Renewable Energy Certificates for Project Financing

Renewable energy certificates (RECs)—also known as green tags and renewable energy credits—can be used to help finance a tribal energy project.

How It Works

Electricity produced from renewable energy can be used by the producer or sold as a commodity to others. Unlike fossil-based generation, which can emit large amounts of air pollution — such as carbon dioxide, sulfur oxides, nitrous oxides, heavy metals, and other toxic substances — renewable-based generation is largely pollution free. Today, these environmental benefits are increasingly being quantified and marketed.

When electricity from a renewable energy producer is used or sold into the power markets as simply electricity, without taking any environmental credit for the source of that power, the environmental attributes of that renewable energy can be sold or traded separately as a commodity, called RECs or green tags.

RECs or green tags provide an additional revenue stream to the project and can be sold to companies and consumers anywhere in the country. In this way, companies and consumers can choose green power even if their local utility does not offer a renewable-based power product.


The revenue generated by selling RECs or green tags can significantly benefit the finances of a renewable energy project. For example, the large 750-kilowatt wind turbine built on the Rosebud Sioux reservation was partly paid for with a major green tags purchase by Native Energy, one of the leading U.S. marketers of green tags. A unique aspect of the Native Energy program is their ability and willingness to purchase the long-term green tags generation for the economic life of a project, instead of on a year-by-year basis. For the Rosebud Sioux, this meant a check worth $200,000 in return for the purchase of green tags generation from the turbine for years 5 through 20. (Years 1 through 5 had already been sold to Ellsworth Air Force Base.)

In another example from late 2003, a green tag marketer called Mainstay Energy was offering a one-time payment of $100 per kilowatt of solar energy capacity or $50 per kilowatt of wind power capacity for recent projects installed in New England. That offer was mainly aimed at smaller projects installed by consumers or businesses. Developers of larger projects will typically sign a contract with a green tag marketer to generate a constant income based on the actual amount of power produced. Although green tag marketers rarely disclose the amount of money they are paying for the green tags, they are currently selling them for as low as 1.5 cents per kilowatt-hour or as much as 4 cents per kilowatt-hour.


However, RECs or green tags have one drawback: the buyer of the green tag must trust the seller's promise that the green tag represents actual renewable energy generation. Green tags could easily be abused. For instance, a renewable power provider could sell the electricity to local consumers as green power and then also sell green tags for the same power — essentially selling the renewable attributes twice.

To build trust in RECs or green tags and other green power products and to prevent their abuse, the non-profit Center for Resource Solutions has established Green-e, a voluntary certification and verification program for green power products.

Additional Resources

The following are additional sources of information on RECs or green tags:

  • Green-e — Independent consumer protection program for the sale of renewable energy and greenhouse gas reductions in the retail market.
  • The Green Power Network — Information from the U.S. Department of Energy on REC retail products, commercial and wholesale marketers, and prices.