What are REPS and RECs?
In August 2007, North Carolina became the first state in the Southeast to adopt a Renewable Energy and Energy Efficiency Portfolio Standard (REPS) requiring North Carolina utilities to meet up to 12.5% of their annual electricity output with renewable energy by 2021. Rural electric cooperatives and municipal electric suppliers are subject to a 10% REPS requirement.
An electric utility can meet the REPS requirements by:
1. generating their own renewable energy or
2. purchasing electric power from another renewable energy facility or by purchasing Renewable Energy Certificates (RECs) from renewable energy generation sources.
A Renewable Energy Certificate (REC) is a tradable financial certificate (like a stock certificate) representing the positive environmental attributes associated with a unit of renewable energy over a unit of electricity generated by a non-renewable fuel facility.
How Can a Government or Non-Profit Organization Take Advantage of This Opportunity?
-North Carolina government organizations and non-profits can use this law to create a green power profit center by financing and installing a renewable energy system, such as a photovoltaic (PV) system, at their own expense and selling the generated electricity and RECs to a willing utility through 10 to 20 year power and REC purchase agreement
-Financing and installing a solar thermal heating, cooling and/or water heating system at their own expense, capitalizing on the thermal energy for meeting their own facility’s needs, and selling just the RECs to a willing utility or another purchaser through REC purchase agreements lasting 10 to 20 years
-Engaging a private solar developer that will own, finance, install and maintain the solar application (either solar thermal or electric), alleviating the facility owner of these typical costs. Additionally, the solar developer leases the space where the solar system is placed providing immediate positive cash flow to the facility owner.
Because of federal and state tax incentives, it is advantageous for the solar developer to retain ownership of the system for approximately 6 to 7 years during which time the tax advantages are exhausted. During this period any benefits from REC or solar electricity sale would be retained by the solar developer.
However, typically around year seven it is advantageous for the solar developer to sell and the facility owner to buy the solar system for a fraction of the cost. Because the facility owner is also the recipient of the balance of the initial power and REC purchase agreement this revenue stream enhances even further the positive cash flow advantages for the facility owner. Given that today’s solar systems remain in operation for over thirty years, the net cash benefit to the facility owner will be substantial.
Who is an Eligible Non-Profit Organization?
Public entities and non-profit organizations that can take advantage of a solar developer project include:
-The State of North Carolina including all departments and divisions;
-The University of North Carolina System and constituent institutions;
-North Carolina Community Colleges;
-Municipal governments including cities, towns, villages; and counties;
-Local school systems;
-Private universities, colleges, and K-12 schools; and