Power Energy
The Two-Tiered Logic of U.S. Renewable Electricity Markets: How Mandatory and Voluntary REC Markets Create a Floor Without a Ceiling
This article dissects the dual-structure of the U.S. renewable electricity market, revealing how mandatory compliance markets (driven by state Renewable Portfolio Standards) create a regulatory floor, while voluntary consumer markets act as an unbounded ceiling. It explains the critical concept of 'regulatory surplus' to prevent double counting, analyzes the pricing mechanics of Renewable Energy Certificates (RECs) in each tier, and examines recent price trends from NREL data. The analysis moves beyond surface-level descriptions to explore underlying economic incentives, supply constraints in compliance markets, and the long-term implications for renewable energy investment and grid decarbonization.