How Do Renewable Energy Credits Work?

May 24, 2022 | Energy Conservation

Do you know where your energy is coming from? Not many people do, and there’s a pretty good reason for this: once energy enters the power grid, no matter the source, it simply converts to electricity. It doesn’t come with a note that says “this came from a solar panel” or “this electricity brought to you by a wind turbine.” Because of that, it’s nearly impossible to know for sure that your electricity is coming from a green or renewable energy source.

But what if you want to be sure that the energy you’re using is sustainable? Enter renewable energy credits (RECs) — also known as renewable energy certificates, green tags, and tradable renewable certificates. With these credits, you can confidently say you’re using renewable energy. Here’s how it works.

What Is an REC?

When someone uses a renewable energy source to generate one megawatt hour of electricity, they are issued an REC. This is a certificate, or credit, that says you used a renewable energy source for this one hour. It’s necessary because the origination point of energy cannot be determined once it’s in the grid, but the government still wants to track the amount of clean energy being produced. And people and companies want to be able to say they’re using clean energy to power their homes and businesses.

What Can You Do with an REC?

The main thing you can do with RECs is purchase them. Each credit is issued with a unique identifier, including information about where, when, and how the energy for which it was issued was produced. The person who produced the energy can then sell the credit. No identifier will ever be reused, and once a credit is sold, it cannot be resold. So when you buy an REC, you’re buying proof that one hour of your electricity usage came from this specific source. No one else can claim that hour. In this way, you can confidently use renewable energy without having to add infrastructure to your own property like solar panels or a windmill. It allows you to decrease your carbon footprint, support the renewable energy market with low overhead, and actually know where your energy is coming from.

How Do RECs Help the Environment?

It’s simple, really. The more RECs are produced and sold, the more market demand is visible. It shows a higher demand for utilities produced with no fossil fuel emissions. That signals companies in the energy sector to produce more of this green energy, because people clearly want it — which in turn helps the environment because we’re ultimately cutting back on harmful energy sources.

Are RECs Mandatory?

If you’re just a regular person looking to support green electricity, you don’t need to worry about any sort of mandatory REC purchase. But some utility companies do. In many states, utility companies are required to buy more renewable electricity through a regulation called a Renewable Portfolio Standard (RPS). These standards govern how much of the energy produced from a utility company is from a green source — and if it’s not enough to match the RPS amount, they must buy RECs to make up the difference. Many times, the credits are bought from homeowners who are creating renewable energy on their own property from things like solar panels and wind turbines.

So if you want to support green energy — but you don’t have the ability to build your own renewable energy infrastructure — try buying some RECs. It’s an easy way for you to support the planet and power your life at the same time.

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