August/September 2005: Connecticut Class I REC prices plummet by $30/MWh on prospect of abundant, cheap supply Source: www.evomarkets.com State RPS Policies: Experiences and Lessons Learned by Dr. Ryan Wiser [May 2006, www.oregon.gov/ENERGY/RENEW/REWG/REWG-Policy.shtml]

33. Oregon RPS Post – 1994 Generation, mostly (Mandatory Voluntary Green Power, non-RPS)

34. Eligible Resources

35. Large (IOU) Timeline

36. Compliance Forecast Statewide 2007 sales = 49.3 million kWh QE is (RPS) Qualifying Electricity

37. D. Sources, Contacts… States Advancing RPS Renewable Energy Credits: Definitions, Attributes and Markets (9/30/2009 webinar) • State REC Definitions • Environmental Attributes • CA REC viz Greenhouse Gas • Market View [www.cleanenergystates.org/JointProjects/State-Federal-RPS.htm]

38. Sources, Contacts • Lawrence Berkeley National Lab (www.lbl.gov) – search “RPS” • Database of State Incentives for Renewables & Efficiency (www.dsireusa.org) – pick a state • Union of Concerned Scientists (www.ucsusa.org) – follow ‘Clean Energy’

39. Oregon RPS, WREGIS Info • More on the Oregon RPS (w/ links to OPUC): www.oregon-RPS.org • WREGIS: www.wregis.org • ODOE homepage: • http://www.energy.state.or.us • Kip Pheil (ODOE): kip.pheil@state.or.us • 503-378-4442 If conservation is the ounce of prevention; an RPS is the pound of cure.