This session focuses on Renewable Portfolio System / Quota System and the creation of Green Certificates market. What quota of renewable energy can achieve in a country? How to design tradable green certificates and create a market liquid enough for investors? Are green certificates a viable option for countries with small generation capacity? This session analyses several existing green certificates markets (USA, India,...). Chad Laurent, Esq. is a Senior Consultant and MCG's General Counsel specializing in renewable energy law and policy, sustainable business strategies, and renewable energy project development. He currently manages MCG's work with the U.S. Dept. of Energy providing technical assistance and training for the SunShot Solar Outreach Partnership where he presents at national conferences on the topic of creating solar energy opportunities within local communities. Mr. Laurent has provided legal analysis of Indonesia's Geothermal feed-in tariff policy, contributed to the drafting of a renewable energy law drafter's guide for the United Nations Environment Programme, and to a study on the legal ability of U.S. states to set feed-in tariff rates for the National Renewable Energy Laboratory. In addition, Mr. Laurent has consulted to the World Bank, DB Climate Change Advisors, the Mass. Dept. of Energy Resources, and the SEMI PV Group among other clients. Prior to attending law school, he was the Manager of Renewable Energy Programs for the Massachusetts Energy Consumers' Alliance. While in law school, Chad worked in the Massachusetts Executive Office of Energy and Environmental Affairs and interned in the Massachusetts Attorney General's Office in the Energy and Telecommunications Division. Chad's professional experience also includes work with the Environmental Defense Fund and the Rocky Mountain Institute. He holds a Juris Doctor (J.D.) from Suffolk University Law School where he was a Rappaport Honors Fellow in Law and Public Policy, and a Bachelors of Science (B.S.) from the University of Michigan in Environmental Policy & Behavior and Natural Resource Ecology & Management. He is admitted to the Massachusetts Bar.

1. RENEWABLE PORTFOLIO, GREEN CERTIFICATES AND
OTHER POLICIES FOR DEVELOPING COUNTRIES
WEBINAR 9 FEBRUARY 2012
Chad Laurent
Senior Consultant - MCG's General Counsel
Course on Regulation and Sustainable Energy in Developing Countries –
Session 5
www.leonardo-energy.org/course-regulation-and-sustainable-energy-
developing-countries
www.mc-group.com

2. WHAT IS A RPS?
• A Renewable Portfolio Standard (RPS) or Renewable Energy
Standard (RES) or Quota System requires a percent of energy
sales (MWh) or installed capacity (MW) to come from
renewable resources.
– There is often a target (e.g. 20% renewables by 2020)
– There frequently is an incremental percentage increase over time.
– Usual the utility or load serving entity is required to meet the RPS and
comply with the percentage requirements.
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

3. WHAT IS A RPS?
• Publicly owned utilities can be exempted from the RPS, or
given more lenient requirements
• Various customer rate-class exemptions have also been
offered (low-income ratepayers or commercial ratepayers).
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

4. WHAT IS A REC?
• Renewable energy certificates or credits (RECs, tradable RECs, TRECs, etc.)
are often the mechanism used to quantify and verify RPS compliance.
• Utilities may comply either by owning generation or purchasing RECs from
independent power producers.
– Some RPS policies create a separate agency which serves as the purchaser of
all RECs (e.g. New York State, Illinois, USA)
• An alternative compliance payment (ACP) is often set to account for
shortfalls or to act as a penalty payment.
Sources: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010; B. Grace, Sustainable Energy Advantage 2011.
www.mc-group.com

5. WHAT IS A REC?
• A REC is a tradable certificate, typically in electronic form
• Represents 1MWh of generation from a specific plant
• Carries type, location, timing, and emissions data
• Can represent environmental “attributes”
• RECs may be “bundled” with electricity or “unbundled”
• REC can represent the “gap”
REC
Renewable
Electricity
Commodity Electricity
www.mc-group.com

6. WHY RECS?
• Relatively simple, less costly
verification
• Low potential for fraud or double
counting
• Relatively low transaction costs of
trading RECs
• Potential price visibility
• Buyers can procure just as many RECs
as they need
• Settlement over time rather than at
the time the electricity is produced
• Can avoid transmission constraint
issues
www.mc-group.com

7. REC MARKETS AND PRICES
• REC prices can vary widely.
• Prices in Massachusetts between $15/MWh for Class I and $525/MWh
for SRECs.
Compliance market (primary tier) REC prices, January 2008 to December 2011
Sources: Spectron Group (2012).
www.mc-group.com

8. WIDE VARIABILITY IN DESIGN
• Structure (who purchases RECs)
• Standard levels (1% of load, 20% of load)
• Resource eligibility (“traditional renewbles,” solar hot water, fuel cells)
• Treatment of existing plants (“new” renewables only or separate REC
classes for existing generator that would have otherwise qualified)
• Tiers and bands (for “new” vs “old” plants, or for “cleaner” vs. “dirtier”
renewables)
• Methods to enforce
• Cost caps
• Contracting requirements
• Role of Government funding mechanisms
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

