Tuesday, December 28, 2010

Renewable Energy Certificates (RECs)

From EPA.gov

What is a REC?

A REC (pronounced: rěk) represents the property rights to the environmental, social, and other non-power qualities of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source.
RECs provide buyers flexibility:
  • In procuring green power across a diverse geographical area.
  • In applying the renewable attributes to the electricity use at a facility of choice.
This flexibility allows organizations to support renewable energy development and protect the environment when green power products are not locally available.

How do RECs work?

All grid-tied renewable-based electricity generators produce two distinct products:
  • Physical electricity
  • RECs
Renewable Energy
Certificates (RECs)
This diagram shows how renewable energy certificates (RECs) and electricity take different pathways to the point of end use.  RECs represent the right to claim the attributes and benefits of the renewable generation source.
High Resolution
At the point of generation, both product components can be sold together or separately, as a bundled or unbundled product. In either case, the renewable generator feeds the physical electricity onto the electricity grid, where it mixes with electricity from other generation sources. Since electrons from all generation sources are indistinguishable, it is impossible to track the physical electrons from a specific point of generation to a specific point of use.

As renewable generators produce electricity, they create one REC for every 1000 kilowatt-hours (or 1 megawatt-hour) of electricity placed on the grid. If the physical electricity and the associated RECs are sold to separate buyers, the electricity is no longer considered “renewable” or “green.” The REC product is what conveys the attributes and benefits of the renewable electricity, not the electricity itself.

RECs serve the role of laying claim to and accounting for the associated attributes of renewable-based generation. The REC and the associated underlying physical electricity take separate pathways to the point of end use (see diagram). As renewable generators produce electricity, they have a positive impact, reducing the need for fossil fuel-based generation sources to meet consumer demand. RECs embody these positive environmental impacts and convey these benefits to the REC owner. The following is a list of the inherent primary and derived attributes that a REC can convey to an owner:

Primary REC Attributes Derived REC Attributes
  • Renewable fuel source
  • Emissions of the renewable generation
  • Geographic location of the generator
  • Vintage of the generator
  • Eligibility for certification or RPS
  • Avoided emissions
  • Eligibility for emission reduction credits or offsets
  • Price stability
There are two approaches to verifying REC ownership and the right to make environmental claims:
Both of these approaches help buyers avoid double counting and double claims and ensure against fraud. Of the two, REC tracking systems provide greater transparency when tracking RECs from their point of creation to their point of final use.

Added Reading

The following documents provides greater detail on issues related to this Web page.
Text Box: ThumbnailEmerging Markets for Renewable Energy Certificates: Opportunities and ChallengesNational Renewable Energy Laboratory NREL/TP-620-37388, January 2005 (PDF) (69 pp, 1.5MB, About PDF). Exit EPA Disclaimer This report describes how RECs are marketed; examines RECs markets, including scope and prices; and identifies and describes the key challenges facing the growth and success of RECs markets.

Cover of Renewable Energy Certificates document.Renewable Energy Certificates (PDF) (6 pp, 996K, About PDF). This white paper provides a brief overview of renewable energy certificates (RECs): what they are, how they work, and why they are an important option for individual and organizational buyers in renewable electricity and green power markets.

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