What Is a Renewable Energy Certificate?
A renewable energy certificate (REC) is a market-based instrument that represents renewable electricity generation's environmental, social, and other non-power attributes.
RECs are created when one megawatt-hour (MWh) of eligible renewable electricity is generated and delivered to the grid.
Utility companies and other retail electricity providers can purchase or retire RECs to help them meet renewable energy goals, such as those established by state renewable portfolio standards (RPS).
How Does a Renewable Energy Certificate Work?
When a renewable energy project is built, it creates two products: electricity and RECs.
The electricity is delivered to the grid and used to power homes and businesses.
The RECs are created when the electricity is generated and can be sold separately from the power.
One megawatt-hour (MWh) of generation equals one REC.
One REC represents all the environmental and non-power attributes of one MWh of renewable electricity generation.
For example, a wind turbine that generates one MWh of electricity would also create one REC.
The owner of the REC can sell it to a utility company or other electricity provider to help them meet state-mandated renewable energy goals, such as renewable portfolio standards (RPS).
What Are the Different Types of Renewable Energy Certificates?
There are two main types of RECs:
Tradable RECs (TRECs)
These are created when one MWh of eligible renewable electricity is generated and delivered to the grid.
TRECs can be bought and sold in the open market.
There are also two subtypes of TRECs:
Vintage RECs
These represent the environmental attributes of renewable electricity generated in a specific year.
Vintage RECs can only be used to meet renewable energy goals for that same year.
Future-Vintage RECs
These represent the environmental attributes of renewable electricity generated in a future year.
Future-vintage RECs can meet renewable energy goals for the year they are generated or any future year.
Non-tradable RECs (NTRECs)
These are created when one MWh of eligible renewable electricity is generated but not delivered to the grid.
NTRECs cannot be bought or sold in the open market.
Why Is a Renewable Energy Certificate Used?
It can be difficult and costly for utility companies and other electricity providers to build new renewable generation capacity to meet state-mandated renewable energy goals.
RECs provide a way for these entities to comply with the goals without building new renewable generation capacity.
Using RECs also provides revenue to the renewable energy project developer, which can help finance the construction and operation of new renewable generation capacity.
Renewable Energy Certificates vs Carbon Credits
Renewable energy certificates are often confused with carbon credits, but they are two different things.
A carbon credit is a market-based instrument representing the environmental attributes of one metric ton of carbon dioxide (CO2) emissions reductions.
Carbon credits can be used to offset emissions from activities such as power generation and transportation.
On the other hand, RECs represent the environmental attributes of one MWh of renewable electricity generation.
One REC equals one MWh of renewable electricity generation.
Carbon credits and RECs are both traded in voluntary and compliance markets.
However, carbon credits are primarily used in compliance to help entities meet emissions reduction goals. In contrast, RECs are used primarily in compliance to help entities meet renewable energy goals.
Benefits of a Renewable Energy Certificate
There are several benefits associated with the use of renewable energy certificates, including the following:
- RECs help utilities and other electricity providers meet state-mandated renewable energy goals.
- Using RECs can provide revenue to the renewable energy project developer, which can help finance the construction and operation of new renewable generation capacity.
- Using RECs can help displace the need for new fossil-fuel generation capacity, reducing greenhouse gas emissions.
How to Get Renewable Energy Certificates
Green power programs are becoming increasingly popular as consumers look for ways to reduce their environmental footprint.
Suppose you are a customer of one of the 850 utilities in the United States that offer a green power program. In that case, you can purchase RECs (renewable energy credits) directly from your electrical utility.
With these programs, utilities purchase RECs and then charge customers a small premium for the added cost. This premium is usually only a few cents per kilowatt-hour (kWh).
If you are already a customer of one of the 850 utilities in the U.S. that offer this type of program, it may be the easiest option for you.
Another option is to purchase RECs directly from an outside supplier. This bypasses your utility entirely, but it may be more complicated.
Green-e is an organization that certifies REC providers, so you can be sure you are getting a reliable product. Purchasing RECs this way will likely be more expensive than going through your utility.
The Bottom Line
A renewable energy certificate (REC) is a market-based instrument representing the environmental attributes of one megawatt-hour (MWh) of renewable electricity generation.
RECs can be used to meet renewable energy goals, and the use of RECs can provide revenue to the renewable energy project developer.
If you are a customer of one of the 850 utilities in the United States that offer a green power program, you can purchase RECs directly from your electrical utility.
You can also purchase RECs from an outside supplier, which may be more expensive.
FAQs
1. What is a renewable energy certificate?
A renewable energy certificate (REC) is a market-based instrument representing the environmental attributes of one megawatt-hour (MWh) of renewable electricity generation. RECs can be used to meet renewable energy goals, and the use of RECs can provide revenue to the renewable energy project developer.
2. What are the different types of markets for renewable energy certificates?
There are two main types of markets for renewable energy certificates: the voluntary market and the compliance market. The voluntary market is used by businesses and individuals who want to support renewable energy development but are not required to do so by law. The compliance market is operated by entities required to obtain a certain percentage of their electricity from renewable sources.
3. What are the benefits of a renewable energy certificate?
Using RECs can help utilities and other electricity providers meet state-mandated renewable energy goals. Using RECs can also provide revenue to the renewable energy project developer, which can help finance the construction and operation of new renewable generation capacity. Additionally, using RECs can help to displace the need for new fossil-fuel generation capacity, which can lead to reductions in greenhouse gas emissions.
4. How can I get renewable energy certificates?
If you are a customer of one of the 850 utilities in the United States that offer a green power program, you can purchase RECs directly from your electrical utility. You can also purchase RECs directly from an outside supplier, which may be more expensive.
5. Why are renewable energy certificates important?
Renewable energy certificates are important because they provide a market-based mechanism to finance the development of new renewable generation capacity. Additionally, using RECs can help to displace the need for new fossil-fuel generation capacity, which can lead to reductions in greenhouse gas emissions.
