Transacting Generation Attributes Across Market Boundaries: Compatible Information Systems and the Treatment of Imports and Exports

Voluntary markets for "green" power, and mandatory policies such as fuel source disclosure requirements and renewables portfolio standards, each rely on the ability to differentiate electricity by the "attributes" of the generation. Throughout North America, electricity markets are devising accounting and verification systems for generation "attributes": those characteristics of a power plant's production such as fuel source and emissions that differentiate it from undifferentiated (or "commodity") electricity. These accounting and verification systems are intended to verify compliance with market mandates, create accurate disclosure labels, substantiate green power claims, and support emissions markets. Simultaneously, interest is growing in transacting (importing or exporting) generation attributes across electricity market borders, with or without associated electricity. Cross-border renewable attribute transactions have advantages and disadvantages. Broad access to markets may encourage more renewable generation at lower cost, but this result may conflict with desires to assure that at least some renewable resources are built locally to achieve either local policy goals or purchaser objectives.

This report is intended to serve as a resource document for those interested in and struggling with cross-border renewable attribute transactions. The report assesses the circumstances under which renewable generation attributes from a "source" region might be recognized in a "sink" region. The report identifies several distinct approaches that might be used to account for and verify attribute import and export transactions, and assesses the suitability of these alternative approaches. Because policymakers have often made systems "compatibility" between market areas a pre-requisite to allowing cross-border renewable transactions, this report develops criteria for "compatible information systems." Where fully compatible information systems do not exist, certain cross-border attribute transactions may still be deemed suitably credible and verifiable to be recognized; this report also identifies possible criteria for such "compatible transactions." The importance of credibly addressing imports and exports of renewable energy attributes should be evident. A lack of clarity as to what generation can and cannot be recognized in various markets can paralyze investment in and contracting for renewable generation. The development of rules for imports and exports will also minimize the potential for "double counting" of renewable energy attributes, will help define where and at what cost renewable plants will be built, and will directly impact the location of the benefits that renewable generation provides.

This report ultimately concludes that the "correct" approach to treating renewable energy imports and exports depends on the context and motivations behind the transaction or the mandate, and that the presence of practical constraints or multiple objectives often make selecting the best approach difficult. That said, the report urges those creating market rules to move quickly in defining valid cross-border transaction structures and to consider the implications of their decisions on the creation of viable markets for new renewable generation.