Gains from an Integrated Market for Tradable Renewable Energy Credits (TRECs)

Decoupling the environmental attributes of renewable energy (RE) generation from the physical unit of energy is an innovative mechanism for marketing green or renewable power. The introduction of ‘Tradable Renewable Energy Credits’ (TRECs) allows the green power attributes to be sold or traded separately from the physical unit of energy. Since the green power certificate system removes potential locational and physical bottlenecks, both suppliers and consumers gain flexibility in the marketplace. The TREC is also an efficient tool to meet ‘Renewable Portfolio Standard’ (RPS) required by different states in the U.S. This paper focuses on the state wise RPS requirements and discusses the implications of an integrated TREC market. It offers a competitive setting to consumers to pay for renewable energy and a cost effective tool to thrive renewable energy generation, Grace and Wiser (2002). This paper also highlights some practical difficulties that should be addressed in order to establish an efficient integrated TREC market.