At the June general meeting of the Local Clean Energy Alliance, Alex Pennock from Center for Resource Solutions made a presentation explaining renewable energy certificates (RECs) to around 25 people. Alex is the manager of the nationally recognized Green-e program at the Center for Resource Solutions, which certifies and verifies, and tracks renewable energy that meets the green-e standards.
Electricity produced by renewable sources of energy and fed into the national electrical grid cannot be distinguished from electricity produced by non-renewable sources. A renewable energy certificate or REC is a way of distinguishing 1 megawatt/ hour of electricity produced by a renewable source.
RECs can be sold with the electricity that they certify (bundled RECs), or they can be sold separately from the electricity (unbundled RECs) and applied to electricity from non-renewable sources. For instance, a utility company that purchases electricity from a coal-fired plant can count that electricity as coming from renewable sources as long as it has enough RECs to cover the amount of coal-produced electricity purchased. This has created a market for the RECs by themselves.
RECs are important to utility companies and other energy service providers that need to comply with renewable energy requirements, or renewable portfolio standards (RPS), set by states or other governing bodies. These RECs are a way of keeping track of the renewable energy purchased and provided to customers, and are bought and sold on what is called the compliance REC market
There is also a voluntary REC market for companies looking to claim that they are using renewable energy. Green-e and other electronic tracking services certify RECs on this voluntary market and make sure that a given REC is claimed by only one party.
Unbundled RECs are usually handled by a third party broker and their value varies with supply and demand. In recent years the compliance market for RECs has grown considerably, while the voluntary market has remained strong, though volatile.
RECs provide many advantages to utility companies and other energy providers, such as the flexibility to buy only as much energy as needed at a given time from any source without the constraints of a fixed contract, while still meeting RPS standards. Utilities can sell off extra RECs not needed to meet their renewable standards as a source of income.
While RECs can be an incentive to the development of renewable energy because they can generate income, unbundled RECs can be sold to "green-wash" energy produced from non-renewable, dirty sources. In this way RECs can encourage the continued use of non-renewable sources of energy.
For those who would like to read more, the Environmental Protection Agency's brochure for organizations that want to claim green power is a good resource of information.