Renewable Energy Certificates (RECs), sometimes called Renewable Energy Credits or Green Tags, were established to provide an equitable system for buying and using energy generated from renewable sources. RECs only apply to industrial renewable energy collection and are not meant for individual homeowners. The system created for selling renewable energy maintains the current mainframe for buying and distributing energy, while end users have no way of determining where their power came from (renewable or nonrenewable sources).
How RECs Work
Renewable energy farms, like wind farms with hundreds or thousands of turbines, similarly constructed solar panel farms, or hydroelectric dams built on lakes and rivers, collect energy from the various renewable sources they use. Instead of directly selling to the end customer, which would require being able to individually access each of the households that want to be powered by this kind of energy, they send the watts of power they collect to their nearest electrical grid and sold on the open market.
RECs Do Not Indicate Source of Power
Technically, consumers who want to purchase Renewable Energy Certificates will not be able to distinguish whether or not the power they are using is from a renewable energy farm or if it is generated by traditional means. Once the farms feed their energy supply into the electrical grid there is nothing keeping it separate from the rest of the energy. RECs simply keep track of the amount of energy that is being fed into the electrical grid by initially crediting the energy collector, or farm, and later signifying that a person did purchase energy from a renewable source.
RECs The Only Financial Incentive to Renewable Energy Producers
Customers who purchase RECs are the only financial incentive that renewable energy farms have for operating. The number of Renewable Energy Certificates they are issued depends on the amount of energy they generate. After being issued the certificates, they can only sell the amount of certificates they receive. This is how renewable energy farms make a profit for their efforts.
States with Legislated Requirements on RECs
In the US, there are two different ways a company or an individual household might end up purchasing an REC. Some states require their electrical companies to purchase a set percent of their power from renewable energy sources before passing that energy on to consumers. In this case, it is the electric companies that are credited with purchasing the renewable energy credit. The companies then use the RECs they have purchased as proof that they are in compliance with their states regulations.
States without Legislated Requirements on RECs
For states without compliance regulations, individuals can purchase renewable energy certificates on their own. People that pursue this route are generally more informed about renewable energy sources and have also looked into how they can support renewable energy by purchasing RECs. It is estimated that more people are not moving to purchasing RECs simply because they are unaware that this option exists. Individuals and companies that purchase RECs on their own can use the certificates to prove that whatever amount of their energy came from a renewable source and can get tax credits for it.
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