What are renewable energy credits (RECs)?
A renewable energy credit is a certificate that represents the energy created by renewable energy sources. Renewable energy credits (also known as renewable energy certificates or RECs) aren’t a way to purchase energy itself—instead, these certificates are a non-tangible item that represent the property rights to a renewable energy source and its environmental benefits. They prove that the electricity used by a household or business comes from a renewable energy source, most commonly wind power and solar power, and allow buyers to use renewable energy without installing renewable energy systems (like solar panels). Each REC has a unique tracking number with information about where it was generated, what type of renewable source it came from, and the date that it was generated.
How do renewable energy credits work?
RECs work by tracking where energy comes from. When your home or business receives physical electricity through the utility grid, there’s no way to tell where the energy came from or how it was generated. RECs work by substantiating the claims that a company, office, or household uses renewable electricity. Once generated, renewable energy certificates can be kept or sold. When an REC is bought, the buyer becomes the owner of that renewable energy source. Therefore, that buyer can claim that the electricity they consume comes from a renewable energy resource with minimal or zero emissions. However, an REC can only be sold one time. The market value and worth of an REC varies greatly, but the estimated average cost for voluntary RECs in 2021 was $3.00 per credit. By buying a REC, you’re able to get renewable energy into your home without having to install or maintain an in-home renewable energy source (like an air pump or wind turbine). Instead, you can simply switch providers and enroll in a renewable energy plan like Indra Energy to go green and reduce your carbon footprint without any complex equipment or expensive installation.
How are renewable energy credits generated?
RECs are created when renewable energy sources deliver electricity to the grid. To be more precise, a single renewable energy credit is generated whenever a renewable energy source (like a solar panel or wind turbine) produces one megawatt-hour (MWh) of electricity and delivers it to the grid. For instance, if a geothermal heat pump produces 10 MWh of electricity, then the owner of the pump has ten renewable energy credits to keep or sell.
How to Get or Purchase Renewable Energy Credits
You can get RECs by generating, purchasing, or re-bundling them. There are three main ways to get RECs as a business owner or homeowner. Firstly, you can generate your own RECs by installing a renewable energy source in your home—like solar panels, heat pumps, or mini wind turbines. If you want to generate renewable energy in your home without installing equipment, you can switch from your electric energy company to a renewable energy company like Indra Energy. Indra Energy is committed to 100% renewable energy plans, and you can quickly switch from your local utility company to their environmentally-sustainable service with zero hassle. Plus, Indra Energy offers both month-to-month and fixed rate plans. If you’re still unsure about using renewable energy in your home, you can try it out with one of the monthly intro variable rate plans from Indra Energy. Secondly, you can purchase RECs from utility authorities in your city that offer green power programs—search “buy renewable energy credits + [your city/town]” and look for certified REC providers. Alternatively, you can get involved in re-bundling, which is a more complicated practice that’s primarily used by corporations. RECs can be purchased as “bundled” or “unbundled” from the electricity that produced them. If you purchase unbundled renewable energy credits, you can then contractually re-bundle the RECs with electricity from another project. In this process, the RECs from one renewable electricity project are sold and replaced by new, cheaper RECs from a separate renewable energy project. This strategy (known as REC arbitrage) is used by electricity consumers that generate, buy, and sell RECs with two main goals in mind: to decrease the cost of their renewable electricity use and to prove their claims about renewable electricity use and carbon footprint reduction.
Why should you buy renewable energy credits?
Consider RECs if you want evidence that you’ve reduced your carbon footprint. RECs have numerous benefits for both business and individual households as they give you a way to prove that you’re using renewable energy without installing solar panels or other renewable energy options. If you’re an individual, you can feel satisfied that you’re reducing your environmental impact and know exactly where your electricity comes from—without having to go through the trouble of installing solar panels. In addition, creating and buying RECs helps to support the renewable energy market. It shows companies and government entities that there’s a demand for renewable energy systems, promoting the growth of environmental consciousness nationwide. If you run a business, you can use RECs to show that you’ve met your carbon emission goals. Some businesses (like Whole Foods and Starbucks) are voluntary REC buyers—i.e., they choose to purchase RECs in order to prove that they’re environmentally conscious. Others are compliance REC buyers, meaning that they’re legally obligated to show where their electricity comes from. Ultimately, the best benefit of using RECs is helping the environment. RECs encourage renewable energy use, as opposed to fossil-fuel based greenhouse gas emissions and other pollutants. Renewable energy is cleaner, safer, and better for the environment. So, if preserving the environment and keeping our planet healthy are issues that you care about, then RECs may be a great fit for you and your home or business.
RECs vs. Solar RECs
Solar renewable energy credits are RECs created from solar panels. Also referred to as solar renewable energy certificates, SRECs are a sub-type of RECs. RECs can be generated by any type of renewable energy source, while SRECs are only generated when electricity is produced by solar panels. Like RECs, SRECs can be sold to electrical utility companies once generated. In certain markets, SRECs can be worth from $200-$300 USD.
