How Renewable Energy Certificates Work
Renewable Energy Certificates (RECs), also known as Renewable Energy Credits or green tags, represent the green or renewable attributes of energy produced by certified renewable resources. A REC represents one megawatt-hour (MWh) of electricity generated by a qualified renewable energy resource like a wind turbine, geothermal plant or solar facility.
RECs can be sold, traded or bartered, and the owner of the REC can claim to have purchased renewable energy.
The RECs and the electricity produced by a certified renewable resource can either be sold together (bundled) or separately (unbundled). The purchase of a REC buys the "greenness" of that energy.
Some states have renewable portfolio standards (RPS), a state policy requiring that a minimum amount (usually a percentage) of the electricity each utility delivers to its customers comes from renewable energy. In the future, there may be similar federal standards.
In states with REC programs, a green energy provider (a wind farm, for example) is credited with one REC for every 1,000 kilowatt-hour (kWh), or one MWh, of electricity produced. An average residential Idaho Power customer uses about 1,050 kWh a month.
A certifying tracking system gives each REC a unique identification number to ensure it's used only once. The electricity produced by the renewable resource is fed into the electrical grid and the associated REC can then be used, held or traded.
REC prices depend on many factors including:
- Location of the facility producing the RECs
- Whether there is a tight supply/demand situation
- Whether the REC is used for renewable portfolio standards (RPS) compliance
- Type of power
- Bundled or unbundled.