Karbone Structures REC Off-Takes for OneEnergy, Seattle City Light

By Jeanne Roberts on December 22, 2011

Karbone, a full service environmental credit brokerage, recently engineered a 20-year off-take agreement with Seattle City Light (SCL) and OneEnergy Renewables for Renewable Energy Credits, or RECs, garnered by the proposed PáTu Wind Farm.

These agreements should not be confused with Power Purchase Agreements, or PPAs, which buy the energy output of a renewable resource like solar or wind and make it available via the grid – outputs which are typically mandated by an RPS, or Renewable Portfolio Standard, which allows utilities operating under the mandate to fulfill their state-based requirement for renewable sources of power through purchases of RECs.

The PáTu Wind Farm agreement allows the two utilities to buy the RECs to meet Washington State’s mandate of 15 percent of renewables by 2020. This mandate allows utilities enjoined by the mandate to either build or buy renewable energy installations, or to acquire equivalent RECs “unbundled (separated)” from energy source, or a combination of both.

According to Washington State’s mandate, I-937, utilities can miss renewable targets as long as they spend four percent of total annual retail revenue requirement on the purchase of eligible resources, or actual RECs, or both.

The same is true in California, at least until the end of this year, since the California Public Utilities Commission approved tradable RECs as a means to satisfy the state’s increasingly aggressive RPS.

REC off-take credits, or (as the Aussies put it) Environmental Credits Offtake Deeds, are good for the buyer, helping fulfill state RPS, and good for the seller, since they make renewable energy installations more desirable from an investor point of view.

Environmental commodities brokerage Karbone is a relative newcomer to the renewable energy and carbon credits marketplace. Founded in 2008 and operating from offices in New York and London, the firm in 2011 won the “Best Broker” award from Energy Risk Magazine. The company has an annual revenue of $630,000.

PáTu Wind, a 10-megawatt installation billed as the “first local investor, community wind turbine farm in Oregon”, is slated for construction about three miles northeast of Wasco, Oregon.

Seattle City Light, the 10^th largest publicly-owned (as opposed to investor-owned) electric utility in the U.S., is based in

Seattle. More than a century old, the utility delivers 87.9 percent renewable hydroelectric power to customers from its own Skagit and Pend Oreille River hydro projects, and from power purchases from the Bonneville Power Authority. Other sources include 2.1 percent wind and 1.1 percent mixed resources (natural gas, landfill gas, biomass and waste-to-energy). Thus, even though SCL also burns coal (for 2.5 percent of the mix) and uses nuclear power for an additional 6.4 percent, it is well ahead of its renewable energy mandate.

The PáTu Wind agreement operates in two time-delineated phases: phase I (2011 to 2015) RECs purchased by OneEnergy Renewables; and phase II (2015 to 2030) purchased by SCL. This dual-phase purchasing schedule allows for the long-term off-take of PáTu Wind RECs, without which (Karbone’s Adam Raphaely notes) there would have been very little demand for renewable energy credits over such a time span.

OneEnergy, a renewable energy firm also in the business of brokering RECs and carbon credits or offsets, is presumably buying the PáTu Wind credits in hopes that issues surrounding tradable RECs in California will resolve themselves in the near term, making the RECs considerably more valuable. OneEnergy, a 2-year-old startup founded by Bryce Smith, has 10 renewable energy projects in development for a nameplate capacity of 200 megawatts. The company hopes eventually to command five times that much renewable energy.

The PáTu Wind agreements provide long-term, guaranteed customers for the RECs the wind farm generates, and offers buyers a fixed-price on the RECs, which can then be used to satisfy RPS or trade with other renewable energy/carbon market participants as RPS demand increases.

Image Credit: floodllama via Flickr.

For more information on renewable energy technologies and the various policies surrounding them, please visit Energy Boom’s learning pages.

Jeanne Roberts is a freelance writer on environment and sustainability issues. In her previous life, she worked as both a reporter and a communications specialist for a major public utility. Her most recent book, Green Your Home, approaches environmentalism from a consumer’s perspective.