Renewable Energy Certificates Offer Quick, Low-Cost Way to Meet Goals

November 30, 2004

A Renewable Energy Certificate (REC), also known as a Tradable Renewable Certificate (TRC) or "green tag," represents the environmental, social, and other positive attributes of power generated by renewable resources. One REC is created with each megawatt-hour of renewable electricity generation. The RECs represent the "renewable" attribute of the electricity generation, including, for example, the reduced emissions from renewable electricity generation compared with those from conventional generation. These attributes may be sold (and, of course, purchased) separately from the underlying commodity electricity. When the REC is sold separately from the electricity, the actual power generated is no longer considered "green" and is treated like any other commodity electricity. RECs can also be re-combined with other generic electricity to create a renewable energy product.

Because RECs can be separated from the underlying electricity, they can be purchased from any location, regardless of the location of the original generation, enabling federal agencies to choose renewable power even if their local utility or power marketer does not offer a green power product. Although theoretically there are no geographic constraints on buying RECs, accounting systems to record and track the exchange of certificates are not yet available everywhere. In addition, the location of environmental benefits and/or local economic development may be important to some purchasers. A variety of REC products are available from local and national sources.

Customers do not need to switch from their current electricity supplier to purchase RECs, and they can buy RECs based on a fixed amount of energy (or carbon footprint) rather than on their daily or monthly load profile. Because certificates are independent of the customer's energy use, load profile, and the delivery of energy to the customer's facility, they provide greater flexibility than purchasing energy and attributes bundled together as renewable power. One drawback to RECs is that they do not currently offer the same financial hedge value that some other green power products provide (although GSA is working to create such a REC product).

Price premiums for certificates may be lower than those for renewable electricity products, for several reasons: (1) RECs have no geographic constraints and therefore can provide access to the least expensive renewable resources; (2) the supplier does not have to deliver the power to the REC purchaser with the associated transmission and distribution costs; and (3)  the supplier is not responsible for meeting the purchaser's electricity needs on a real-time basis.

The Defense Energy Support Center, General Services Administration, and Western Area Power Administration all have experience with REC purchases and can work with your agency to complete a purchase that meets the renewable purchase requirements of EO 13123 within a couple of months. In general, agencies have found that RECs provides a quick, low cost way to meet the FY 2005 renewable goal.

For more information on RECs, please contact David McAndrew, 202-586-7722, david.mcandrew@ee.doe.gov.