15-0427 v2.X PV Array Ownership
We now understand that at a point in time, ILFI adjusted its policy to require that projects do not sell the renewable energy credits. Three projects with which IES is involved are planning on achieving net zero energy through an on-site power purchase agreement, so the value of the renewable energy credits must be established as part of the contract with the third-party finance entities. If the sale of SRECs violates the LBC Net Zero Energy imperative, in letter or in spirit, each of the projects will adjust their plans to comply fully with current requirements.In Massachusetts, there is a particular form of a REC, a Solar Renewable Energy Credit (SREC), which is defined and created to encourage the development of new solar generating capacity. All public utilities are required to purchase SRECs annually, according to a formula defined and adjusted by the utility regulators. A newly-commissioned solar array generates SRECs for a period of 10 years (40 quarters), and the utility regulators have defined a floor price for the value of these SRECs. Historically, they have traded for as much as $0.55 per kWh, and the current floor price is $0.20. At present, they trade for more than $0.25 per kWh. If utilities do not purchase all of the SRECs that are created in a given year, they are penalized and the purchase quota for the following year is increased accordingly. http://www.srectrade.com/srec_markets/massachusettsBecause of this captive market, there is a tremendous incentive for third-party developers of solar arrays to bring the SRECs to market. Indeed, this state policy is understood to be the main reason why solar development in Massachusetts is so active.We seek a means of meeting the requirements of the Net Zero imperative without destroying the value inherent SRECs generated by new systems in Massachusetts. One possibility is that each project allows the installer to sell the SRECs in the Massachusetts market, and that the building owner replaces those SRECs with generic RECs (Iowa wind RECs, for instance). This arbitrage will allow the teams to capture approximately 90% of the SRECs value, but will ensure that each project also has unambiguous rights to RECs that meet or exceed the site energy requirements. The Federal Trade Commission offers guidance on language that is appropriate to guide messaging. We understand that it is deceptive to sell renewable energy credits and claim their environmental benefits simultaneously, and none of the projects intends to do so. In the case of Massachusetts SRECs, utility companies are required by law to purchase SRECS, so they are not entitles to make claims about SRECs and carbon offsets. Is it permissible to sell and re-purchase RECs as part of a third party finance arrangement?
Since the prohibition of REC sales is meant to deter "double-counting" energy or carbon claims, not impede government programs that incentivize renewable production, the sale of RECs will be allowed under a new Exception:v2.1: I07-E10 Government REC Sales/v3.0: I06-E10 Government REC Sales. Project teams are allowed to sell their RECs (or other similar production incentives) as part of a governmentally established program for achieving larger public policy objectives such as carbon reduction. In these cases, the RECs must be sold to a governmentally specified REC recipient and the REC purchase contract must specify that the RECs will be held (not re-sold) by the governmentally established recipient for a minimum of fifteen years in order to prevent double-counting the energy & carbon benefits. Project teams must provide the REC contract as I06-c Technical Documentation and highlight the renewable attribute language of that contract. Basic Documentation must demonstrate any claims of renewable production are consistent with the contract language.
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