That is correct. If your project’s annual production is 12,000,000 kWh then the REC production is 12,000 RECs (12,000,000 kWh = 12,000 MWh = 12,000 annual RECs). Prior to the first REC delivery, the collateral requirement is 1.5 times the Annual Contract Value or $50,000, whichever is greater. With a bid price of $100 per REC, the Annual Contract Value is $100 x 12,000 or $1.2M. Thus, the collateral requirement is the greater of $1.2M x 1.5 = $1.8M or $50,000, which is $1.8M.
After the first REC delivery, the collateral requirement is reduced to 1 time the Annual Contract Value or $50,000, whichever is greater. Finally, the collateral requirement in the last delivery year is reduced to reflect the amount that will be delivered in that delivery year (which may be less than a full year).
Revised 6-12-2017 first posted 6-09-2017