Unbundle Electricity and Renewable Energy Certificates
A renewable energy certificate (REC) represents the attributes of one megawatt-hour (MWh) of renewable electricity that is generated and delivered to the grid. RECs are used to track and assign ownership to renewable electricity generation and use. The term unbundled REC means the non-physical REC has been separated from the physical electricity.
- Power can be sold to a utility or local spot market in competitive power markets.
- Project is in an area where landfill gas (LFG) RECs are eligible to be sold for compliance purposes under a state renewable portfolio standard.
- A voluntary purchaser is interested in purchasing unbundled RECs to meet their internal greenhouse gas reduction or renewable energy goals (in regulated* or unregulated* state).
- The project owner may be able to generate more revenue selling the electricity and RECs separately than selling them together.
- Unbundled RECs can be aggregated with other RECs through a broker which may offer a more attractive purchase to potential buyers.
- Unbundled REC sales are accessible to a wide variety of customers, with more than 400,000 customers procuring energy this way in 2021.1
- Selling separately means additional negotiation, tracking and paperwork.
- Unbundled REC pricing has been under $1/MWh since at least 2015, but increased in mid-2020 to about $1.50/MWh.1
- Retail RECs, EPA Green Power Partnership Program
- Voluntary Green Power Procurement, U.S. Department of Energy/National Renewable Energy Laboratory
- Renewable Energy Credits, Sustainable Development Strategies Group
*A state’s electricity market status can impact which options a biogas generator has to sell its electricity. Agreements with utilities could differ in length and price as compared to agreements made directly with the electricity purchasers.
- Regulated states – For biogas generators located in regulated states, utilities are the only permitted buyer of the power. Therefore, the biogas generator has two options in selling its product(s):
- Sell the project’s power and associated RECs to its utility under a power purchase agreement (PPA).
- Sell the project’s power to its utility under a PPA and sell the RECs to a REC marketer and REC buyer under a separate contract.
- Deregulated or Competitive states – In competitive electricity markets, the biogas generator can sell its power to any buyer (utility, competitive electricity supplier, corporate or institutional purchaser) located in the competitive retail electricity markets. Deal structures could include:
- Sell the project’s power and associated RECs to an energy supplier or corporate purchaser under a physical PPA.
- Sell the project’s power under a PPA and as a separate deal sell the project RECs.
- Sell the project’s power and associated RECs to a corporate purchaser under a virtual PPA (VPPA). With a VPPA, the buyer can be located anywhere in the United States since they are not taking physical delivery of the power.
- Contracts for electricity directly between the renewable energy generator and entity purchasing the power are allowed, or the renewable energy generator would contract with competitive power suppliers.
- All Areas – Regardless of how the power market is structured (regulated or competitive), projects in all states can sell RECs as a stand-alone product, “unbundled” from the organization’s electricity use of sales.
For more information on regulated and deregulated states:
- EPA Green Power Partnership Program
- Quick Electricity
1 Heeter, Jenny. U.S. Department of Energy. National Renewable Energy Laboratory. Status and Trends in the Voluntary Market (2021 data). September 15, 2022. https://www.nrel.gov/docs/fy23osti/84419.pdf.