What You Should Know About Renewable Energy Credits

Generation plants across the United States create the electricity that is delivered to your home or business. 

A majority of these plants have traditionally been fueled by coal and natural gas; however, renewables continue to pave the way as an inexhaustible resource of energy. Research shows that conventional types of electric generation produce about one-third of all greenhouse gases emitted into the atmosphere. In order to reduce the carbon footprint of the electricity market, Renewable Energy Credits (RECs) have been created to guarantee investment in renewable resources. 

Here are five frequently asked questions about RECs. 

What are RECs?

Renewable Energy Credits are tradable energy certificates that represent proof that one megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource and delivered into the power grid. Each REC, which can only be counted once, is given an identification number from a certification organization. Most states establish REC goals based on annual percentages, but two base REC targets on megawatt-hour quantities (e.g., Texas and Iowa).

Where are RECs applied?

Twenty-nine states and the District of Columbia have mandatory Renewable Portfolio Standards (RPS) that determine polices and requirements for RECs. RPS policies help drive the renewable energy market, and incentivize both the increased production of renewable energy and the reduction of greenhouse gases.

When were RECs created?

States developed their Renewable Portfolio Standards at different times, with most guidelines established in the late 1990s and early 2000s. Once created, state guidelines are subject to annual review and may be adjusted to reflect prevailing objectives.

Why consider RECs?

RECs ensure that energy companies invest in renewable resources. In order to qualify as renewable, electricity sources must satisfy each state’s environmental standards. Examples of renewable resources include solar, wind, hydroelectric, biomass and geothermal power. Once an energy company, like Direct Energy, buys a REC, this guarantees that one megawatt-hour of renewable energy has been delivered to the power grid. Increasing the usage of renewables will reduce global pollution. 

Who can buy RECs and their products?

Participating states require that utility companies and third-party suppliers purchase RECs according to targeted plans. However, you may purchase beyond state mandated guidelines, including product options that meet all energy needs through green supply!

Learn how Direct Energy Business can help your business go green.

Sally Hilton is a market analyst in Direct Energy’s Small Business Unit.