Can the REC Market Self-Regulate and Remain Credible?

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First it was a missed filing deadline last June, then a series of stalls and unsuccessful requests for extensions. Finally, in late September 2007, the Green-e team got the message: Clean & Green (C&G), a Boulder, Colorado-based renewable energy marketer, wasn't going to come up with records for 2006 that would show its purchase of renewable energy certifications (RECs) matched its sales.

So in November, Green-e, a consumer protection and REC certification program run by San Francisco-based Center for Resource Solutions, took a step it had managed to avoid over ten years in the REC marketplace: it revoked C&G's certification , and is pursuing criminal charges against the company's principles.

For its part, C&G has closed up shop, and former C&G CEO Gerry Dameron, now with Patriot Wind, has told the Rocky Mountain News that his company voluntary withdrew from the Green-e program because it couldn't afford the auditing process that Green-e requires.

"We called Green-e and said, 'Look, we appreciate what you guys do, and we'd love to be Green-e-certified in the future, but we can't afford all the fees," he told the paper. "We can't afford to spend $6,000 a year. Our company has never made a profit, and I've never drawn a salary, not one dime."

He was traveling at press time and unavailable for comment.

Green-e concedes its process is costly, but denies that C&G backed out voluntarily and says they knew the rules when they used the Green-e seal of approval for all of 2006 and most of 2007, but then failed to submit the necessary documentation. "We cannot substantiate that Clean and Green in fact purchased as many RECs as it purports to have sold to its customers in 2006 and 2007," wrote Arthur O'Donnell, who is executive director of the Center for Resource Solutions, in a letter to Colorado Attorney General John Suthers dated January 30, 2008.

Green-e says it has no choice but to pursue the matter if it is to provide a credible deterrent against other companies failing to comply in the future - both in the REC arena, and in markets for other ecosystem services.

Indeed, validation and verification are hot issues in all ecosystem markets and all schemes involving payments for ecosystem services.

"Our first obligation is to ensure REC customers get what they pay for," said Green-e energy project manager Alex Pennock on the November, 2007 decertification of Clean & Green. "If we can't provide (accreditation) security, then Green-e has no value."

He adds that both Green-e and C&G, as well as companies that bought RECs from C&G, are looking for legal clarity in uncharted territory. "Clean & Green may well have purchased the RECs they needed, and then just not been able to handle the costs," he says. "But they haven't proven it to us, and that proof is what we offer the market."

Taking it Legal

Green-e's decertification of Clean & Green (C&G) has raised the issue of how far REC certifiers like Green-e are prepared to go to ensure the integrity of their systems. The answer seems to be: as far as the system will let them. But that might not be much of a distance.

To remain part of the Green-e marketplace, smaller participants like C&G pay a fee of around $4,000 annually plus the cost of a Certified Public Accountant (CPA) to conduct an audit, verified by Green-e, of RECs bought and sold by the participant. Larger participants, with more information to sift through, pay a higher fee.

C&G had given no indication of any problems in complying with Green-e the previous year. But from June 2007, when its 2006 documents were due, and throughout that summer, C&G consistently failed to produce their REC paperwork, leading to the November decertification.

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