REC Trading

According to the Environmental Protection Agency, more than half of all U.S. electricity customers have the option to buy power from renewable and alternative energy source producers. However, the rest of the country does not. The benefits of renewable energy can be sent from those areas that have a high density of renewable energy sources to those areas that do not.

Renewable energy certificates are given to producers of renewable energy to subsidize them by inserting the benefits of renewable energy into the free market. RECs can be traded from energy producer to company in order to show a company’s commitment to renewable energy or to offset any energy received from non-renewable sources. In return, renewable energy producers receive monetary value for their energy and therefore can stay operational. By making RECs a commodity to be traded, state governments allow the intrinsic value of renewable energy to go up. There is no set monetary goal for RECs. The more in demand a REC is, because of where it was produced, the energy that produced it or other factors, the higher its value will be.

Two Halves of Renewable Energy

Renewable energy certificates come in two parts. The first part of the REC is the actual electricity produced by renewable energy sources. However, electricity from renewable sources is the same as energy from non-renewable sources. Neither one is “better” electricity than the other. All energy goes into the grid and leaves in the same way. The second part of the REC is the beneficial impact renewable energy has on the environment. Renewable energy helps reduce the need for energy from non-renewable sources. A REC removes the need for 1 megawatt hour of energy from a non-renewable energy source and replaces it with energy from a renewable source. This financially supports the renewable energy source, even if the buyer of the REC is in a different state than the producer of the REC. Both the electricity and beneficial aspects of a REC can either be sold together or separately.