Renewables industry at risk from Dodd-Frank provision

Experts from the renewables industry recently said that the Dodd-Frank Act could potentially reduce capital funding for energy projects and hurt environmental commodity trading.

"There was a perception that bankers were ripping off Main Street folks and that needed to be changed,” Steve Michelson, a counsel for environmental commodities specialist 3Degrees said, reports. “If you look at these causes and say what does this have to do with renewable energy…this has very little to do with renewable energy. Our [environmental] markets and the energy industry did not cause the financial crisis. But if you look at Congress's solutions to these problems we are implicated in some ways."

A concern felt within the industry is that Renewable Energy Credits could be defined as “swaps,” which would force them to comply with new regulations aimed at curtailing risk-taking in derivatives trading.

A provision in the new financial regulation overhaul law requires any entity that involves itself in REC transactions to post collateral deposits to a highly regulated exchange with a clearinghouse.

The Commodity Futures Trading Commission has not yet set the level of deposit that would be required, but observers have suggested that it may fall in between five percent and 25 percent.

During a recent Renewable Energy Markets Conference in San Francisco, attorney Jeremy Weinstein said that the amount of capital available in renewable energy markets and for new projects would sharply decline, according to

The CFTC said that it would announce the final regulations before the end of the year. Defenders of the provision say the new rule on swaps would reduce risk and speculation.

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