People with renewable energy systems or considering installing one and those who live in communities that have or recently voted for Municipal Aggregation of their electricity will be faced with a term that can be confusing - Renewable Energy Certificates/Credits, often referred to as RECs.
All energy production generates at least two outputs. Traditional energy, coal and nuclear, generate electricity and pollution/waste. Renewable energy systems, like solar arrays and wind turbines, generate two outputs as well – electricity and RECs. The RECs are a mechanism developed by the EPA to encourage development of non polluting energy projects. For every 1000 k Wh (1 MWh) of renewable energy produced, one REC is generated.
RECs are tradable, marketable commodities that are sold to companies, states, cities, or other entities that have established a Renewable Energy Standard or other commitment to renewable energy. If you travel, you may have seen an option to “green” your travel by purchasing these credits or you may live in a community that offers a “green” energy option for your electricity usage.
The sale of RECs provides a revenue stream for solar and wind developers that contribute to the financial viability of a project. Financing will often include a contract of 5-20 years for the RECs produced by the project. REC pricing fluctuates due to supply and demand, but in areas where it is an effective mechanism to spur development, pricing is typically in the $100-$400 range.
A project can sell RECs as long as it is operational, so a wind farm that was built 10 years ago can continue to sell the RECs it generates. These RECs provide additional revenue to the project developer, but do not support NEW development and are often sold cheaply. We are already enjoying the environmental benefits of this project and they have already received the revenue to finance, so rather than purchase these “cheap” RECs, consider purchasing RECs from a project that needs the additional revenue in order to be developed.
Illinois has a Renewable Portfolio Standard to procure 25% of its energy from renewable sources by 2025. RECs are the mechanism by which the state achieves this percentage. Unfortunately, Illinois does not have an in-state preference, which means they don’t have to purchase RECs from Illinois based solar and wind projects. This hurts the Illinois economy by supporting renewable energy development in other states rather than in Illinois and prevents the reduction of environmental and health problems created by our continued reliance on fossil fuel based energy.
So when purchasing RECs, buy Illinois and support new development!