REC Trading

Since all electricity performs the same function, RECs are not restricted to use by the energy producer. Individuals or companies who wish to positively impact the environment can buy these RECs from the energy producers, thereby supporting the advancement of green energy.

The national power grid receives power from many different sources, including renewable and non-renewable energy providers. Traditional non-renewable energy sources account for 98 percent of the energy consumed in the United States and are often subsidized by state and local governments. Subsidies and market domination can make it difficult for emerging renewable energy producers to get a foothold in the market. How can renewable energy producers get the support they need to survive?

When energy is generated from a renewable energy source, the government can offer tradable renewable energy certificates, or RECs, to the energy producer. Also known as renewable energy credits or greentags, renewable energy certificates provide key information about the type of energy put into the electrical grid. According to the Environmental Protection Agency, RECs usually include information such as:

• The renewable resource that produced the REC
• The date the REC was created
• The date the REC generator was built
• The location of the REC generator
• The REC generator’s greenhouse gas emissions

Renewable energy certificates are effectively the “currency” of the renewable energy markets. They can be traded between companies in order to show that those companies have made renewable energy a priority.

Renewable energy certificates are the beneficial attributes of renewable energy packaged as a tradable product. They offer more than just power; they offer support to renewable energy sources and remove the need for dependence on non-renewable energy. RECs are a way of promoting renewable energy sources by allowing the benefits of renewable energy to be bought or sold on the market. They can be bundled or unbundled from the actual electricity produced. One REC is equal to one megawatt hour (MWh). Each megawatt hour of clean and renewable energy reduces the need for a MWh from a non-renewable source. This helps reduce the pollution associated with the production of non-renewable energy. RECs symbolize the positive impact renewable energy has on the environment and the electrical grid.