Paper examines thermal RECs in state RPSs

By Anna Simet | October 05, 2012

A new paper released by FutureMetrics LLC examines the impacts of adding full thermal renewable energy credits to state renewable portfolio standards (RPS).

The paper is based off of New Hampshire’s recent legislation that qualifies renewable thermal in its RPS, a modest incentive that allows 2.6 percent of thermal renewable energy credits (RECs) into the current Class I obligation by 2025.

While the report focuses on Maine, author William Strauss said implementing the same strategies in other states with RPSs would create similar results to what is discussed in the paper, including the creation of around 9,000 permanent jobs. These jobs will be created from three effects, identified by Strauss as being the supply of biomass and fuel, from jobs not being exported out of state with money paying for heating oil, and from the increased disposable income that results from heating costs being so much lower.

Another key point Strauss makes in the paper is that thermal energy from biomass can be produced at high efficiencies— 0.5 tons of wood will typically generate a thermal REC versus 1.7 tons of wood to generate an electric REC in a standalone biomass power plant. Therefore, thermal RECs could lower the cost of compliance for utilities and thus should lower rates for consumers of power, and should be set at roughly half of the price of electric RECs.

Homeowners could benefit as well.  Each ton of pellet fuel generates about 4 RECs, according to Strauss, and assuming $14 for thermal RECs, a homeowner would receive a $56 per ton rebate from the REC sales for every ton. This would lower the cost of fuel to about 35 percent of the cost of heating oil for the same energy.

Though New Hampshire set its thermal RECs at $28 per MWh, the paper assumes that RECs will sell for less than that in states like Maine where an oversupply is expected, due to the total heat used compared to the final RPS thermal carve-out percentage.

To download the paper, click here