How RECs and ZECs work in New York City
Renewable source of energy’ has become a keyword in the global push for environment-protection today. The use – or rather the abuse – of non-renewable sources of energy has already wreaked havoc on the environment, creating such a breakdown in the environment that it is extremely hard for the Earth to go back to being how it was in the past. The effects of human exploitation of the earth’s non-renewable resources are clearly evident in the pollution that has invaded the air, water, soil and every other aspect that makes up our world.
While Global leaders are constantly engaging in discussions and debates with an aim to come up with an effective solution to put an end to this problem, the abuse of non-renewable resources such as oil and coal are still happening on a large scale everywhere. At this point, the question arises – is it only the world leaders who should be worrying about the environment? Or is it a problem that every individual should actively try to tackle?
Needless to say, the devastating effects of the pollution affect everyone indiscriminately and the alarming levels that it has gained today has made it all the more necessary than ever before for every individual to try hard to find an effective solution. RECs (Renewable Energy Certification) and ZECs (Zero Emission Certification) are two ways that the common man is brought into the global fight for conservation of the environment.
Why did the REC and ZEC come into being?
New York has been seeing a very ambitious push for the generation of Green Energy for the past some time now under the Clean Energy Commission (CES). The CES is taking an aggressive stance in promoting clean energy and has raised the bar for clean energy consumption from 30% of the total consumption by 2020 to 50% by 2030.
Besides, the CES is also proactively invested in encouraging more producers to come forward to produce clean energy. Allowing energy producers to trade RECs for additional income was a way to encourage producers to engage more in the production of green energy. In addition, the CES is also trying hard to make sure that nuclear-energy generators, which produce emission-free energy, stay afloat despite low demand and the high cost of production through ZEC. On the whole, the vision of the CES is to tackle the problem of non-renewable sources of energy and replace them with the use of clean, environment-friendly sources of energy.
By allowing the RECs and ZECs to be obtained from the NYSERDA, the CES is hopeful that it can achieve its ambitious goals of achieving 50% clean energy consumption in New York City by 2030. While RECs make sure that more and more producers of clean energy come forward to produce more renewable sources-based energy, ZECs make sure that the already existing nuclear-energy producers that are emission-free stay alive until they reach an era where the cost of production reduces and demand increases. As of now, nuclear energy producers face tough competition from the cheaper energy alternative such as biogas.
An invitation to welcome more producers of renewable resources
Energy generation is a privatized feature in the US, individuals can always come forward to generate more energy for public use. Having a certification program rewarding individuals for generating more energy from renewable resources can act as a catalyst to tip the balance from the overuse of non-renewable resources to harnessing the energy of renewable resources. In the long run, this can greatly reverse the negative effects that the overuse of non-renewable resources of energy has had on the environment.
This results in a number of benefits. The following are a few:
- Overall reduction in non-renewable sources of energy
Needless to say, the availability of renewable sources of energy as a better, more environment-friendly option will prompt a greater reduction in the use of non-renewable resources. Already countries such as Germany are pushing for cars that run on renewable resources. As such, it is only safe to conclude that the movement towards a future with just renewable resources has already gained momentum. Eventually, with the coming of more producers of renewable resources of energy onto the scene, It will only be a matter of time before renewable resources become the norm and majorly replaces non-renewable resources, if not completely replacing them.
- Increased research on renewable-energy generation
With the increased generation of renewable sources of energy, there will definitely be an increased drive for intensive research on renewable-energy generation. As a result, you can expect a better quality generation of renewable energy, more efficient distribution of energy and a more powerful network of energy connectivity.
The increased research will result in better equipment and come up with more effective ways of generating power. Intensive focus on the generation of renewable-energy will also help in churning up more economic and cheaper ways of supplying energy.
- Added push for environment conservation
The reduction of non-renewable energy source use will greatly help in reducing pollution and the destruction of the environment. Because renewable sources of energy such as solar-power do not exhaust the earth’s existing resources, there is no damage or harm done to the environment. If such a movement takes flight all over the world, the benefits it will have for the environment is phenomenal.
How RECs work in New York City
RECs are earned when a renewable-energy power-generation unit has successfully managed to generate one megawatt-hour (Mwh) worth of energy. Also known as Green Tags, Renewable Energy Credits and Tradable Renewable Certificates (TRCs), these certificates are ‘tradable’ in that, they can be sold to a buyer just as any other commodity. As a result, RECs can prove to be an additional source of income for renewable energy power generation units. This acts as a motivation booster not only for existing renewable energy producers but also invites more people to generate this ‘green energy’.
Producing Green Energy can prove to be expensive. As such, the tradability of RECs reduces the cost of production that renewable energy producers incur.
RECs can be obtained directly from the New York State Energy Research and Development Authority (“NYSERDA”), or from any other agencies that have been deemed competent enough to issue the RECs. RECs can also be obtained from the NYSERDA by making Alternative Compliance Payments to NYSERDA. This can be done when the Load Serving Entity has proved itself to be competent enough to earn the credits. NYSERDA has a complete list of its eligibility criteria spelled out on its websites for reference.
Benefits of a REC
RECs have numerous benefits. From encouraging more producers of renewable energy resources, to creating a sort of accountability for the energy produced, RECs are a great option to create a reliable, responsible network of energy supply.
- It enhances accountability
Being a certification, power-generation under the REC system ensures that the power-generation is accounted for. As a result, there is a reduced chance of abuse of energy, assuring every involved party of legal, safe power supply. The source and destination of the power generated are documented carefully so that the use of power is consistent and trusted. Besides, the accountability that an REC brings in makes it easier for government bodies to identify misuse of power so that it can be appropriated more carefully to the right places.
Greater Accountability will result in more responsible supply and use of energy as well. Illegal use of energy, abuse of energy and unequal distribution of energy can be almost eliminated as a result.
