Pranav Phatak
September 29, 2023
Renewable Energy Certificates (RECs): Everything You Need to Know
All our readers are probably aware of the benefits of green power by this point. Switching to green power or renewable energy from fossil fuels is one of the best ways to reduce greenhouse gas emissions and is a much cleaner form of energy. But what if you don’t have your own wind/hydel turbines or solar panels? How do you ensure that the energy you are receiving from the grid is coming from a green or renewable source? A Renewable Energy Certificate or a ‘REC’ would be the best alternative.
Definition
According to the Department of Energy, ‘A renewable energy certificate, or REC, is a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes of renewable electricity generation’. RECs are issued when a certified renewable energy source generates one megawatt-hour of electrical energy and supplies it to the grid. RECs allow you to purchase renewable power and assist in the growth of the renewable energy market.
2020 NGBS Includes RECs as an Option
The 2020 NGBS allows builders to purchase RECs in order to meet NGBS Green+ Net Zero Energy requirements. For our readers not familiar with the NGBS Green+ certification, this program provides additional recognition to buildings that go “above and beyond” in certain areas such as Energy, Water, Universal Design, Wellness, Resilience and Smart Homes. More information on this program can be found on our NGBS Green+ page along with our Green+ compliance handbook. Points for RECs are based on the home’s anticipated power usage in kWh. To claim points, a purchase of at least two years along with a recurring purchase plan is mandatory. The Net Zero Energy Green+ badge is awarded to buildings that achieve a Silver Level energy performance without the help of renewable energy, but with RECs purchased to balance out the building’s energy use. The badge certification is based on as-built conditions once the construction is complete, and post occupancy review is not required.
Purchasing RECs
The electricity reaching our homes comes from the national power grid. The grid gets power from all types of sources like coal, gas, solar, wind, hydro, nuclear etc. and it is impossible to determine the exact source of the power. One REC is equivalent to one Megawatt-hour (or 1000 kilowatt hour) of energy produced by a renewable source. Purchasing the REC makes you the owner of that Green Power and allows you to claim that the electricity you use originates from a renewable resource with low or zero emissions.
RECs are the currency of the renewable energy market. They can be uniquely numbered and tracked when making transactions. RECs allow individuals and businesses to opt for cleaner sources of energy and reduce their carbon footprint. There are systems that track and report transactions whenever a REC is purchased or sold. Once a REC has been purchased, it can no longer be resold. It is automatically ‘retired’ from the tracking system.
Under Chapter 7 of the 2020 NGBS, developers can opt for Renewable Energy Credits regardless of what energy path they are pursuing – expect for the Alternative Bronze and Silver Path. Builders can claim points when renewable energy is provided on a temporary basis before the building is constructed or they can go for a two-year commitment plan for renewable energy once the property is developed.
Third-Party Retailers
What if you install solar on your own rooftop and decide to sell the RECs? In that case, you cannot claim to be using renewable energy yourself. Since RECs trading takes place through a legal tracking system, they can only be claimed or bought once until before they are retired from the system. Buyers have the option of purchasing their RECS from third-party Green-e certified retailers or they can go directly to the utilities that manufacture RECs (like a solar or a wind farm). The voluntary REC prices vary widely depending on factors such as geographical location, technology used, generation date etc. According to EPA, the voluntary wholesale REC price has been declining from $1.20/MWh in 2010 to less than $0.35/MWh in 2016.
Pros and Cons
One of the challenges associated with RECs is that customers need to purchase electricity from another supplier thus paying twice – once for the REC and once for the electricity. Customers are also typically unable to link their REC purchase to a specific project of their choice. Retail RECs are mainly sourced from projects across the country, which limits the customers’ ability to make a local economic or environmental impact. Individuals or businesses need to pay close attention to the source of their REC (generation utility like wind, solar, geothermal) to match their green power goals and claims accordingly.
On the bright side, RECs greatly impact our energy grid. It encourages customers to purchase a large number of RECs in a single contract to prevent additional transaction cost. Since voluntary REC prices greatly depend on volume, location, source, and length of contract, purchasing multiple RECs at once is economical. The customers have flexibility in purchasing green power from sources located nationwide and away from their own homes. They also have the option of purchasing RECs on short term contracts – in case the building’s electric load changes.
RECs and Carbon Credits
Although similar in many ways, there is a fine line that distinguishes RECs from carbon credits. Carbon credits or carbon ‘offsets’ are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases into the environment. One credit grants the owner permission to emit one metric ton of carbon dioxide or equivalent in other greenhouse gases. Like the RECs, it encourages organizations to mitigate their carbon and GHG emission. However, businesses that sell RECs are not permitted to sell carbon credits for the same source at the same time. Both RECs and carbon offsets help achieve the same goal – to promote a cleaner and healthier environment.
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