What Are Renewable Energy Credits?
Every Renewable Energy Credit represents one megawatt-hour of renewable energy added to the grid. Sources of renewable energy can include solar, wind, hydroelectric, or even nuclear and natural gas generation facilities. RECs aren’t really a unit of energy, but rather a certificate of the attributes related to the energy source.
Some of the information recorded on Renewable Energy Credits are:
- The renewable facility’s location and build date
- A unique identification number and certificate type
- Eligibility for certification under the applicable RPS
Additional data may include the emissions rating of the renewable facility, generation type, project name, and total capacity.
How Do Renewable Energy Credits Work?
An electrical grid consists of many different generating facilities, each adding energy to the system. Traditionally, the bulk of these sources used fossil fuels but over the last few decades, more renewable sources use the same grid to deliver energy to consumers. Because you cannot track the source of your energy, for every one-megawatt hour (MWh) of renewable energy added, the facility receives a credit under the RPS.
Once you buy the credit, the facility transfers the clean energy to you, and you become the new owner. You can only buy a credit once as it indicates that you used one MWh of clean energy to offset a portion of your consumption or generation capacity.
What Are the Benefits of Renewable Energy Credits?
Buying RECs from electricity providers can help bring down your carbon footprint without investing in your own renewable energy source. For businesses who want to be more eco-friendly, Renewable Energy Credits are a cost-effective option if you don’t have the resources to install your own solar panels at your company’s locations.
Are Renewable Energy Credits Different from Solar Renewable Energy Certificates?
Solar Renewable Energy Certificates (or SRECs) apply only to renewable sources based on solar technologies. In some states, a “solar carve out” policy is part of their RPSs, requiring utilities to purchase SRECs if it doesn’t have its own sufficient solar generation capacity. Businesses and homeowners who live in a state where such a policy exists can install their own solar panels and generate an SREC for each megawatt of solar energy they generate.
The value of an SREC depends on the demand in the region, determined by a utility’s ability to meet the solar requirements as defined in the RPS. Compliance premiums may apply to utilities that did not meet the required demand, increasing the value of the SREC.