Story by Noah Botwinick, contributing author for the PeoplePlanetProfitBlog.com.
What are RECS?
Renewable Energy Certificates, which also go by the name Green Tags, Renewable Energy Credits, Renewable Electricity Certificates, or Tradable Renewable Certificates, are the tradable property rights to the energy generated from renewable energy resources. In other words, RECs are non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour of electricity was generated from a certified renewable energy source. One REC is created when one megawatt of renewable energy has been generated and delivered to a local power pool. Ownership of an REC denotes that the owner purchased renewable energy; however, the actual electricity itself that is represented by the certificate is actually sold separately and is used by someone else.
How Did RECs Come About?
The necessity for RECs, which came about in the 1990s, came about because the electricity from renewable generators that is fed into the electricity grid gets mixed together with the electricity that comes from other, traditional energy sources. As a result, it is impossible to tell where each specific electron came from, so they can’t be sold individually. RECs are a way of making it possible to essentially purchase these electrons in the energy pool that came from renewable energy sources.
What Types of Energy Sources Qualify for REC Certificates?
- Solar Electricity
- Low-impact hydropower
- Wind Power
- Fuel Cells that use renewable fuels
- Geothermal energy
Why Buy RECs?
- Meeting Government Standards: There are policies in place that require electricity service providers to incorporate a minimum level of renewable energy into their electricity supply. Such energy regulations, such as state Renewable Electricity Standards (RES) and Renewable Portfolio Standards (RPS) (http://www.eia.gov/todayinenergy/detail.cfm?id=4850 ), outline which energy technologies or resources can be used, as well as explain how electricity service providers must act in accordance with these regulations. Electricity service providers must either generate enough renewable energy to meet this obligation, or they can simply purchase enough RECs to fulfill their renewable energy requirements. Thus, RECs can be used to meet compliance with government renewable energy policies and regulations. Rather than a company completely revamping the way it receives its electricity, it has the option of purchasing RECs, either from another company or from the energy generator themselves. By purchasing RECs, the company is giving business to the renewable energy sources without having to actually change anything.
- Environmental Benefits: Buying RECs enables the clean energy generators to keep on producing their clean energy and selling it. This is crucial because approximately 38 percent of the greenhouse gases produced in the United States come from traditional sources of electricity generation ( EPAs 2009 Inventory of Greenhouse Gas Emissions and Sinks), and the buying of RECs adds more clean energy to the power grid and helps decrease the amount of electricity generated from greenhouse gas emitting fossil fuels.
- Energy User Preference for Green Electricity: Energy user preference for green electricity has led to the buying and selling of RECs as retail, commercial and industrial energy users seek to meet their own self-imposed renewable energy goals. By purchasing RECs, a company can do its share in helping the environment without actually taking tangible steps towards going green or using renewable energy themselves. RECs are also beneficial because they allow such buyers to support electrical generators that use renewable energy resources from all over, not just those that are close enough to supply them with clean energy. This allows green energy plants to increase their business because it enables more energy users to buy their products.
- Supporting Renewable Energy: The buying and selling of RECs are crucial for the continuing production and usage of renewable energy in industrialized countries. Producing electricity from clean energy sources is often more expensive than energy derived from traditional energy sources. So, when someone purchases an REC, they are helping pay the additional costs associated with producing renewable energy. The more renewable energy generators are able to be set up and supported, the more benefit there is for the environment. Without RECs, renewable energy generators would not be able to remain functional due to the costs associated with producing energy from renewable resources.
- Supporting Clean Energy Projects: Money generated from the sale of an REC can help fund clean energy projects.
- Balancing the Market Flow: Purchasing RECs can help balance the supply and demand for clean energy. By separating the eco-friendly benefits of clean energy generation from the actual electricity itself, the clean energy generator can get a fair market price for its electricity and help energy consumers elsewhere offset the emissions associated with their fossil fuel generated electricity use.
How are RECs Sold and Bought?
There are two ways that RECs are sold by clean energy generators. Either the generator can sell the electricity and the REC to an energy utility, which then resells both the electricity and the REC to an energy consumer, or the REC can be sold to an a REC Marketer, who can then resell just the REC to a consumer who is interested in supporting a clean energy generator.
RECs can be bought easily from an REC marketer, either as a one-time purchase or in monthly installments. There are several business that sell RECs online, and each marketer can offer different product options, such as which type of clean energy you are supporting. The cost of RECs varies, because it depends on the type of renewable resource that was used to generate the energy, as well as where it is purchased from. Generally, people purchase enough RECs to cover either a portion of or all their electricity use, thereby offsetting their own carbon emissions footprint. However, buying any amount of RECs is beneficial for the environment
Who are the Largest purchasers of RECs in the US?
The Air Force: The largest purchaser of RECs in the US government
- 899,142 MWh worth of RECs
University of Pennsylvania and Philadelphia: The largest purchaser of RECs among colleges and universities
- 192,727 MWh of RECs (from wind power)
Intel: The largest purchaser of RECs among large corporations
- 1,302,040 MWh purchased (in 2007)
Whole Foods: The largest purchaser among retailers
- 509,040 MWh worth of RECs (enough to counteract 100% of its energy needs)
What is on an REC?
Each REC states the location of where the energy came from, the source of where it came from and when it was generated. Additionally, each REC tells the purchaser about the renewable fuel sources, the emissions that are emitted from the renewable generation as well as avoided emissions, the vintage of the generator and the eligibility of the source for certification. Each REC tells the owner that its purchase has prevented more than 18,000 pounds of carbon dioxide emissions. A certifying agency gives a specific serial number to each REC, which is a unique identification number to make sure it doesn’t get double-counted. Each REC is also given an independent tracking system, in order to ensure that each REC is legitimate and used only once.
Picture taken from: http://www.noaanews.noaa.gov/stories2011/20110426_windwakes.html