Renewable Energy Credits (RECs)
Category: Energy Source, Financial/Accounting Strategies
Renewable energy certificates (RECs) are non-tangible commodities that represent the property rights to the environmental and social benefits of renewable energy. Every megawatt hour (MWh) of electricity produced through renewable sources produces one REC. One must own RECs in order to make renewable energy claims.
RECs can be acquired in the following three ways:
- Unbundled: purchased separately from the electricity that produced them
- Bundled: purchased with the electricity that produced them
- Unbundled from the electricity that produced them and contractually re-bundled with electricity from another project. This is also called “sub RECs,” and “REC arbitrage.”
One REC mitigates the greenhouse gas emissions from one MWh of electricity, regardless of the REC acquisition strategy. A variety of third-party organizations track, verify, manage, and trade RECs.
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
- Buyers pay a net cost for unbundled RECs
- State-based regulations such as the Renewables Portfolio Standards cause RECs to vary in price
- Not all stakeholders view unbundled RECs as a strong carbon-mitigation strategy
Impacts
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GHG Impact
Enormous
More InfoCan be significant if large amounts are purchased
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Economic Impact
Small Net Cost
More InfoBy definition purchasing RECs is cost-additive.
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Feasibility
Doable
More InfoMany institutions are already purchasing RECs.
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Timeline
< 1 year
More InfoRECs are available for purchase. Internal approval may take time.
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Maintenance
Low / None
More InfoOther than annual monitoring and purchasing, there is no maintenance required.
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Publicity
That's cool
More InfoOne of the most accessible solutions but stakeholders may remain skeptical.
Coho and Loyola University Chicago's REC Strategy
Loyola University Chicago wanted to meet LEED requirements on campus. To reach this goal and respond to student pressure, they began purchasing unbundled RECs in 2008. They continued to purchase RECs as a short-term solution until their partnership with Coho (formerly CustomerFirst Renewables) resulted in a new strategy for purchasing renewable energy.
