Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, Renewable Electricity Certificates, or Tradable Renewable Certificates (TRCs), are tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource (renewable electricity). Solar renewable energy certificates (SRECs) are RECs that are specifically generated by solar energy.
These certificates can be sold and traded or bartered, and the owner of the REC can claim to have purchased renewable energy. According to the U.S. Department of Energy‘s Green Power Network, RECs represent the environmental attributes of the power produced from renewable energy projects and are sold separately from commodity electricity. While traditional carbon emissions trading programs use penalties and incentives to achieve established emissions targets, RECs simply incentivize carbon-neutral renewable energy by providing a production subsidy to electricity generated from renewable sources. It is important to understand that the energy associated with a REC is sold separately and is used by another party. The consumer of a REC receives only a certificate.
In states that have a REC program, a green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces (for reference, an average residential customer consumes about 800 kWh in a month). A certifying agency gives each REC a unique identification number to make sure it doesn’t get double-counted. The green energy is then fed into the electrical grid (by mandate), and the accompanying REC can then be sold on the open market. “Retirement occurs when a Renewable Energy Certificate (REC) is used by the owner of the REC. Use of the REC may include, but is not limited to, (1) use of the REC by an end-use customer, marketer, generator, or utility to comply with a statutory or regulatory requirement, (2) a public claim associated with a purchase of RECs by an end-use customer, or (3) the sale of any component attributes of a REC for any purpose. Once a REC is retired, it may not be sold, donated, or transferred to any other party. No party other than the owner may make claims associated with retired RECs.”
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