Please Explain Renewable Energy Credits

Texas energy providers are required to buy a certain number of renewable energy credits. Those credits come from energy sources like solar power, wind, and bio-diesel. But what exactly is a renewable energy credit and how does it work? Houston Public Radio's Laurie Johnson explains.

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Next time you open your electricity bill, you might notice an offer to enroll in some sort of renewable energy plan. It might be the Green Plan, the Wind Plan or the Better Earth Plan. Whatever it's called, check the fine print. It's likely to mention something about the company purchasing renewable energy credits. Okay. What does that mean?

"It's part of the electricity deregulation in the state of Texas."

That's Dr. Peter Hartley. He's a professor of economics at Rice University and his expertise is in energy markets.

"What they did was they instituted this idea of renewable energy credits. So what they mandated is that all electricity providers who are selling electricity in the state of Texas have to buy renewable energy credits. And the amount of renewable energy buy is related to how much electricity they sell."

Yes, but what does that mean? If I sign up for one of these plans, am I helping the environment, encouraging green living and increasing the market for cleaner fuels? Janie Mitcham is senior vice president of Reliant Energy's Smart Energy division. She says the simple answer is yes.

"When we sell, at Reliant, this wind product to our residential customers, we're actually retiring more credits than the state requires us to. And so, the consumer, by purchasing that product, is actually causing more credits to be retired than just the minimum mandated under state statute."

While Reliant and other energy providers are buying more renewable energy than they're required to, consumers are the ones who will determine whether wind, water, solar and biodiesel power become significant sources of energy in Texas.

"If a lot of consumers were to purchase renewable energy sources, that could increase the demand for renewable energy above the state mandate. At that point then, the electric company would be increasing its demand say for wind generation over and above the state mandate and extra plants would be built."

Right now there isn't a whole lot of demand. For example, out of Reliant's nearly two million residential customers, just under 11,000 are enrolled in the wind plan. But Hartley says Texas is a sort of market test. He says it's a time and place where energy providers who purchase credits are essentially paying for research into what kinds of renewable energy are the most reliable, cost-effective and efficient. And when they figure that out, they won't need those renewable energy credits any more. Laurie Johnson, Houston Public Radio News.

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