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Renewable Energy Credits (RECs) are financial instruments used to offset the indirect greenhouse gas emissions of an organization while funding the development and operation of renewable energy resources. The story of RECs in the US begins in Texas, the first state to implement a Renewable Portfolio Standard (RPS) back in 1999. Texas law required that a certain amount of the electricity consumed within the state come from a renewable energy source at a future date, driving the local utility companies to purchase RECs from renewable power plants to comply. Since then, dozens of US states and many countries around the world have established their own RPS and purchase RECs to comply with those standards.
Soon a voluntary market emerged for purchasing RECs in the context of corporate sustainability. Today, the demand for RECs is as high as the number of companies establishing their own internal targets for renewable energy continues to increase. RECs are a simple and cost-effective way for most companies to meet their sustainability goals. RECs also provide transparency and credibility to a company’s environmental claims as certifying agencies, such as Green-e, track the ownership trail and eventual retirement of each REC.
The US has multiple, independent electricity grids that are interconnected to some degree. This allows RECs to be sourced from one part of the country and applied and claimed against electricity consumed anywhere else in the country. There is also an established, over-the-counter market for RECs where banks, brokers, traders, and end-users such as utilities and competitive suppliers, transact with one another.
The team at 5 works closely with clients to determine the most important factors for any environmental sustainability effort including the geographic location of the facilities, the size of the annual electricity requirements, and the specific sustainability targets established by the client. For most clients, REC purchases are the starting point on their path toward more sustainable operations. RECs have a long track record of decarbonizing electricity generation through a market mechanism for energy buyers to make environmental claims that support renewable power projects.
RECs are also growing and rapidly changing. New attributes are being assigned to RECs at the request of large corporate buyers, like those in the RE100 (a global group of businesses committed to 100% renewable electricity). There are also emerging markets for other types of environmental commodities beyond RECs, such as Carbon Offset Credits, which generate their own set of unique environmental claims related to “net zero emissions”.
RECs are an exciting and evolving aspect of the energy industry that 5 is well-equipped to navigate for clients.
Contact Us to explore the Renewable Energy Credit options available for your business.