David C. Schanbacher, P.E. TNRCC Air Program Coordinator

1. Renewable Energy Credit Trading Program David C. Schanbacher, P.E. TNRCC Air Program Coordinator

2. Graphics Courtesy of Roy McCoy Manager, Congestion & Renewable Credits

3. Renewable Energy Credit (REC) Program • Required by Texas Restructuring Legislation • Goal: Develop 2000 MW new Renewable Capacity in TX by 2009 • Full Program began January 1, 2002

4. New Capacity Ratchets

5. TX Definition of Renewable Renewable energy technology—Any technology that exclusively relies on an energy source that is naturally regenerated over a short time and derived directly from the sun, indirectly from the sun, or from moving water or other natural movements and mechanisms of the environment. Renewable energy technologies include those that rely on energy derived directly from the sun, or wind, geothermal, hydroelectric, wave, or tidal energy, or on biomass or biomass-based waste products, including landfill gas. A renewable energy technology does not rely on energy resources derived from fossil fuels, waste products from fossil fuels, or waste products from inorganic sources.

6. REC Program Overview • Affects Competitive Retail Providers & Renewable Generators • Texas-wide (includes non-ERCOT areas) • Requires Generators to be Certified by PUC • Requires Competitive Retailers to submit RECs annually for Compliance

7. REC Attributes • Generated from Renewable Resource: • Hydro, Solar, Wind, Geothermal, Biomass • 1 MWh renewable energy = 1 REC • Each REC is good for two compliance periods after the year of generation (“three year life”)

8. REC Uses • REC Program: Annual REC Compliance Requirement for Competitive Retail Providers • Submit RECs annually in proportion to retail load served in TX • PUC Labeling Initiative: RECs will (likely) be used for verification of advertising claims for green power

9. REC Program: ERCOT Administrator Responsibilities • PUC appointed ERCOT as REC Program Administrator in May 2000 • Register Program Participants • Create REC accounts • Track MWh of renewable energy generated • Create unique REC IDs for each MWh • Distribute RECs to generators, quarterly • Determine annual REC Allocation for Competitive Providers • Retire RECs submitted for compliance • Retire REC’s as they expire

10. Administrator Responsibilities Continued • Maintain public information –Website • Monthly report of MWH load in Texas • List of REC account holders with contact information • List of Facility ID Numbers, and associated information • Report to the PUCT – Compliance • Verify that Competitive Retailers meet REC compliance requirements

11. Participant Responsibilities: Generators • Apply to PUCT for certification as a REC generator • Apply to ERCOT for REC account • Generate & Sell Energy • Separate Energy from Attribute as Renewable • Two revenue streams for the same “product” • Flexible pricing—lower Energy cost and recover difference through sale of RECs • Receive RECs • Sell RECs

12. Participant Responsibilities: Competitive Retailers & Others • Competitive Retail Providers • Annual REC Compliance Requirement • Apply to ERCOT for REC account • Other Entities • No Restrictions on Participation • Apply to ERCOT for REC account

13. REC Software Design: Account Holder Functionality • All Activities Online • Account Registration • Secure Portal for REC Account Holders • Enable Account Activities: View, sort, batch, or singly identify RECs to Transfer or Retire

14. Software Scaling: Potential Transaction Volumes • At outset—assume 1000 MW generation * 35% CF * 8760 = 3,066,000 unique IDs in year 1 • If trade 3 times before retirement: 9 million transactions for Year 1 RECs alone! • All data available online for 3 years • No limits on REC Account Applications

15. REC Software Design: ERCOT Perspective • ERCOT Load and Generation Data used to calculate annual REC requirements (Siebel output) • Nonmetered and nonERCOT data: API or manually

16. Questions?