From a Legal
Perspective
The ABCs of RECs
Alan I. Robbins, Attorney, Jennings Strouss & Salmon PLC
Editor’s Note: “From a Legal Perspective”
appears in each edition of District Energy
magazine to address legal issues of
current importance to the district energy
industry. It is intended for educational
purposes only and does not constitute
legal advice
Getting credit for the production or purchase of renewable energy is becoming increasingly important as states develop and refine their
renewable portfolio standards, as private
markets emerge to commodify the benefits of renewable resources, and as our
national energy policy moves toward
a more organized approach to address
greenhouse gas emissions.
For that reason, contracts governing
the output of renewable energy resources
now commonly address the ‘green’ rights
associated with the renewable project
that either currently, or in the future, may
hold some value – be it in the private mar-
ketplace or under a regulatory scheme.
These rights are typically referred to as
“environmental attributes” or “renew-
able energy credits” (RECs), though they
are also known as “green tags,” “green
energy certificates” or “tradable renew-
able certificates.” Whatever their name,
environmental attributes generally include
the right to be regarded as the owner
or holder of the legal and market rights
associated with the green aspects of the
facility. They represent the technology
and environmental attributes of electricity
generated from renewable resources. (See
www.epa.gov/greenpower/buygp/types.
htm#rec.)
Specific contractual provisions
dealing with RECs are necessary
because a project’s capacity and
energy are often sold separately
from the RECs.
Specific contractual provisions dealing
with environmental attributes are necessary
because the capacity and energy available
© 2011 International District Energy Association. ALL RIGHTS RESERVED.
from a renewable resource are often sold
separately from the environmental attributes associated with that same project.
The buyer of electric capacity and energy
from a renewable resource may be different from the buyer of the environmental
attributes of the project.
Because the sale of a project’s electric
capabilities is frequently separated from the
sale of its environmental attributes, the contract governing the sale of electric capacity
and energy from a renewable resource
must make clear whether the buyer is or is
not also receiving the environmental attributes. If the electric buyer is not also the
REC buyer, then the contract needs only to
clearly provide that the sale of capacity and
energy does not include the RECs, which
the seller will sell or transfer separately.
Defining Environmental
Attributes
The first provision that requires attention is the definition of environmental
attributes, RECs or whatever term is being
employed. State laws requiring or encouraging a renewable resource portfolio will each
have a statutory definition. These definitions
vary from state to state; thus care must be
taken not only to reflect the law of the state
that governs the agreement but also to
consider the need to satisfy the laws in other
states as well. While moving in the direction
of uniformity, the five major tracking systems
(see sidebar) do not yet use identical definitions either. The definition should also make
clear how RECs or environmental attributes
are being measured, so that the agreement
is clear regarding the amount of credit the
Major REC Tracking Systems
in the United States
• Electric Reliability Council of Texas
(ERCOT)
• New England Power Pool/Generation
Information System (NEPOOL/GIS)
• PJM Generation Attribute Tracking
System (GATS)
• Western Renewable Energy
Generation Information System
(WREGIS)
• Midwest Renewable Energy Tracking
System (M-RETS)
