Understanding the Renewable Energy Certificate (REC)
What is a REC?
A renewable energy certificate (REC) is created when one megawatt-hour (MWh) of renewable electricity is fed into the power grid. A REC represents the positive environmental benefits associated with renewable energy generation. Renewable energy facilities generate electrons that are no different from the electrons generated by coal or nuclear. The benefits of renewable energy stem from the environmentally-friendly way in which these electrons are generated. RECs simply represent these quantifiable environmental benefits and allow the holder legitimate legal claim to them.
How do RECs work?
RECs have economic value and can be bought and sold, which allows anyone in any part of the country to support green energy regardless of local supply. When you buy a REC, you are not consuming renewable energy directly. To do so would require you either to put a renewable energy generator on-site (like a solar panel on your roof) or to build power lines direct from a project to your house or business (usually this isn’t possible). RECs were developed to remove these barriers so that consumers could directly support renewable energy projects. Since the holder of a REC is paying the premium for renewable energy fed onto the power grid, the holder can take credit for the environmental benefits associated with the renewable energy produced.
How do RECs impact the industry?
Without RECs, renewable energy projects would not be financially viable and developers would stop building them. A REC purchase signals to project developers and landowners that consumers value the environmental benefits of clean energy, and they are willing to pay for them. That signal supports existing projects, and encourages additional clean energy development.