Renewables 102: Renewable Energy Credits
Posted on February 6, 2014 by Heather Kendall
Tags, Climate and Conservation, Consumers and Utility Customers, Generation, Transmission, Distribution, Legislative & Political
As discussed in our recent Renewables 101 blog post, policies in Oregon have been implemented to meet our region’s growing energy needs for the purposes of reining in the damaging climate changing effects of greenhouse gas emissions and keeping rates affordable in the long-term. An important tool built into those policies – from the Renewable Energy Standard (RES) to voluntary renewable options – that supports the development of renewable resources is the Renewable Energy Certificate (REC). A REC is a “unique representation of the environmental, economic, and social benefits associated with the generation of electricity from renewable energy sources that produce qualifying electricity” (from the Oregon Department of Energy’s website). One REC is created in association with the generation of one Megawatt-hour (MWh) of qualifying electricity, i.e., electricity generated from renewable resources.
Renewable Energy Certificates are tradable market mechanisms, just like a company’s stock or even currency. They can be used to meet compliance requirements for various renewable energy policies as well as other voluntary efforts. The certificates are not necessarily tied to the physical delivery of the electrons produced by a certain renewable energy facility (although they could be). They can be used at a much later time after the electricity is actually generated. RECS are designed to create value on the environmentally-friendly attributes of the generation of the renewable energy in addition to the energy itself. They provide a way for the benefits of clean renewable energy to be accessible to those who place value on the positive attributes of that renewable energy. There are two ways in which REC’s can be exchanged: “bundled” and “unbundled.” When a REC is bundled, the entity that is acquiring the REC is receiving the “environmental, economic and social benefits” represented by the REC as well as the actual renewable energy for which the certificate was issued. An unbundled REC is a renewable energy certificate for qualifying electricity that is acquired through purchase or other transfer without also acquiring the electricity. In both cases, once the REC has been generated, purchased, or transferred, it is immediately tracked until it is ultimately “retired,” assuring that the REC is only applied once and no double counting occurs.
RECs help with the financing of renewable energy facilities and support their long-term operation. They do this because they have value in a regulated marketplace. The initial purchase of a REC goes to the renewable energy facility developer to help build the facility and that facility can generate more RECs that can be purchased to support its ongoing function. A REC can be purchased or traded until it is retired to comply with a policy or in conjunction with a voluntary program such as Portland General Electric’s Green Source program or Pacific Power’s Blue Sky program.
Oregon’s RECs are managed by an independent third party called the Western Renewable Energy Generation Information System (WREGIS). WREGIS tracks renewable energy generation using verifiable data, creates RECs, and acts as a “bank” through which RECs are exchanged. Each REC designates the energy source of a particular megawatt hour, the location and date of its generation, and environmental emissions.
To provide an idea of how RECs are used, Oregon utilities can generate a REC by generating qualifying power and then bank it for use to meet the Renewable Energy Standard. The utilities can also purchase RECs from other generation entities and apply these RECs (with some limitations) toward the standard.
Oregon utilities can also use RECs to provide an avenue for customers who want to assist in increasing the demand for renewable energy. The utilities purchase RECs in response to their customers’ participation in the voluntary renewable energy programs. Those “orders” for renewable energy (above and beyond the renewable resources the utilities are required to purchase by law) make sure that more renewable energy is delivered to the grid, reducing the mix of fossil fuel-based energy being used overall. You can read more about the voluntary programs here.
RECs are an important tool in developing more renewable energy. The National Renewable Energy Laboratory (NREL) is a very reliable source of information about RECs and their uses. Their paper “The Role of Renewable Energy Certificates in Developing New Renewable Energy Projects” from June 2011 is a great resource to learn more!
To keep up with CUB, like us on Facebook and follow us on Twitter!
04/05/17 | 1 Comment | Renewables 102: Renewable Energy Credits