World Resources Institute WRI

The bottom line on renewable energy certificates

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Renewable Energy Certificates (RECs) provide businesses a means to support renewable energy generation and meet clean energy goals. This fact sheet answers some basic questions about RECs and REC purchasing. What are RECs? Renewable Energy Certificates (RECs), also known as “green tags,” “green certificates,” and “renewable energy credits,” are tradable instruments which can be used to meet voluntary renewable energy targets as well as to meet compliance requirements for renewable energy policies. A REC is a certificate that indicates the generation of one megawatt hour (MWh) of electricity from an eligible source of renewable power. Each REC denotes the underlying generation source, location of generation, and year of generation (a.k.a. “vintage”). RECs are often considered to represent a claim to the environmental attributes associated with renewable energy generation.

What are the differences between compliance and voluntary markets for RECs?

Policies that require electricity service providers to incorporate a minimum level of renewable energy in their electricity supply create compliance markets or mandatory markets for RECs. These energy policies, such as state Renewable Electricity Standards (RES) and Renewable Portfolio Standards (RPS), specify the eligible energy resources or technologies that can be utilized and describe how electricity service providers must comply. (For more information on RES/RPS, see Issue 5 of The Bottom Line.) Electricity service providers must produce or obtain RECs in an amount suffi cient to meet their renewable energy obligations under an RES/RPS.

Voluntary markets for RECs, while not mandated by law, have developed in response to energy user preferences for green electricity. Retail, commercial, and industrial energy users can meet voluntary renewable energy goals and support the deployment of green power through the purchase of RECs.

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