Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, Renewable Electricity Certificates, or Tradable Renewable Certificates (TRCs), are tradable, non-tangible
energy certificates in the United States that represent proof that 1
megawatt-hour
A kilowatt-hour (unit symbol: kW⋅h or kW h; commonly written as kWh) is a unit of energy: one kilowatt of power for one hour. In terms of SI derived units with special names, it equals 3.6 megajoules (MJ). Kilowatt-hours are a common bil ...
(MWh) of
electricity
Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as described ...
was generated from an eligible
renewable energy
Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
resource (
renewable electricity
Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
) and was fed into the shared system of power lines which transport energy.
Solar renewable energy certificates (SRECs) are RECs that are specifically generated by solar energy.
Background
There are two main markets for renewable energy certificates in the United States – compliance markets and voluntary markets.
Compliance markets are created by a policy that exists in 29 U.S. states, the District of Columbia, and Puerto Rico, called
Renewable Portfolio Standard. In these states, the electric companies are required to supply a certain percent of their electricity from
renewable
A renewable resource, also known as a flow resource, is a natural resource which will replenish to replace the portion depleted by usage and consumption, either through natural reproduction or other recurring processes in a finite amount of ti ...
generators by a specified year. For example, in California the law is 33% renewable by 2020, whereas New York has a 24% requirement by 2013.
Electric utilities
An electric utility is a company in the electric power industry (often a public utility) that engages in electricity generation and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major p ...
in these states demonstrate compliance with their requirements by purchasing RECs; in the California example, the electric companies would need to hold RECs equivalent to 33% of their electricity sales.
Voluntary markets are ones in which customers choose to buy renewable power out of a desire to use renewable energy. Most corporate and household purchases of renewable energy are voluntary purchases. Renewable energy generators located in states that do not have a
Renewable Portfolio Standard can sell their RECs to voluntary buyers, usually at a cheaper price than compliance market RECs.
Marketers
RECs can be traded directly from buyer to seller, but third party marketers, brokers, or asset managers are commonly found in the marketplace. Renewable generation facilities will often sell their credits to these entities, who then resell them on the market at a later date.
Texas developed the first comprehensive RECs system in the U.S., a web-based platform that provides for the issuance, registration, trade, and retirement of RECs. The Texas REC Program, which only tracks renewable energy certificates, started operating in July 2001.
In the Western United States RECs are traded on the Western Renewable Energy Generation Information System (WREGIS) as part of the Western Electricity Coordinating Council (WECC). The WECC encompasses 14 states, 2 Canadian provinces, and the northern Baja Mexico.
Prices
Prices depend on many factors, such as the vintage year the RECs were generated, location of the facility, whether there is a tight supply/demand situation, whether the REC is used for
RPS compliance, even the type of power created. Solar renewable energy certificates or
SRECs, for example, tend to be more valuable in the 16 states that have set aside a portion of the RPS specifically for solar energy. This differentiation is intended to promote diversity in the renewable
energy mix
The energy mix is a group of different primary energy sources from which secondary energy for direct use - such as electricity - is produced. Energy mix refers to all direct uses of energy, such as transportation and housing, and should not be c ...
which in an undifferentiated, competitive REC market, favors the economics and scale achieved by wind farms.
In the United States, spot prices for SRECs generally decreased from 2010 to 2014. In New Jersey, the spot price for a 2010 SREC was $665.04 in July 2010 and about $160 in May 2014 for SRECs generated in different years. In Delaware, the spot price for a 2010 SREC was $255 in July 2010 and about $50 in May 2014 for SRECs generated in different years. Rates for 2015 to 2017 RECS purchased have averaged between $0.15—$0.045 per
kWh produced. In 2021, SREC prices range from $10 to over $400 depending on the state SREC market.
In Canada, 2008–09 BCHydro offers $3 /MWh for "green attributes", for long-term contracts, 20 plus years. Many Independent Power Producers (IPPs) believe that this is much less than "fair market value", but have no alternative.
While the value of RECs fluctuate, most sellers are legally obligated to "deliver" RECs to their customers within a few months of their generation date. Other organizations will sell as many RECs as possible and then use the funds to guarantee a specific fixed price per MWh generated by a future wind farm, for example, making the building of the wind farm a financially viable prospect. The income provided by RECs, and a long-term stabilized market for tags can generate the additional incentive needed to build renewable energy plants.