9. WIDE VARIABILITY IN DESIGN
• Start and end dates
• Application of standards (requirements for run-of-river hydro or
sustainable biomass)
• Enforcement/penalties (just the ACP or actual fines)
• Flexibility mechanisms (purchasing future RECs or applying RECs across
generation years)
• Renewable energy credit (REC) trading mechanism (in-state only vs. out-
of-state and tracking systems)
• Voluntary Market
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

10. POTENTIAL DESIGN ISSUES
• Too Narrow Applicability
– If applied un-equally to suppliers will limit the
impact of the RPS, Poorly
• Balanced Supply-Demand Condition
– Enough time to comply and build generation
– If too low then no certainty for project
development
• Insufficient Duration and Stability of Targets
– Standards must be durable and stable
– Energy projects need long-term contracts in
order to be financed
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

11. ADDITIONAL DESIGN ISSUES
• Insufficient Enforcement
– Non-compliance, policy failure
• Lack of Contracting Standards and Cost Recovery Mechanisms
– Consider long-term contract standards for utilities
• Imputed debt obligations
• Undue Design Complexity
– Complex policies that require considerable and detailed regulatory
oversight may be unwieldy
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

12. EFFECTIVE DESIGN CRITERIA
• Strong political support and regulatory commitment
(longevity)
• Clear and renewable energy eligibility rules
• Predictable long-term targets (certainty)
• Standards that are achievable given permitting challenges
(transparency)
• Credible and automatic enforcement – penalties should
exceed cost of compliance (transparency)
• REC purchase requirements tied to a credit-worthy entity and
allow long-term contracts (certainty)
Sources: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010, MCG Research, DBCCA
www.mc-group.com

13. BEST PRACTICES/RECOMMENDATIONS
• Diverse Electricity and REC Market
– sufficiently liquid REC market
– large number of market actors exist
• Stable and Long term target
– 10 years ahead (preferably 15 or more years),
– long-term REC contracting options
• Reasonable targets
– targets must be set taking into account current and future supply-demand
conditions
– Reasonable cost considerations
• Differentiated technology support
– Tiers or different REC prices for more expensive technologies
Source: van der Linden, Nico, et al. “Review of International Experience with Renewable Energy
Obligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.
www.mc-group.com

14. BEST PRACTICES/RECOMMENDATIONS
• Utility is the compliance entity
– electricity suppliers/utilities, (administrative cost implications).
• Flexibility
– banking and borrowing of RECs
– recommended to limit borrowing to three months and banking to a
maximum of 25% of the obligation.
• Penalty revenues
– Revenues used for further research and development or additional
subsidies for the least competitive renewable technologies or energy
efficiency
Source: van der Linden, Nico, et al. “Review of International Experience with Renewable Energy
Obligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.
www.mc-group.com

15. BEST PRACTICES/RECOMMENDATIONS
• Harmonization
– eligibility for the obligation system be in
line with the EU Renewables Directive.
• Government commitment
– Strong and long-term political commitment
• clearly defined monitoring and verification
rules
• adequate enforcement rules in case of non-
compliance
Source: van der Linden, Nico, et al. “Review of International Experience with Renewable Energy
Obligation Support Mechanisms.” ECN-C—05-025, May 2005. http://eetd.lbl.gov/ea/ems/reports/57666.pdf.
www.mc-group.com

16. IMPLICATIONS FOR DEVELOPING COUNTRIES
Source: MCG research; REN21 (2011)
www.mc-group.com

17. DEVELOPING COUNTRY TARGETS
• There are many developing countries with renewable energy
targets.
• Few if any with Renewable Energy Certificate markets
• Few if any cross-border trading or regional targets
• REC concept started in and is tailored to deregulated
electricity markets
Source: MCG research
www.mc-group.com

18. IMPLICATIONS FOR SMALL MARKETS
• Not unlike US States
• Original 1996 model of the RPS no longer used in the US.
• Most RPS and quota markets moving towards different or
supplemental policies.
– Feed-in Tariffs
– Auctions
– Technology specific targets
• Few global examples of cross-border trading
– New England (US) and Quebec Canada
Source: MCG research
www.mc-group.com

19. US EXPERIENCE
• 29 States and Washington DC and Puerto Rico have an
RPS requirement.
• 8 States have non-binding renewable energy goals.
www.mc-group.com

