What are Renewable Energy Credits PDF Print E-mail

Many people and organizations are willing to pay for electricity that is produced on their behalf using cleaner, renewable sources of generation. These buyers often find renewable electricity attractive for its environmental and greenhouse gas reduction benefits when compared to conventional fossil fuel-based electricity generation.

Both individual and organizational buyers have several green power product options available. These include buying renewable energy certificates (RECs) by themselves, buying RECs along with physical electricity from their utility service provider, or developing onsite renewable projects that produce both electricity and RECs together. RECs in particular have become an important choice for buyers of green power nationwide and serve as the currency for renewable energy markets.

This document provides a review of RECs: what they are, how they work, and why they are an important option for individual and organizational buyers
in renewable electricity and green power markets.

What Is A REC?

RECs represent the environmental and other non-power attributes of renewable electricity generation and are a component of all renewable electricity products. RECs are measured in single megawatt-hour increments and are created at the point of electric generation. Buyers can select RECs based on the generation resource (e.g., wind, solar, geothermal), when the generation occurred, as well as the location of the renewable generator. RECs provide key information about the generation of renewable electricity delivered to the utility grid. Since RECs represent only the environmental or non-power attributes of renewable electricity generation, they are not subject to electricity
delivery constraints. The information conveyed by a REC allows buyers to make specific environmental claims about how their electricity is produced. RECs usually include the following
primary attributes and information:

  • The type of renewable resource producing the electricity
  • The vintage of the REC (i.e., the date when it was created)
  • The vintage of the renewable generator, or the date when the generator was built
  • The renewable generator’s location
  • The RECs eligibility for certification or renewable portfolio compliance
  • The renewable generation’s associated greenhouse gas emissions (if any)

RECs are increasingly seen as the currency of renewable electricity and green power markets. They can be bought and sold between multiple parties, and they allow their owners to claim that renewable electricity was produced to meet the electricity demand they create.

Increasingly, federal, state and local governments are also using RECs as a credible means to meet environmental goals for renewable energy generation. For example, most states allow utilities to use RECs to meet mandated state renewable portfolio standards. State renewable portfolio standards require that a percentage of a utility’s electricity generation comes from renewable resources.

Increasingly, individuals and organizations are also buying RECs to satisfy a number of other environmental and non-environmental goals:

  • Avoid the carbon dioxide (CO2) emissions associated with conventional electricity use
  • Reduce some types of air pollution
  • Hedge against future electricity price increases for onsite and some utility products
  • Serve as a brand differentiator
  • Generate customer, investor, or stakeholder loyalty and • employee pride
  • Create positive publicity and enhance public image
  • Demonstrate civic leadership

How Do RECs Work?

To understand how RECs work, it is helpful to understand how electricity is delivered across the utility grid, as well as what makes renewable electricity generation attractive to individuals and organizational buyers. Within the United States, electricity demand is met by various types of generation technologies and fuel resources. These electricity generators feed electrons onto the utility grid for delivery to consumers through a complex network of wires and distribution infrastructure.

Because the electrons generated are of a different technology and fuel resources are physically the same, it is impossible for individuals or organizations to know what type of generation technology or resource produced the electricity that reaches their particular facility.

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