Certification
RECs are known under functionally equivalent names, such as Green Tags or Tradable Renewable Certificates (TRCs), depending on the market. The U.S. currently does not have a national registry of RECs issued. Though the
Center for Resource Solutions and other groups claim to offer programs to prevent double counting, allowing two entities to take environmental credit for the same electricity is, in effect, the same. Under the Green-e Energy program, participants are required to submit to an annual Verification Process Audit of all eligible transactions to ensure the RECs meet the requirements for certification. The certification process requires 3rd party verification to be performed by an independent certified public accountant or a certified internal auditor. CRS maintains a list of auditors who meet the criteria to be listed on the program website. Increasingly RECs are being assigned unique ID numbers and tracked through regional tracking systems/registries such a
WREGISNEPOOLERCOTNYGATSNARMIRECSNC-RETSNVTRECan
M-RETS
Qualifying technologies
The following generation technologies qualify as producers of RECs:
*
Solar electric
A solar cell, or photovoltaic cell, is an electronic device that converts the energy of light directly into electricity by the photovoltaic effect, which is a physical and chemical phenomenon.
*
Wind
Wind is the natural movement of air or other gases relative to a planet's surface. Winds occur on a range of scales, from thunderstorm flows lasting tens of minutes, to local breezes generated by heating of land surfaces and lasting a few hou ...
*
Geothermal
* Low Impact Hydropower (
small-run-of-the-river facilities, not ones that require large dams and reservoirs, or affecting river flows adversely.)
*
Biomass
Biomass is plant-based material used as a fuel for heat or electricity production. It can be in the form of wood, wood residues, energy crops, agricultural residues, and waste from industry, farms, and households. Some people use the terms bi ...
,
biofuel
Biofuel is a fuel that is produced over a short time span from biomass, rather than by the very slow natural processes involved in the formation of fossil fuels, such as oil. According to the United States Energy Information Administration (E ...
s and
landfill to gas
*
Fuel cell
A fuel cell is an electrochemical cell that converts the chemical energy of a fuel (often hydrogen) and an oxidizing agent (often oxygen) into electricity through a pair of redox reactions. Fuel cells are different from most batteries in requ ...
s (only if powered by
hydrogen
Hydrogen is the chemical element with the symbol H and atomic number 1. Hydrogen is the lightest element. At standard conditions hydrogen is a gas of diatomic molecules having the formula . It is colorless, odorless, tasteless, non-toxic, an ...
produced by one of the above approved generators, not from
fossil fuel
A fossil fuel is a hydrocarbon-containing material formed naturally in the Earth's crust from the remains of dead plants and animals that is extracted and burned as a fuel. The main fossil fuels are coal, oil, and natural gas. Fossil fuels m ...
s).
* In some states,
combined heat and power
Cogeneration or combined heat and power (CHP) is the use of a heat engine or power station to generate electricity and useful heat at the same time.
Cogeneration is a more efficient use of fuel or heat, because otherwise- wasted heat from elect ...
systems
Additionality
"Additionality" in the context of greenhouse gas (GHG) regulations means that a purchased renewable energy certificate introduces new renewable energy onto the electricity grid beyond what would have happened without the project or "business as usual". The U.S. Environmental Protection Agency (EPA) favors performance-based measures of additionality, such as the megawatt-hour (MWh) equivalent per REC.
Critics argue "additionality" amounts to a subsidy for renewable energy, that business as usual (supply and demand) prevents unnecessary/duplicative renewable energy from being sold in some markets where overgeneration (excess supply in relation to demand) threatens grid reliability.
Whereas air and water pollution travels across state and national boundaries irrespective of its origin, the value of RECs and the emergence of RECs markets depend very much on the markets created state by state through legislative action to mandate a Renewable Portfolio Standard. Such a balkanized approach to establishing RECs markets and incentives state by state creates issues of equity as some states could legitimately claim that their neighboring states (and their electricity consumers) with voluntary RPS are operating as free riders of pollution prevention, paid for by states (and their electricity consumers) with mandatory RPS. We can learn fro
cap and trade">EPA's SOx and NOx emissions trading, cap and trade programregarding how the principle of additionality with a national standard provided a benchmark for measuring and validating the commodification of pollution prevention credits that lead to market-driven initiatives with proven results in improving regional and national air quality.
In states with a Renewable Portfolio Standard, a RECs purchase enables the utility company to meet its minimum renewable electricity percentage without having to install that renewable generating capacity itself, regardless of the source of generating renewable energy. By analogy, in the EPA cap and trade program, a "clean" utility in one state can sell its NOx credits to a "dirty" utility in another state that would otherwise have to install additional smokestack scrubbers.
The United States Environmental Protection Agency claims to have the highest percentage use of green power of any federal agency. In 2007, it offset the electricity use of 100% of its offices. The Air Force is the largest purchaser in the US government in absolute terms, purchasing 899,142 MWh worth of RECs. Among colleges and universities, the University of Pennsylvania in Philadelphia is the largest purchaser of RECs, buying 192,727 MWh of RECs from wind power. The corporate leader is Intel, with 1,302,040 MWh purchased in 2007, and the largest purchaser among retailers is Whole Foods, which purchased 509,104 MWH, or enough RECs to offset 100% of its electricity needs.
Note that research shows that RECs purchased and retired voluntarily in the United States (i.e., not for compliance with a Renewable Portfolio Standard) do not lead to any significant additional renewable energy investment or generation.