20. US EXPERIENCE
RP S P olicies
www.dsireusa.org / January
ME: 30% x
WA: 15% x 2012 VT: (1) RE meets any
2000
MN: 25% x increase in retail sales x
2020* MT: 15% x 2012; NH: 23.8%
New RE: 10% x x
2025 2017
2015 (Xcel: 30% x 2020) MI: 10% & (2) 20% RE & CHP x 2017
1,100 2025
MA: 22.1% x 2020
OR: 25% x 2025 (large ND: 10% x
utilities)* 2015 MW x 2015* New RE: 15% x 2020
(+1% annually thereafter)
5% - 10% x 2025 (smaller utilities) SD: 10% x WI: Varies by RI: 16% x
2015 utility; NY: 29% x
CO: 30% by 2020 (IOUs) 2015 2020
CT: 27% x
NV: 25% x ~10% x 2015 OH: 25% x
IA: 105
2025* 10% by 2020 (co-ops & large
statewide 2025† 2020
PA: ~18% x
munis)* MW
IL: 25% x 2021†
WV: 25% x NJ: 20.38% RE x 2021
2025 IN: 15% x 2025†
CA: 33% x UT: 20% by KS: 20% x 2020 VA: 15% x †
2025* 2025* + 5,316 GWh solar x
2020 2025* 2026
MO: 15% x MD: 20% x
AZ: 15% x 2025
OK: 15% x 2015 2021 NC: 12.5% x 2021
2022
DE: 25% x
(IOUs) 2026*
NM: 20% x 2020 10% x 2018 (co-ops & munis) DC
(IOUs) DC: 20% x
10% x 2020 (co-ops) 2020
TX: 5,880 MW x PR: 20% x 2035
2015
HI: 40% x
2030
Renewable portfolio standard Minimum solar or customer-sited requirement
Renewable portfolio goal
Solar water heating eligible *
†
Extra credit for solar or customer-sited renewables
Includes non-renewable alternative resources
www.mc-group.com

21. IN THE US THE RPS HAS SUPPORTED WIND POWER
DEVELOPMENT
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

22. RP S P olicies w ith Solar/ DG P rovisions
Source: www.dsireusa.org / January 2012
WA: double credit for DG
NH: 0.3% solar-
electric x 2014
OR: 20 MW solar PV x 2020; MI: triple credit for solar-
double credit for PV
MA: 400 MW PV x 2020
electric
NY: 0.4092% customer-
sited x 2015
OH: 0.5% solar-
CO: 3.0% DG x 2020 NJ: 5,316 GWh solar-
NV: 1.5% solar x 2025; electric x 2025
1.5% customer-sited x 2020 electric x 2026
2.4 - 2.45 multiplier for PV
IL: 1.5% PV x 2025
0.25% DG by 2025 W V: various PA: 0.5% PV x 2021
UT: 2.4 m ultiplier
m ultipliers DE: 3.5% PV x 2026;
for solar-electric
MO: 0.3% solar- triple credit for PV †
AZ: 4.5% DG x 2025 electric x 2021 NC: 0.2% solar
x 2018
MD: 2% solar x 2022
NM: 4% solar-electric x 2020 DC DC: 2.5% solar x 2023
0.6% DG x 2020
TX: double credit for non-wind
(non-wind goal: 500 MW)
16 states +
Renewable portfolio standard with solar / distributed generation (DG) provision
DC have an RPS
with solar/DG
Renewable portfolio goal with solar / DG provision
Delaware allows certain fuel cell systems to
provisions
Solar water heating counts toward solar / DG provision
† qualify for the PV carve-out
www.mc-group.com

23. US TRENDS
• Increased stringency of RPS targets
• Expanded use of resource-specific set-asides, especially for
solar
• Expanded applicability of RPS policies to publicly owned
utilities
• Some leniency given to publicly owned utilities in meeting RPS
targets and obligations
Source: Supporting Solar Power in Renewables Portfolio Standards: Experience from the United States
Wiser, R., G. Barbose and E. Holt. LBNL-3984E. October 2010
www.mc-group.com

24. INDIA
• 15% by 2020
• RECs, Feed-in tariffs, grants,
• Authorizes tradable RECs, not technology specific
• RECs designed to encourage renewable development in areas with higher
potential without limiting development to the purchase obligation in
those regions.
• Generator can choose to either receive a preferential tariff rate, or use the
RECs where the commodity energy is purchased at the weighted average
power purchase cost of the distribution utility.
Sources: Renewable Energy Certificate Registry of India, REN21, Indian Power Sector
www.mc-group.com

25. SOME OTHER EXAMPLES?
• China
– 15% by 2020, 17% Wind by 2050
– No tradable RECs
– Feed-in tariffs, grants, loan guarantees
• UK
– RPS with tradable RECs implemented in 2002
– Yearly changes and a feed-in tariff was adopted on top of RECs for
small generation
www.mc-group.com

26. QUESTIONS?
THANK YOU
Presenter: Contact:
Chad Laurent, Esq. T: +1 617.209.1986
Senior Consultant chad.laurent@mc-group.com
www.mc-group.com