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Renewable Energy Credits (RECs)

Category: Energy Supply, Renewable Energy Credits

Renewable energy certificates (RECs) are non-tangible commodities that represent the property rights to the environmental and social benefits of renewable energy. One REC is produced for every megawatt hour (MWh) of electricity generated from renewable sources such as solar and wind. REC ownership is required to make renewable energy claims.

There are three main strategies for acquiring RECs: 1) unbundled, i.e. purchased separately from the electricity that produced them, 2) bundled with the electricity that produced them, and 3) unbundled from the electricity that generated them and contractually re-bundled with electricity from another project, a.k.a. “sub RECs,” or “REC arbitrage.”

One REC mitigates the greenhouse gas emissions from one MWh of electricity, regardless of how the REC was acquired. RECs are tracked, verified, managed, and traded by a variety of third-party organizations.

This topic focuses on unbundled RECs. 

Benefits

  • One of the easiest and most flexible ways to mitigate purchased electricity related emissions.
  • Supports development of renewable energy resources by providing an additional revenue stream.
  • Minimal upfront cost with no long-term contract required. 

Challenges

  • Unbundled RECs are a net cost to the REC buyer. 
  • RECs vary in price, which is especially impacted by state-based regulations such as Renewables Portfolio Standards..
  • Not all stakeholders view unbundled RECs as a strong carbon-mitigation strategy.
Renewable Energy Credits

Impacts

  • GHG Impact

    Enormous

    Can be significant if large amounts are purchased

  • Economic Impact

    Small Net Cost

    By definition purchasing RECs is cost-additive.

  • Feasibility

    Doable

    Many institutions are already purchasing RECs.

  • Timeline

    < 1 year

    RECs are available for purchase. Internal approval may take time.

  • Maintenance

    Low / None

    Other than annual monitoring and purchasing, there is no maintenance required.

  • Publicity

    That's cool

    One of the most accessible solutions but stakeholders may remain skeptical.

Resources

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