- Better supply of energy
The supply of energy can be greatly enhanced and made more efficient thanks to the REC. Not only is there a greater generation of energy, but the supply also can be controlled and managed more efficiently so that there is consistent, uniform energy supply everywhere. Better management of renewable energy will further help in environment-protection, thereby giving fresh impetus to the efforts that are already under way to reverse the effects of the widespread destruction caused by the abuse of non-renewable sources of energy.
More the producers, better the amount of energy available at hand for better supply. This has two implications – one, there will be definitely an increase in energy demand, and second, with more Clean energy producers coming forward to produce energy, more of the energy available will be clean. As a result, the devastating effects of non-renewable resources can be reversed.
- Sustainable in the long run
The model followed under the REC system is simple and effective in creating a sustainable future in the long run. The tradability of the RECs makes sure that existing producers of renewable energy have a good reason to go on doing what they do, and at the same time attracts more producers as well.
- Reduces burden on energy-producer
Green energy production can be expensive for the Load Service Entities. RECs help reduce this economic pressure on the producers of Green Energy.
What is a Zero Emission Credit (ZEC)?
While RECs take care of promoting the use of energy generated from renewable resources, ZECs encourage emission-free power generation. The idea is to power generation centers towards an era where no emissions in the form of poisonous gases are released into the atmosphere. As it is, the magnitude of emission has reduced when compared to a decade or so ago. This is indicative of the onset of an era where energy generation can take place without the need for emission, thereby putting an end to the poisoning of the atmosphere.
The Zero Emission Credit (ZEC) acts as a lifeline for nuclear energy producers that are finding it hard to stay afloat. As of now, the level of demand for emission-free nuclear energy is low and nuclear energy is quite costly when compared to the existing cheaper alternatives. The CES is hopeful that by helping the nuclear energy producers stay alive for a little longer, the dynamics of demand will change and there will be more demand for nuclear energy. With an increase in demand, there is a possibility that the cost of production and supply will also reduce.
In addition, ZECs are also becoming popular today because of the great leaps that are being made in energy-generation using wind and solar technologies. These advances have shown that it is quite possible for greater energy-generation from renewable resources, thereby greatly reducing the reliance on power-generation that depends on emissions. This indicates that with increased application of time and effort, there can definitely be a higher level of energy production from renewable resources. Until now it was through that renewable resources cannot produce enough energy for the magnitude of consumption that exists. With the developments that are happening now, it is not long before we finally hit upon the technological upgrade that will enable higher generation of energy.
Currently, ZECs are applicable to only Nuclear plants because only the power generated by Nuclear plants is significant enough to qualify in terms of the magnitude of production. There are some plants that are doing good business, while the others are finding it hard to survive due to low demand and the high cost of production. The ZEC system simply requires that Nuclear plants purchase as many credits as the amount of load that they serve. The money that is collected in this way is re-allocated to help nuclear plants that are trying hard to survive so that they remain financially on their feet until such a time that they can generate enough income to be on their own.
How do ZECs work?
ZECs are often confused with RECs – even thought of as being an alternative or replacement. However, ZECs do not replace RECs at all. ZECs take the push for environment-friendly energy-production a notch further by encouraging Load Serving Entities to produce energy without letting out pollutants into the air. As of now, wind-energy producing entities and solar energy producing entities do not come into the ambit of ZECs – only Nuclear energy producers do.
ZECs help Nuclear energy producers by subsidizing them so that they can remain afloat in the competition that they face from the producers of other cheaper energy resources. In a way, ZEC is something that enables Green Energy producers to continue doing so without having to suffer from economic difficulty. Producers of other forms of energy such as biogas pose a tough competition to the producers of Nuclear-energy producers.
ZECs are purchased from issuing authorities such as NYSRD by Nuclear Energy producers in proportion to the amount of power that they generate. For example, suppose a Nuclear energy producer supplies 25% of the power in an area, then they have to produce 35 Zero Emission credits from the issuing authority. The money that is collected from these purchases is then pooled together and re-distributed among other nuclear energy producers. This way, nuclear energy producers who are facing economic difficulties will receive economic relief and will be able to continue operating until the situation changes and demand for nuclear energy increases enough for the Nuclear Energy producers to start making profits.
Key differences between ZEC and REC
Although almost always used together, ZECs and RECs have three major differences.
- Tradability: While RECs can be traded in an open market just as any other commodity, ZECs cannot be sold off. ZECs are an additional source of income for nuclear energy producers who are finding it hard to survive, and as such cannot simply be exchanged for money in the market. Making the RECs tradable makes sure that existing suppliers of Green Energy remain in the race, in addition to bringing in a fresh pool of Green energy producers onto the scene. As for ZECs, making them a tradable commodity would defeat the purpose because they themselves act as subsidies for companies that produce Green Energy.
- Not earned: ZECs are purchased from a competitive body while RECs are purchased. To obtain an REC, the Load Service Entity has to meet a set of requirements and qualify for the certification. Once a Green Energy producer has met all the requirements, they can apply for an REC from a competitive body, which they can later sell off in the open market. In the case of ZECs, they are simply purchased from a competitive body in proportion to the magnitude of energy that they supply. The money that comes in from the nuclear-energy producers that are generating more income is then re-allocated towards the nuclear-energy producers are struggling due to tough competition from producers of other forms of energy.
- Open vs. Closed market: Needless to say, an REC is a commodity that is used in an open market, traded between buyer and seller. As such, an REC can be shared with anybody and serves a wide range of the open market. In fact, there is an existing market for RECs. ZEC, on the other hand, cannot be traded freely. It is meant for only a select few who will be assigned the certification by a competent authority. That is why it serves only a closed market. It is only between the issuing authority and the energy producers.