MTC - Renewable Energy Credit Payment Options

June 05, 2007

Summary

The Massachusetts Green Power Partnership (MGPP) provides financial assistance to stimulate private investment in the construction of new clean electric-generating facilities in Massachusetts and other New England states. Specifically, the MGPP aims to promote project stability by providing long-term contracts for the renewable-energy credits (RECs) associated with the generation of electricity by renewable-energy resources. Through the MGPP, the Massachusetts Technology Collaborative (MTC) offers three types of contracts for RECs:

1. Purchase agreements, under which the bidder is obliged to sell and MTC is obliged to purchase a specified quantity of RECs over multiple years at the prices bid in a proposal.
2. Put options, under which a bidder secures the right, but not the obligation, to sell RECs to MTC over the contract period at the prices set in a proposal (the “put option strike price”). Bidders also may propose to combine a put-back option with a put option. The put-back allows MTC to require that the seller buy back the RECs at a set per-unit price that is lower than the put option strike price.
3. Price collars (combined put and call Options), under which a bidder secures the right to sell RECs to MTC and MTC also obtains the right to purchase RECs from the bidder at a specified higher price (a call option). This contract type allows MTC to share some of the “up side potential” if the market price for RECs reaches higher levels.

The MTC will re-sell the RECs that it purchases, with funds from the Renewable Energy Trust (RET), through MGPP contracts. This will return funds to the RET. Companies that purchase RECs from the MTC will sell them to green-power customers or will use them for compliance with the Massachusetts renewable portfolio standard (RPS). The MGPP Round 1 solicitation was issued in May 2003; the Round 2 solicitation was issued in January 2005. There are no firm plans for a Round 3 solicitation at this point. Contact the MGPP for more information about potential future rounds of funding.