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.
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.
Resources
- Triple Pundit: Bottom Line on Renewable Energy Certificates
- Harvard Business Review: Energy Credit Buyers Beware
- Center for Resource Solutions: Best Practices in Public Claims for Green Power Purchases and Sales
- World Research Institute: Bottom Line on Renewable Certificates
- Loyola University Chicago Project Snapshot