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KEA hoping to increase margins by selling Renewable Energy Certificates

Kodiak’s wind generators. Photo via Alaska Public Media.
(Alaska Public Media)
Kodiak’s wind turbines on Pillar Mountain.

As Kodiak Electric Association’s revenue from the local commercial fish processors dwindles, the utility is exploring alternative funding streams. One involves green power markets and selling what are called Renewable Energy Certificates, or RECs.

The Kodiak Electric Association’s Board of Directors on March 28, approved a five year contract with Greenlight Energy Group, a New York-based company, to sell local Renewable Energy Certificates.

One Renewable Energy Certificate or REC represents one megawatt-hour of electricity generated by a renewable energy resource. In Kodiak, the vast majority of local power is generated by wind and hydro sources which qualifies the utility provider to sell the certificates.

“It is actually described as a non-tangible vehicle. It’s nothing that we budget for,” Dan Menth, the manager of finance for Kodiak Electric Association, said of RECs.

He said the association provides basic data on its energy output and in return could receive thousands of dollars on a quarterly basis.

It’s a very simple process, we just relay our actual generation, kilowatt hours from both the Terror Lake hydro facility and the Pillar Mountain wind project. And then they [Greenlight Energy] do their thing behind the scenes, and turn them into a marketable REC,” Menth explained.

The association enacted its first electricity rate hike for Kodiak residents in thirty years at the beginning of April. That was partially due to declining sales from the local fish processors, which account for a third of the association’s power consumption.

Menth said selling RECs will help offset the utility provider’s revenue from local businesses and residents.

“It’ll go into our normal bottom line margins, that help pay our bills and anything left over at the end of the day is margins, and those will get paid back in the form of capital credits,” Menth said.

Kodiak Electric Association’s substation off of East Marine Way. (Davis Hovey/KMXT)
(Davis Hovey/KMXT)
One of Kodiak Electric Association’s six substations, which helps distribute thousands of megawatt-hours of energy using renewable energy sources.

Kelly Beck, the chief executive officer of Greenlight Energy Group, said once Kodiak Electric Association transfers the hard numbers, then her company turns its power generation data into a market-based instrument for sale.

“And the beauty of renewable energy, and RECs, is that it’s metered. So this is not a guess, there is a meter tied to the production so we know actual megawatt hours that are generated from that facility. In most cases those RECs would be entered into a registry,’ Beck said. “And from there, those RECs can be traded, can be moved around. They can be moved from one registry to another registry. They can be moved from one buyer to another buyer, or they can be retired.”

Beck describes her company as the middle man or marketer selling to a variety of buyers. Some buyers are big name companies like Whole Foods or Starbucks, that want to certify that they are purchasing renewable energy by buying RECs in the North American market. There are other types of buyers in the global market, but Beck says each geographic area/country relies on RECs in their market area, ie GreenLight selling RECs from Kodiak Electric Association to companies in the Lower 48.

It sounds almost too good to be true. But Beck said with a growing number of U.S. companies committing to reducing their carbon footprint and cutting greenhouse gas emissions, eventually there may not be a market for selling RECs at all. Beck cited double-digit growth in the voluntary market since she’s been involved in selling RECs over the last 20 years.

“And I think that ultimately the day that there was a grid that operates on 100% renewable energy all of the time, then you wouldn’t need to purchase RECs anymore. And that will be a good day for us all in this industry, I think,” Beck stated.

Beck and KEA’s Menth point out that neither Greenlight Energy Group nor the local utility make any money if the RECs aren’t sold. This is why Beck describes her company as a marketer rather than a broker in this business relationship. So Greenlight has a strong incentive to get the best sale price for RECs as it can.

Menth expects KEA will see a steady stream of revenue coming in later this year as their certificates are sold, which could help offset utility rate increases for Kodiak residents in the future. 75% of the profits from each REC sold goes to KEA and 25% to Greenlight, according to Menth.