Thermal RECs Explained: Added Value for Heating with Biomass

The positive financial impact of Thermal RECs is making biomass a preferred form of renewable energy in New Hampshire and Massachusetts for heating schools, commercial and industrial facilities, campuses, and hospitals. And Maine will have them soon.

What Is a REC?

A REC is a Renewable Energy Certificate.

State laws, generally known as Renewable Portfolio Standards (RPS), require electric utilities to generate a specified fraction of their total output from renewable energy sources. At this time, 29 states and the District of Columbia have RPS laws. Requirements vary from state to state but most states divide their RPS into different sources such as solar, wind and biomass thermal. RPS targets increase each year, step by step, so goals can be reached. This encourages increasing development of renewable generation within each state.

The total electricity that a utility generates each year is tabulated in Megawatts which is what RECs are based on: One REC = One Megawatt

Most utilities have very little renewable generation of their own. To compensate for this deficit, each year state RPS laws force them to purchase RECs in the amount that they are lacking.

Here’s an example: New Hampshire’s RPS goal for 2025 is for each electricity provider in the state to acquire 25.2% of retail electricity sold to their customers from renewable sources. In 2020 the overall goal is 20.7%. However, RPS goals in New Hampshire are divided up into 5 classes that include a wide range of possible renewable energy sources. The biggest portion (9.6%) of the RPS comes from solar, hydro and wind installations put in since 2006. In 2020 1.6% is denoted as “Class 1 Renewable Thermal”.

Utilities have an alternative to buying RECs. They can make an “alternative compliance payment” (ACP). This is a fixed price per megawatt that they can simply pay the state instead of buying RECs from others. Alternative Compliance Payments are deposited into state-run funds that support the use of renewable energy. By default, the ACP determines the highest price a utility is willing to pay for a REC. To avoid paying the ACP price, they bid for RECs in a regulated “pool” that includes a wide group of generators where prices are at least 10% below the ACP.

Who are REC Generators?

You, your company, town or non-profit could all become REC generators. Anyone who generates megawatts of energy using solar, wind or other renewable sources can generate RECs that can be sold to utilities at a profit. Think of these RECs as “rewards” for doing the right thing—helping to meet the state’s goals for renewable energy.

What is a Thermal REC?

Thermal RECs—T-RECs—are just like any other REC, except they are based on the generation of thermal energy from renewable sources such as biomass and solar. For instance, let’s say a manufacturing company installs a biomass boiler system that uses dried wood chips. For each megawatt of heat this system produces, the company will earn one T-REC that they can sell to a utility.  This gives the company a new revenue stream that provides a further reduction in their cost of heat energy, which is a large part of operating costs here in the Northeast.

You are probably asking, what is a megawatt of heat? 1 MW = 3,412,141 BTUs

How much fuel generates 1 MW of heat?  1/3 ton of dry wood chips  (the same as 30.7 gallons of oil)

Here’s an example using an actual Froling Energy boiler and dry chip fuel customer. This manufacturer has three biomass-fired boiler rooms on its 500,000 square foot complex of buildings. They burned over 2000 tons of dry wood chips last year that created over 19 billion BTUs of useful thermal energy—as recorded in precision energy metering equipment.

Result:  At the end of the year they produced 5600 NH Class 1 Thermal RECs that they sold for about $19 each. This reduced their already low biomass (dry wood chip) fuel cost by 45%. Their net cost for heat is less than $7.20 per million BTU which is like buying heating oil for just 80 cents a gallon!

If you’d like to estimate the quantity and cost of wood chips or pellets that a biomass boiler system would use to keep your building warm with each winter, we can help you do the calculations.

Please feel free to contact us for more information about Thermal RECs. We’ll be glad to explain how your state’s RPS laws can give you a new revenue stream even as you’re enjoying the economy and cost stability that biomass delivers.

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