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Report Questions Legality of Renewable Energy Certificates

PORTLAND, Ore. – Cascade Policy Institute issued a report today, questioning the legality of renewable energy certificates (RECs) and calling for the state Attorney General to investigate possible violations of the Oregon Unfair Trade Practices Act.

RECs are tradable commodities purporting to represent the “environmental amenities” of producing electricity from a select list of renewable energy sources. A REC is created electronically for each megawatt-hour of electricity produced by qualifying sources, and a unique number is assigned to the REC. It can then be bought or sold as a product that is either bundled with the actual electrical output of the facility, or sold separately.

However, nowhere in the transaction process are the so-called “environmental amenities” associated with each REC verified. The REC market is shrouded in secrecy; relevant data about individual RECs such as the power facility it is associated with cannot be obtained from utilities, REC brokers, or the Oregon Public Utility Commission. This is the major finding in the Cascade report entitled “Renewable Energy Certificates: A Costly Illusion.”This lack of transparency is a problem because not all “renewable power” sources are benign. Intermittent sources such as wind and solar require back-up power at all times to ensure reliability of the regional grid, and most of those sources create environmental problems such as air pollution or fish mortality. It is impossible for any consumer to know where their purchased RECs came from, and therefore impossible to know if there are any net environmental benefits.

“We believe that statements made by REC producers and brokers violate the Oregon Unfair Trade Practices Act by representing that the purchased RECs have benefits and qualities that they do not have,” Cascade’s President and CEO John A. Charles, Jr. stated in the letter to Attorney General Ellen Rosenblum.

There is no direct link in time or location between the payments a customer makes for “renewable” energy and the production of that electricity or its delivery to the customer paying for it. According to Charles, “The REC market is a Trojan Horse. Purchasers of RECs such as universities and businesses are buying these certificates to provide a ‘green glow’ for themselves, yet the alleged environmental benefits probably do not exist.”

In 2007, the Oregon legislature approved a law that would require at least 5 percent of power generated by electricity utility companies to come from “renewable resources,” like solar and wind power. This required percentage increases to 15 percent by 2015, 20 percent by 2020, and 25 percent by 2025. Instead of having to actually produce this electricity themselves, the law allows electricity companies to purchase or produce RECs.

The Cascade report recommends that the Oregon Legislature amend the 2007 statute to prohibit the use of RECs for compliance purposes if they are associated with intermittent power sources.

Click here to read the report.

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