Criticism
Critics have attacked renewable energy certificates/credits for allowing renewables producers to double-count the clean energy contribution of the energy they represent. By separating clean energy "attributes" from the energy itself, then selling them in the form of certificates to fossil fuel producers, they allow two entities to take clean-energy credit for the same electricity. Corresponding electricity from the fossil fuel producer is recorded as sourceless "null" energy, effectively scrubbing greenhouse gases emitted during its production from the record.
Though both sources are properly credited financially, double-counting permits states to report emissions as being up to 50% lower than they actually are, making claims of progress in meeting climate goals dubious. For renewables producers, selling the certificates may be in violation of federal law. Severin Borenstein, director of the Energy Institute at UC Berkeley's Haas School of Business, writes, "If the certificates are stripped off...separately from the electricity, the FTC
ederal Trade Commissionsays...it is deceptive for the TPO
hird party owner
The hird (also named "Håndgangne Menn" in Norwegian), in Scandinavian history, was originally an informal retinue of personal armed companions, hirdmen or housecarls, but came to mean not only the nucleus ('Guards') of the royal army, but also d ...
to advertise or tell solar buyers they are getting 'clean', 'renewable', or maybe even 'solar' electricity with their lease or power purchase agreement."
See also
*
Carbon offset
A carbon offset is a reduction or removal of emissions of carbon dioxide or other greenhouse gases made in order to compensate for emissions made elsewhere. Offsets are measured in tonnes of carbon dioxide-equivalent (CO2e). One ton of carbon ...
*
Climate change in Sweden#Policy - Renewable energy certificate system
*
Energy accounting Energy accounting is a system used to measure, analyze and report the energy consumption of different activities on a regular basis. This is done to improve energy efficiency, and to monitor the environment impact of energy consumption.
Energy man ...
*
Energy development
Energy development is the field of activities focused on obtaining sources of energy from natural resources. These activities include production of renewable, nuclear, and fossil fuel derived sources of energy, and for the recovery and reuse ...
*
Energy economics
Energy economics is a broad scientific subject area which includes topics related to supply and use of energy in societies. Considering the cost of energy services and associated value gives economic meaning to the efficiency at which energy c ...
*
Energy Efficiency Credit
*
Green certificate
A green certificate are a tradable commodity proving that certain electricity is generated using renewable energy sources. Typically one certificate represents the generation of one Megawatthour of electricity. What is defined as "renewable" varie ...
(Europe)
*
Green energy
Energy is sustainable if it "meets the needs of the present without compromising the ability of future generations to meet their own needs". Most definitions of sustainable energy include considerations of environmental aspects such as greenho ...
*
Green tax shift
An environmental tax, ecotax (short for ecological taxation), or green tax is a tax levied on activities which are considered to be harmful to the environment and is intended to promote environmentally friendly activities via economic incentives. ...
*
Guarantee of origin
A Guarantee of Origin (GO or GoO) is an energy certificate defined in article 15 of the European Directive 2009/28/EC. A GO labels electricity from renewable sources to provide information to electricity customers on the source of their energy. Gu ...
*
Renewable Energy Certificates Registry The Renewable Energy Certificates Registry (REC-registry) is an internet-based registry system in Australia for renewable energy certificates (RECs). If an Australian organization installs a green energy installation (solar energy, wind energy, etc ...
– Australia
*
Renewable Energy Certificate System
The Renewable Energy Certificate System (RECS) was a voluntary system for international trade in renewable energy certificates that was created by RECS International to stimulate the international development of renewable energy. It advocated the ...
– Europe
*
Renewable energy development
*
Renewable Energy Payments
*
Renewables
Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
*
Renewables Obligation
The Renewables Obligation (RO) is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form (the Renewables Obligation (Scotland)) in Scot ...
(UK)
*
Solar-charged vehicle
A solar vehicle or solar electric vehicle is an electric vehicle powered completely or significantly by direct solar energy. Usually, photovoltaic (PV) cells contained in solar panels convert the sun's energy directly into electric energy. ...
*
Solar Renewable Energy Certificates
References
External links
Green Power Network's RECs page(
EERE
The Office of Energy Efficiency and Renewable Energy (EERE) is an office within the United States Department of Energy. Formed from other energy agencies after the 1973 energy crisis, EERE is led by the Assistant Secretary of Energy Efficiency an ...
).
Green Power Partnership(
U.S. Environmental Protection Agency
The Environmental Protection Agency (EPA) is an Independent agencies of the United States government, independent executive agency of the United States federal government tasked with environmental protection matters. President Richard Nixon pro ...
).
EPAU.S. Department Of Energy – Green Power Markets Comparison TableDrax Renewable Energy Certificates
{{Authority control
Carbon finance
Climate change in the United States
Renewable energy certification
Renewable electricity
Renewable energy