What are RECs?

Updated on January 24, 2023

Introduction

Renewable energy certificates (RECs) are a tradable commodity in the United States that represent the property rights to the environmental, social and other non-power attributes of renewable electricity generation. One REC is equal to 1 megawatt-hour (MWh) of electricity generated from a renewable resource and delivered to the grid. Each REC is unique and can only be used by the owner with whom it was originally issued. In most states, power utilities must purchase enough RECs from approved sources to match their customers’ annual consumption—a process known as “compliance.”

What exactly is a renewable energy certificate (REC)?

Renewable energy certificates (RECs) are certificates that represent the environmental, social and other non-power attributes of renewable electricity generation. When you buy a REC, you are buying the environmental attributes of power generated by wind or solar facilities. These certificates can be sold separately from the electricity itself and allow buyers to purchase the environmental attributes of renewable electricity generation.

This market allows buyers to purchase the environmental attributes of renewable electricity generation through third party certification agencies or directly from producers.

How do RECs work?

RECs are an accounting system that tracks the environmental benefits of renewable energy. They’re sold by power producers (like wind farms or solar arrays) to utilities, who then sell them to consumers as certificates for renewable power generation. Utilities use RECs to meet state renewable portfolio standards (RPS), which require utilities in certain states to produce a minimum amount of electricity from renewable sources.

The idea behind RECs is that they give consumers more control over their energy choices and encourage purchases of green power, while also providing a market incentive for more clean energy development. The way they work is simple enough: when you buy an electric product with an associated REC, your utility will retire the certificate and credit your account with its value in kilowatt-hours. Your utility then goes back out into the marketplace and buys another certificate on your behalf; this new one can be used toward your total RPS requirement or sold on the open market if it was already retired previously by another consumer’s purchase before yours.

 

RECs Attributes: An in-depth analysis
The attributes of an REC are important for tracking, verifying, and trading renewable energy certificates. 

The most important attribute of an REC is the Certificate Data. It includes the type of renewable energy, the tracking system ID, the renewable fuel type, the renewable facility location, the nameplate capacity of the project, the project name, the project vintage (build date), the certificate (generation) vintage, the certificate unique identification number, the utility to which the project is interconnected, the eligibility for certification or RPS, and the emissions rate of the renewable resource. REC Certificate Data can have more information than this, too.

The tracking system ID is used to trace the RECs that are being traded. This helps to ensure that any RECs that are being traded are legitimate. The emissions rate of the renewable resource is also important, as it allows buyers and sellers of RECs to be aware of the environmental impact of the renewable energy that they are trading. 

The certificate unique identification number is used to verify that the REC is authentic and that it has not been altered or tampered with in any way. This ensures that any RECs being traded are legitimate and can be trusted. 

Finally, the eligibility for certification or RPS is important as it allows buyers and sellers of RECs to know whether or not the renewable energy being traded is eligible for certification or RPS. This helps to ensure that the renewable energy being traded is of good quality. 

Overall, the data attributes of an REC are important for tracking, verifying, and trading renewable energy certificates. They provide important information and help to ensure that any RECs being traded are legitimate and can be trusted.

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Legal Basis of RECs

RECs are legally binding contracts between the seller and the buyer. This means that if you buy RECs from a producer, then those RECs belong to you. They can be traded on an open market and used to meet compliance requirements for renewable energy.

REC laws are different in each state, and even within states they can vary depending on whether you’re buying electricity or RECs. In some places you may need to buy RECs from a utility or other energy provider that offers renewable energy as one of their options. Other times, it will be easier to purchase directly from a producer of renewable energy.

What is the Difference Between RECs and Offsets?

There is a difference between RECs and offsets. RECs are the property rights to the environmental, social and other non-power attributes of renewable electricity generation. One REC is equal to one MWh of electricity generated from a renewable resource and delivered to the grid. The term “green power” can be misleading because it refers only to renewable sources (such as wind or solar), not necessarily environmentally friendly sources (such as hydropower). Offsets are used when you want to purchase carbon dioxide reductions outside your company’s operations, such as by funding reforestation projects in Brazil or methane capture at landfills in California.

What is an Offset?

An offset is a certificate that represents a reduction in greenhouse gas emissions from the atmosphere. Offsets can be purchased by individuals, companies, and governments to compensate for their carbon footprint. These units can then be traded through the Chicago Climate Exchange (CCX) or other exchanges that specialize in these types of transactions.

A Quick Summary: RECs

RECs are: a tradable commodity. They represent the environmental, social and other non-power attributes of renewable electricity generation. RECs are created when electricity from a renewable energy source goes onto the grid – for example, when an individual purchases solar panels or uses technology that serves as distributed generation at their home or business.

Purchase of an REC grants you: a specific amount of environmental benefit—in this case, one MWh of solar power going into your local energy mix—and can sell it on the open market if your needs change in any way. They are commodities traded on exchanges just like stocks or bonds and have value based on demand for clean energy sources in different parts of the world.

RECs give investors: exposure to growing global markets while benefiting both themselves and society through cleaner air pollution levels thanks to reduced carbon dioxide emissions as well as other positive environmental impacts such as habitat protection (for wind farms), reduced water usage (for hydroelectric plants) and no hazardous waste left behind after construction has been completed at sites where solar arrays were installed.