Renewable Energy Options for Homeowners
Switch to an electricity supplier that uses renewable energy. If you live in a state with a deregulated energy system, you have the right to choose an electricity supplier that best fits your needs and your priorities. If you’re passionate about using renewable energy to power your home, then switching to a renewable energy provider like Indra Energy is one of the cheapest and easiest ways to do so. Indra Energy is 100% committed to renewable energy, so you can rest assured that all of the energy being used to heat and power your home is coming from sustainable sources (and not fossil fuels!). Plus, switching your electricity provider is one of the only ways to bring renewable energy into your home that doesn’t require the big up-front costs involved in installing equipment. Indra Energy also offers a month-to-month intro variable rate plan, so you can try out their services before committing to a 6- or 12-month plan. As an added bonus, Indra Energy can tell you exactly how much money you’ll save by switching to renewable energy. In the Boston area, for instance, Indra Energy currently provides a variable rate offer that’s 17% lower than the utility's current electric supply price to compare (PTC) for the first two months of service. You can save some additional money (along with energy!) with Indra Energy’s customer rewards program, where customers earn points every month to spend on thousands of retail, dining, and entertainment experiences (valued at $1100 USD per year).
Make energy efficiency updates to your home. Before making big changes to your home, start small by updating your home with tools and features that will make your energy production and use more efficient. For starters, get a home energy assessment from a qualified professional. This assessment will tell you what features of your home are allowing energy to go unused or to be used inefficiently. Depending on the results of your assessment, you might consider the following energy efficiency updates to save energy and support your renewable energy use: Install proper insulation and air sealing Install energy-efficient windows (with double- or triple-pane glass) Install energy-efficient kitchen appliances and lighting systems. Implement smart water use habits to save water Rely on available daylight before turning on lamps and overhead lights
Install a geothermal or air source heat pump. Geothermal heat pumps and air source heat pumps both naturally extract heat from the environment to be used as energy—giving your home hot water and natural heat. While geothermal heat pumps draw heat from the ground, air source heat pumps take heat from the surrounding air. These pumps work in all temperatures—air pumps have been shown to work at temperatures well below freezing. Both types of heat pumps are forms of renewable energy, but geothermals pumps are considered more energy efficient due to ground temperatures being more stable than air temperatures. However, geothermal heat pumps are much more expensive and require a much more complex installation process.
Purchase a wind turbine for your home. When you picture a wind turbine, you’re probably thinking of the massive, skyscraper-sized pinwheel structures you see while driving through open farmland. However, smaller wind turbines are available as an excellent renewable energy source for homeowners. They can be installed as a free standing pole or directly onto the building. As the wind blows, the blades will turn, driving the internal turbine and generating power.
Use a biomass system to produce heat and hot water. Biomass heating systems use organic materials like wood pellets, chips, and logs, to create heat and hot water. In a biomass system, these organic materials are burned in order to generate electricity in your home. Compared to fossil fuels like coal and oil, the wood burned in a biomass system generates much less carbon—about the same amount as the tree absorbed during the time that it was growing.
Install a solar power or solar heating system. Solar power can be used as a renewable energy source through solar panels and solar water heaters—and it doesn’t even have to be sunny for these systems to work efficiently! Solar photovoltaic panels are one of the most recognizable types of renewable energy. The panels can be installed on the roof, and they convert the sun’s rays into energy that can be used to warm your home, power your devices, and provide hot water. However, installing solar panels as a homeowner can be a costly and time-consuming endeavor (even though solar panels will likely still save you money in the long-term). As an alternative, solar water heaters use sunlight channeled through solar collectors to capture and retain the sun’s heat in an insulated storage tank. This tank then heats the circulating water to provide it to your home. Solar water heaters, however, do require a backup system when there’s insufficient sunlight.
Try a hydroelectric system if you live near a lake or river. Hydroelectric systems use downward-flowing numbers to generate electricity. In-home hydroelectric systems aren’t an option for everyone, since they require water. However, if you live in a home that’s on a river with a 1 metre (0.00062 mi) drop, you may be able to generate enough electricity to power your entire home with a hydroelectric system.
FAQs About Renewable Energy Credits
What is renewable energy? Renewable energy is energy generated from natural sources, like the sun, wind, biomass, and water. Typically, renewable energy sources are things that can be naturally replenished and don’t emit harmful greenhouse gasses. Often referred to as “green” or “clean” energy, renewable energy is a step away from traditional energy sources like fossil fuels (coal and oil) that emit greenhouse gasses and do irreparable harm to the environment.
How are RECs priced? RECs are bought and sold on two different markets: compliance markets and voluntary markets. Compliance market prices are typically driven by renewable portfolio standards, while voluntary markets are usually driven by climate-related sustainability goals. The prices in each of these markets vary greatly depending on these factors as well as national and statewide economics, but compliance markets are typically more expensive than voluntary ones.
What is the legal basis of RECs? RECs are legally designated by the government as a way to substantiate claims in the U.S. renewable electricity market. When a corporation, household, non-profit, business, or other organization has to or chooses to legally prove where their energy comes from, renewable energy credits are the only way to do it. RECs are supported by governmental entities, regional electricity authorities, NGOs, trade associations, and U.S. case law.
What is the difference between RECs and carbon offsets? Offsets and renewable energy credits both represent the environmental benefits of actions taken to reduce greenhouse gas emissions. RECs represent 1 MWh of generated renewable electricity, while offsets represent a metric ton of avoided or reduced emissions. Fundamentally, an REC and a carbon offset have different criteria for qualification and crediting—RECs are focused on crediting the creation of good energy, while offsets are focused on crediting the reduction of harmful energy.
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