Unbundled Renewable Energy Certificates (RECs)
What is an Unbundled REC?
Renewable energy certificates (RECs) are tradeable, market-based instruments that represent the legal property rights to the "renewable-ness" (i.e. environmental attributes) of one megawatt-hour (MWh) of renewable electricity generation. A REC is issued for every MWh of electricity generated and delivered to the electric grid from a renewable energy resource. Electricity cannot be considered renewable without a REC to substantiate its renewable-ness. All green power supply options involve the generation and retirement of RECs.
Unbundled Renewable Energy Certificates (RECs) refer to RECs that are sold, delivered, or purchased separately from electricity. RECs provide no physical delivery of electricity to customers and as such the customer is purchasing power from a separate entity than the one selling them the REC.
How do RECs work?
Unbundled RECs are available nationally and can be sourced from a single type of renewable resource, such as solar, or from a mix of resources, such as 50% solar and 50% wind REC procurement by customers is not limited by the location of the consumer or by individual state policies. This flexibility allows organizations to support renewable energy development and protect the environment, even if bundled green power products are not locally available.
Customers purchase unbundled RECs for a forward-looking or backward-looking performance period, which is usually 12 months and can cover a calendar year, fiscal year, or other 12-month period. Sold in MWh increments, unbundled RECs must be from eligible generation dates that align with the performance period they are being applied to. Customers generally purchase the desired amount in one clump, which generally reduces the transactional cost. Customers often get to specify what type of renewable resource they would like to buy RECs from, but generally the more limitations the consumer puts on the product in terms of specific attributes, such as location of generation and resource mix, the higher the price becomes, as the supplier has fewer options to choose from.
The owner of a REC has exclusive rights to make claims about "using" or "being powered with" the renewable electricity associated with that renewable energy generation. Various regional REC tracking systems help verify REC ownership and the right to make environmental claims.
Unbundled RECs, certified by an independent third-party, offer consumers a higher level of certainty about the integrity of their purchase. In meeting specific environmental and customer protection guidelines adopted by the certifying organization, purchasers can be sure that their purchase meets nationally accepted standards for resource and product quality.
What attributes do RECs include?
RECs include several data attributes, including renewable resource type, period of generation, first date of generator operation, nameplate capacity of the project, tracking system ID, and renewable generator location. Some RECs also specify the utility that the project is interconnected to, as well as the emissions rate of the renewable resource, among other attributes.
Advantages and Challenges of Unbundled RECs
- Can purchase a large number of RECs in a single contract thus reducing the transactional costs in purchasing green power
- Can be a cost effective green power solution since suppliers are able to source RECs nationally, and can select efficient projects in region with abundant renewable energy resources
- Flexibility in procuring green power from sources across the U.S., which can be far from the customer
- Often advantageous for organizations with a dispersed electricity load, such as retail stores or those organizations with a national footprint with many stores in various electricity markets
- Generally bought with a short-term contract, which means purchase levels can be adjusted year-to-year if the organization's electric load changes
- Customer must also buy electricity from another supplier thus the purchaser is paying for electricity PLUS the RECs
- REC ownership can be hard to track, although tracking systems increasingly assist with accounting
- Organizations should pay close attention to the generation source of their RECs (eg. wind, solar) and match their green power use claims accordingly
- Customer often cannot tie their REC purchase directly to a specific project
What are some organizations that have used unbundled RECs?
- EPA video, 2015. RECs: Making Green Power Possible Exit
- EPA webinar, 2015. Understanding RECs and the Green Power Procurement Process
- National Renewable Energy Laboratory, 2015. Renewable electricity: how do you know you are using it? (PDF) (2 pp, 543K) Exit
- Center for Resource Solutions, 2015. The Legal Basis of RECs (PDF) (25 pp, 351K) Exit