|Action||Reduce and Cap Carbon Dioxide from Fossil Fuel Fired Electric Power Generating Facilities (Rev. C17)|
|Comment Period||Ends 3/6/2019|
Recommendation to Include a Voluntary Renewable Energy Set-Aside Mechanism
March 6, 2019
Comments of Center for Resource Solutions (CRS) to the Virginia Department of Environmental Quality (DEQ) on the Proposed Regulation for Emissions Trading (9 VAC 5 - 140)
Dear Ms. Sabasteanski,
CRS appreciates this opportunity to submit comments in response to Virginia’s proposed Regulation for Emissions Trading, specifically in regard to the treatment of voluntary and corporate renewable energy purchases. The intent of these comments is to provide information about the economic and environmental benefits of including a voluntary renewable energy (VRE) set-aside mechanism in the design of this program. CRS also submitted comments on this proposed regulation during the previous comment period.
Background on CRS and Green-e® Certification
CRS is a 501(c)(3) nonprofit organization that creates policy and market solutions to advance sustainable energy. CRS has broad expertise in renewable energy policy design and implementation, electricity product disclosures and consumer protection, and greenhouse gas (GHG) reporting and accounting. CRS administers the Green-e programs. Green-e is the leading certification program for voluntary renewable energy products in North America. For over 20 years, Green-e staff have worked with independent third-party auditors to annually verify renewable energy purchases in the voluntary market and ensure purchasers receive the full environmental benefits and sole ownership of each megawatt-hour (MWh) of renewable energy they purchase. Verification procedures ensure there is no double counting between voluntary and compliance markets, and that other renewable energy or carbon policies do not claim any of the environmental benefits of certified renewable energy. In 2017, Green-e certified retail sales of over 60 million MWh, representing over 1.6% of the total U.S. electricity mix. In 2017, there were over 1,107,000 retail purchasers of Green-e certified renewable energy, including 54,000 businesses.
Value of VRE Set-Asides in Virginia
The Regional Greenhouse Gas Initiative (RGGI) Model Rule includes an optional VRE set-aside provision, which a state regulatory agency may use to allocate a certain number of tons from the CO2 budget to a VRE set-aside account for each control period based on voluntary purchases of renewable energy generation located within RGGI. Under an emissions cap, renewable energy generation reduces emissions but does not affect the level of allowed emissions, i.e. the cap. As a result, the emissions reductions from renewable energy generation driven by voluntary and corporate purchases can be reversed if those actions are not considered in the design of the cap-and-trade program. In other words, VRE can simply create space under the cap for more emissions. Without a VRE set-aside, there can be no verifiable avoided grid emissions associated with renewable energy purchases, and voluntary action may just reduce compliance obligations for regulated entities.
For this reason, voluntary sales of renewable energy generated within RGGI to customers in a RGGI state without a VRE set-aside are not eligible for Green-e certification. Delaware is currently the only RGGI state that does not include a VRE set-aside provision in its regulation. As a result, voluntary and corporate purchasers in Delaware must buy Green-e certified renewable energy from facilities located outside of the RGGI region. If Virginia does not adopt a VRE set-aside, then Virginia customers may be similarly restricted from buying certified renewable energy from facilities located within RGGI, and renewable energy providers in Virginia may see reduced in-state demand in the voluntary market. Furthermore, VRE purchasers often consider geographic location when evaluating renewable energy purchasing options; forcing them to choose between their proximity to the renewable energy they purchase and the avoided emissions value of this generation presents an unnecessary obstacle to impactful procurement.
VRE Set-Asides Support Emissions Reductions and the Growth of Renewable Energy
A cap on emissions from the power sector not only affects the claims associated with the emissions benefits of VRE but also impacts voluntary demand for and investment in renewable energy. Companies and individuals that purchase and invest in renewable energy voluntarily often do so in order to take steps beyond the actions attributable to state or federal policy. In this way, their investment has an incremental impact, particularly with respect to GHG emissions. This difference is often referred to as “regulatory surplus.” However, where renewable energy sold into the voluntary market does not have this effect, and instead only serves to help regulated entities comply with existing regulatory requirements, this production cannot be considered surplus, therefore undermining demand for VRE. Where voluntary demand for renewable energy is limited, by extension, so is the overall development of renewable energy and the associated emissions reductions.
Regulatory surplus is critical to sustaining clear voluntary claims and has been helpful in sustaining voluntary investment in renewable energy beyond what is already required by regulation in the RGGI region. Because a set-aside mechanism preserves regulatory surplus for VRE, it can help leverage private capital to drive renewable energy generation in excess of state mandates. CRS has written extensively on the value of set-aside mechanisms in protecting the impact of voluntary action and has published an Air Regulator’s Guide to Corporate and Voluntary Renewable Energy in State Greenhouse Gas Policy as well an accompanyingVRE set-aside fact sheet.
A VRE Set-Aside in Virginia Would Have a Positive In-State Economic Impact
In the last five years, there have been approximately 3.8 million MWh of Green-e certified sales to retail customers located in Virginia. In 2017, this included nearly 700,000 MWh sold to about 35,000 individual customers. This shows considerable voluntary demand for renewable energy in the state. If Virginia does not include a VRE set-aside, it is unlikely that renewable energy from any RGGI state could be sold in a Green-e certified product to customers in Virginia. Adoption of a VRE set-aside would allow this demand to continue to be met by resources in Virginia, allowing the state to capture private investment dollars that could otherwise go elsewhere. In other words, the implementation of a VRE set-aside would remove a significant barrier to investment in and development of renewable energy in Virginia beyond that which is mandated by RPS regulations, and this could lead to increased revenue resulting from growing voluntary and corporate participation in renewable energy markets.
Should DEQ staff or any other affected stakeholders have additional questions relating to these comments or the suggestions contained herein, CRS would be happy to provide clarifying information and participate further as this regulatory process proceeds.
Manager, Policy and Standard Setting
Center for Resource Solutions
See Section XX-5.3(l) of the RGGI Model Rule, revised 12/19/17. Available at: https://www.rggi.org/sites/default/files/Uploads/Program-Review/12-19-2017/Model_Rule_2017_12_19.pdf