Skystream Markets is focused on providing transaction services in the Renewable Energy Certificate ("REC") markets, which are created by state Renewable Portfolio Standards ("RPS"). Currently, 30 States, D.C., and Puerto Rico have enacted an RPS, while several other states have legislated voluntary markets.
RECs are generated from the production of "renewable" power through eligible technologies such as solar, wind, biomass and geothermal. One REC represents the environmental attributes produced from one megawatt-hour ("MWh") of clean energy generation. A REC may be sold independently of, or together with, the power. In order to create RECs, a renewables facility must register with one or more state utility districts to obtain a state certification number. Based on the facility's attributes and location, a facility may produce RECs that are eligible to satisfy the compliance requirement in more than one state.
Whereas REC creation occurs at the point of power generation, the compliance requirement occurs when a Load Serving Entity ("LSE") delivers electricity to a utility or end user within a state. The LSE has a compliance obligation based on the amount of electricity actually served and must surrender a corresponding amount of state eligible RECs at the end of the yearly compliance period. If the compliance entity does not produce its own RECs it may either pay an Alternative Compliance Payment ("ACP") to the state regulatory body or purchase them from independent REC producers. The ACP requirement is what creates the trading in REC markets.
The creation of RECs and the accounting of an LSE's compliance obligation are managed by REC tracking systems known as registries. Registries are quasi-governmental entities created as accounting systems to issue, track, and retire RECs, within their jurisdiction and in accordance with States' RPS rules. The five most active registries for REC trading in the US are ERCOT, NEPOOL-GIS, PJM-GATS, WREGIS, and M-RETS. A few states operate their own tracking system independently, or as a part of the NARR Registry. The tracking systems broadly define the regional REC markets and have footprints based on the regional power markets.
In addition to the regional markets, federal legislation continues to be debated regarding a national Clean Energy Standard ("CES"), which would create a national REC market. The national CES would act as a base line, so that states mandating stricter RPS requirements would continue. A national CES would help standardize this market and lead to significant transaction and volume growth.
In addition to the Renewable Energy Certificate Markets, there are a number of promising Environmental Credit Markets developing in the United States. Each market is legislated to support specific environmental initiatives that support US energy independence and environmental quality. By design, these markets use environmental credits as a tool to attract private capital investment and the power of competitive markets to allocate resources, determine a cost of capital, and eliminate negative economic externalities. As they scale in size, these markets have great potential to achieve state, regional, and federal environmental and economic goals. These markets include the:
- SOx and NOx Emissions Markets
- California Carbon Market
- Regional Greenhouse Gas Initiative
- Federal and State Wetland Mitigation Markets
- Water Quality | Quantity Markets
Skystream Markets provides transaction services in the Renewable Identification Number ("RIN") market. Congress and the US EPA created the RIN market under the federal Renewable Fuel Standard (RFS) program, which mandates increasing consumption of qualifying renewable fuel to 36 billion gallons per year in the US by 2022 - estimated to be 21% of the fuel supply at that time.
RINs are generated when a gallon of renewable fuel is produced or imported by a registered party. The RINs are attached to that gallon until the fuel is used in the national fuel supply. The entity that separates the RIN, which is done by blending the biofuel into gasoline or diesel, is free to sell the RIN to any counterparty at their discretion. RIN prices fluctuate based upon their supply and demand, and the monetization of this market mechanism drives renewable fuel use.
The compliance requirement is generated when conventional fuel is produced or imported. The RFS is volume based, but the RIN requirement is percentage based. To convert the RFS into a RIN requirement for each obligated party (net buyer), the EPA converts the year's renewable fuel volume target to a percentage based on projected domestic gas and diesel consumption.
RIN tracking takes place on an Electronic Moderated Tracking System (EMTS) which was created and is administered by the EPA. The EMTS facilitates the process of registering and transferring RINs by tracking the generation and transfer of RINs from party to party. RINs only exist on EMTS. Upon producing a quantity of qualifying renewable fuel, the producer must record it in EMTS which "generates" the RIN. Once a transaction is done between a buyer and seller, the transaction must be recorded in the EMTS to track the transfer of RINs from buyer to seller. RINs expire or are retired to meet a compliance obligation on EMTS.
RINs types correspond to the mandated categories of the renewable fuel standard and are classified by vintage year and fuel type. RIN categories are: Cellulosic Biofuel (D3), Biomass-Based Diesel (D4), Advanced Biofuel (D5) Renewable Fuel (D6), Cellulosic Diesel (D7). RINs have a two calendar year life, meaning RINs generated during the current year may be used to satisfy that year's or the following year's requirements.
For Sales/Brokerage, please call: +1.212.961.6990