Renewable energy trading markets vary considerably by state and can be heavily influenced by politics, but they are functioning with apparent room for growth.

The various markets fall within the territories controlled by large utilities and independent system operators and are then further subdivided by state. Some states like Illinois fall within the jurisdiction of multiple utilities or ISOs.

Renewable Energy Certificates or credits are the commodity traded among stakeholders and REC markets are created by state Renewable Portfolio Standards that require a certain percentage of power generation to be derived from renewable energy sources.

Imports are permitted in regions that lack adequate indigenous renewable energy supply. In Massachusetts for instance, supplies of landfill gas are essentially “tapped out,” Gabe Phillips, CEO of GP Renewables & Trading recently told the audience at the AGRION Energy Summit and Sustainability Meeting in New York. As a result, some landfill gas is imported from states with excess capacity.

Energy from biomass is mostly produced in northeastern New England and Phillips said it’s unlikely new plants will be built in Massachusetts due to stricter environmental regulations that recently went into effect.

The New England REC market is currently short, with the “spot market trading at the cap,” which refers to the maximum price for which RECs can be bought and sold. Connecticut and Massachusetts accounted for 48% of the total 6 million megawatt 2012 New England market. Total demand in the New England REC market is about 8 million MW, according to Phillips.

The PJM region is made up of 5 major trading markets, with New Jersey serving as the benchmark because it is the oldest and most liquid, Erin Eckenrod, Manager of Renewable Energy Marketing and Organization at Horizon Wind Energy told the Audience. Horizon was recently purchased by Portuguese utility EDP.

REC markets are working through various imperfections, but are functioning in many regions the panelists said. RECs that are eligible for application toward RPS requirements in multiple states create trading opportunities, but do not increase overall liquidity, said Phillips.

Political agendas sometimes impede market function. State politicians’ need to promote local job creation can act as a disincentive toward importing RECs from other states, Phillips said. This is true in New Jersey where the desire to attract solar installation jobs has driven up solar REC trading, said Eckenrod.