Many public agencies and commercial enterprises have deployed solar and battery systems in order to reduce their energy costs and meet their sustainability goals. While many are familiar with the cost savings benefits of these technologies, fewer are familiar with the revenue opportunities that exist for these behind-the-meter systems. For qualified energy projects in California, there are two such programs: Solar Renewable Energy Credits (RECs) for solar PV and the Demand Response Auction Mechanism (DRAM) for batteries.

Solar RECs

Solar renewable energy credits are essentially an accounting method used to track renewable energy production and provide proof that electricity has been generated from an eligible resource and either consumed on-site or delivered to the grid.  A renewable generator, such as a solar PV array, produces two outputs simultaneously: electricity and the associated environmental attributes.  RECs provide a method of tracking these benefits, which can be sold with the generated electricity (bundled) or separated as a stand-alone product (unbundled).  These certificates represent the environmental benefits of renewable energy production. One REC is produced for each megawatt hour (MWh) of renewable energy.

Organizations with deployed solar systems may be able to benefit from the REC market by selling the environmental attributes of the renewable energy generated on their facilities.  Buyers of RECs usually fall into two groups, those who are required to meet portfolio compliance mandates (such as Load Serving Entities) and those in the voluntary market (such as commercial enterprises) with internal sustainability goals.

There are many regulations that have been established to provide structure to the REC market to ensure that the program avoids fraud and mismanagement.  The first thing that you will need to find out before entering the REC market is who owns the rights to the certificates generated at your facility.  Often it is the owner of the solar PV system that owns the rights to the environmental attributes at an operational site, but this is not always the case.  You will want to review the contracts related to the installation of the system to clarify who has the legal rights of ownership over the environmental attributes at your location, because only that entity can market RECs generated at the site.

California’s REC market is tracked by the Western Renewable Energy Generation Information System known as WREGIS.  This organization tracks renewable generation and creates certificates for every REC generated from registered sites.  We noted earlier that one REC represents one MWh of renewable energy.  Let’s look at an example of what this could mean for a system host that owns the rights to the renewable attributes at a location that has a 1-megawatt (MW) capacity.

System Size:      1 MW-DC capacity PV solar array

  • Assuming a yield of 1.5 MWh per kilowatt, the estimated annual production for this facility would be 1,500 MWh.
  • Assuming a market price of $5-15 per REC, the annual revenue opportunity would range between of $7,500 and $22,500

There are several factors that impact both the system’s production and the market price for RECs so keep that in mind when estimating potential revenue from your site.

Key steps in the Solar REC Marketing process include the following:

  1. Determining legal ownership of environmental attributes for your system
  2. Registering your generating solar PV system with WREGIS
  3. Reporting of production to WREGIS by a Qualified Reporting Entity (QRE)
  4. Production data received, reviewed and validated by WREGIS
  5. Certificates minted and categorized based on month and year of the reported production

Those interested in marketing the RECs produced at their facility must comply with certain marketing claim implications.  Per the Federal Trade Commission, it should be noted that once you sell the environmental attributes of your Solar PV system, you’ll know longer have the rights to represent (directly or by implication) that your facility uses renewable energy.

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DRAM

The Demand Response Auction Mechanism (DRAM) program provides yet another way in which electricity customers can benefit from deployed distributed energy systems including battery energy storage systems.  DRAM is a procurement process that encourages California load serving entities to procure Resource Adequacy (RA) capacity from demand response resources such as behind the meter battery storage systems.  DRAM creates a revenue opportunity for organizations that have deployed qualifying systems.

The DRAM program was developed in 2014 and launched in 2016 in coordination with the California Public Utility Commission (CPUC) with the goal of combining utility based reliable demand response with the California grid operator, CAISO.  In traditional demand response programs, behind the meter resources such as smart thermostats, EV charging systems and HVAC systems can be called upon to respond to critical events when CAISO must take steps to ensure that overall demand is met while ensuring enough transmission capacity for delivery of power.  In most cases, demand response participants can act to lower demand. But those with deployed energy storage systems can discharge power from their batteries when called upon rather than lower their overall site usage.

Within the DRAM program, batteries (and other resources) can be compensated for both availability (in the capacity markets) and use (in the energy markets).  The amount of revenue which can be realized by a participating system depends on a few factors including how often they can be called upon and at what price they have bid into the market.  Those interested in this program should note that battery participation is dependent upon availability of “shedable” load during these events (electric load on site that can be met by the battery).

Before entering the DRAM program, participants should review their existing battery contracts to determine if they are eligible to participate in such programs and if so, what administrative terms are in place .  Utilities allow net-metered systems and recipients of SGIP funds to participate in the DRAM program. However, if a facility is already participating in other demand response programs, they are not eligible to be a part of the DRAM program.

System hosts enter the program by selecting an “Aggregator” and executing a Grid Services agreement with that provider.  Aggregators are also known as bidders, as they will aggregate load from different sources and then bid them into the market.  Once battery systems are registered, the aggregator then bids the capacity into the online auction.  Winning bids must meet the performance requirements as provision shortfalls will result in penalties.  Revenues for successful participation and performance are paid to the aggregator and funds are then distributed to the system hosts as per the terms of their agreement.

For those seeking to explore these revenue generating opportunities, TerraVerde Energy can be a valuable resource.  As an independent energy advisor, TerraVerde helps our clients to address the operational and financial risk of participating in both the solar REC market and the DRAM program, as well as provide a reporting framework to manage these value streams. Contact Phil Villagomez at phil@terraverde.energy for more information.

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