What’s a Renewable Energy Credit?
The renewable energy industry is full of jargon and endless acronyms that can seem confusing at first; luckily, we’re here to break it down for you.
Renewable Energy Credits (RECs) are certificates you can earn every time you produce one megawatt-hour (1,000 kWh) of renewable electricity like solar power. Once you’ve earned a REC, it has a monetary value that you can redeem within REC markets. The REC is completely separate from the electricity itself, which is going into the grid (as well as into your house, in the case of solar panels). The REC is proof that the energy was renewable, and represents the environmental benefits of reduced emissions and pollution.
Who buys these things?
Utilities are one major buyer of RECs. In many states, electric companies are required by law to supply a particular percentage of renewable energy. Over thirty states (plus D.C.) have this type of regulation, called a Renewable Portfolio Standard (or RPS– yep, yet another acronym). Check out this handy map showing which states have an RPS. In California, for example, the law requires that electric utility companies supply 33% renewable energy by 2020. The electric companies don’t necessarily have to produce that energy themselves; they can meet the required amount by purchasing RECs. If you are sending electricity back into the grid, it’s likely that your utility will want to buy not only your electricity, but RECs as well.
In states that don’t have regulations requiring utilities to supply renewable energy, RECs go to voluntary buyers, like households or corporations who want to offset their energy use. In the U.S., Intel is the single largest purchaser of RECs, buying more than 1.4 billion kilowatt hours of RECs per year– which the EPA estimates is equivalent to taking 200,000 cars off the road.
How are RECs created?
RECs are created by regional tracking systems. The system issues a unique identification number for each REC, and deposits it into an electronic account, where it can be sold to someone else. The REC contains important info like the location where the energy was produced and the type of facility (solar, wind, etc.) so that potential buyers can choose the type of REC that meets their requirements. Once someone buys the REC and makes a claim about renewable energy using it, the REC is retired. Note that if you need to make a claim that you’re using renewable energy– if you have a business, for example, and want to advertise green power as something you’re doing for the environment– you shouldn’t sell your RECs. Legally, only the owner of an REC can make environmental claims.
How much are RECs worth?
The value of an REC varies based on supply and demand. Those in states that require utilities to buy renewable energy usually earn more. If you’re in a state with fewer renewable energy projects, that also means you may be able to earn more. Solar projects can often earn more than other types of renewable energy. Here’s more information on Solar Renewable Energy Credits (SRECs), which are available in eight states.
How are REC transactions verified?
RECs are certified by programs like Green-e, which independently verifies that RECs are not double-counted, and that the consumer is getting exactly what the marketer claims is being sold.
Other incentives
RECs are just one of the incentives available for homeowners installing solar panels. Check out the 1BOG solar cities page in your area for details about specific incentives that apply to you. Our online solar calculator can also help you estimate the cost of solar panels for your home.
