Renewable energy credits, also called renewable energy certificates or RECs, are tradeable, non-tangible commodities that represent energy generated from a renewable source. Organizations can purchase RECs along with their electricity. RECs certify that a certain amount of electricity comes from renewables. 

Understanding Renewable Energy Credits 

One REC represents proof that 1 megawatt-hour (MWh) of electricity was generated by a renewable energy source. This proof is necessary because few grids emanate from just one power source. And because electrical grids typically derive energy from numerous sources, it’s impossible to know the provenance of the energy powering a given building.  

By purchasing a REC, an organization takes responsibility for renewable energy generation, meaning that energy is being generated on its behalf. The more RECs that buildings and businesses purchase, the more demand there is for renewable energy. This provides a benefit to both the renewable energy sector and to the buildings and the companies that own them. RECs play a crucial role in accounting, tracking, and assigning ownership to renewable electricity generation and use. 

Benefits of Renewable Energy Credits 

RECs offer several benefits, including: 

Supporting Sustainable Energy Generation 

When you purchase a renewable energy certificate, you support clean energy. The money you pay helps cover the cost of generating renewable electricity and it demonstrates demand for green power. This helps further our collective sustainability goals, diversifies our energy supply, and reduces overall greenhouse gas emissions. 

Allowing a Greater Number of People and Organizations to Support Clean Energy 

Not everyone who wants to support renewable electricity can do so directly. Budgetary, logistical, and regulatory reasons might prevent a building or organization from installing the necessary infrastructure to benefit from solar or geothermal energy. But by purchasing RECs, they can still support renewable power. 

Encouraging Knowledge of the Electrical Grid 

Apart from the environmental benefits, learning about and buying RECs helps building owners and businesses better understand the electrical grid. Knowing more about how the grid works can help people unlock savings and energy efficiency. For example, a building owner might learn about demand-side energy management and discover the best off-peak hours to use energy. 

Impressing Investors and Consumers 

People want to support green energy. Potential investors might be more inclined to buy into your company if they know you’re forward-looking and have begun preparing to move away from fossil fuel use and toward a renewable resource. Consumers might be likelier to buy from you if they know their purchase won’t significantly add to carbon emissions. 

Key Considerations When Purchasing Renewable Energy Credits 

Who should buy RECs? And why? 

Well, if you want to support renewable energy and sustainability and environmental goals, RECs are a great option. However, so are solar panels. If you’re a building owner and you install a solar panel on the roof of your building, you support sustainability and the renewable energy sector while benefiting from free solar energy. 

Unfortunately, this isn’t always possible. It’s a question of whether you have the infrastructure and permissions to benefit from solar power — as well as the budget. Panels often require an expensive upfront investment. Even if it’s a wise investment that will pay for itself, not every organization and property owner can provide that outlay. 

However, it’s wrong to pose this as an “either or” scenario. Buildings can benefit from both solar panels and RECs. It’s important to look into your renewable energy procurement options to find out the best path forward for your building or organization. 

FAQs About Renewable Energy Credits 

Here are some frequently asked questions regarding RECs: 

Are Renewable Energy Credits Worth It? 

REC purchasers may do so voluntarily or for compliance. Some major companies buy RECs voluntarily because they believe in reducing emissions and sustainability. They may also think it’s a valuable selling point for their products/services. 

Electrical utility companies, on the other hand, sometimes have obligations to have a certain percentage of their energy come from renewable resources. Some states have Renewable Portfolio Standards (RPS) that set requirements for renewable energy usage. 

How Do Renewable Energy Tax Credits Work? 

Individuals or businesses that purchase RECs might be able to claim a tax deduction or receive a tax credit for supporting renewable energy projects. By partnering with an energy procurement company, you can learn about the potential tax incentives for purchasing RECs in the state where your property or properties are located. 

What Is the Difference Between RECs and Offsets? 

Both carbon offsets and RECs represent the environmental benefits of actions that help reduce greenhouse gas emissions. Offsets represent a metric ton of emissions avoided or reduced, while RECs represent 1 MWh of renewable electricity generation. It’s possible to offset fossil fuel usage in a number of ways, but RECs directly represent renewable energy generation. While they’re popular among individuals and organizations with similar sustainability goals, RECs and offsets are different instruments with different effects. They also have different criteria for qualification and crediting. 

What Is REC Arbitrage? 

Consumers may use renewable energy certificate arbitrage to meet two objectives: 

• To decrease the cost of renewable electricity. 

• To support renewable electricity, use and carbon footprint reduction claims. 

REC arbitrage is popular with those who have self-financed renewable electricity projects and consumers who have bought renewable electricity directly from a renewable electricity project, such as through a power purchase agreement. 

What’s the Difference Between Recs and SRECs? 

Solar renewable energy certificates (SRECs) are another form of renewable energy credit. SRECs come from energy generated by solar panels and only solar panels. Like RECs, SRECs are tradable commodities for owners of renewable energy facilities. 

Some state Renewable Portfolio Standards have “solar carve-outs.” An RPS with a solar carve-out mandates that a certain percentage of the state’s electricity production must come from solar panels. SRECs account for this solar energy. 

EnerConnex Offers Renewable Energy Procurement Services 

At EnerConnex, we know the intricacies of federal, state, and utility renewable incentives, including RECs. We can help you understand your eligibility for tax credits and rebates. 

We also source different financing options, including cash purchases and Power Purchase Agreements, to help fund your renewable energy goals. Explore EnerConnex Energy Services for Businesses to discover how we can help you.