Annie Beall and Ellen Ross are supported by the Sustainable Development Strategies Group (SDSG), which is a tax-exempt nonprofit organization established under the laws of the State of Colorado to conduct research, education, and implementation in support of more sustainable management of natural resources. SDSG works in many countries. For more information on the SDSG, see: www.sdsg.org
The world of Renewable Energy Credits, also known as Renewable Energy Certificates, or RECs. is a little understood system that is claimed to be a key tool in the conversion of our electric grids to a renewable, low carbon future. Like any tool, RECs can be used for positive purposes, but can also be abused. Determining whether RECS are in fact helping to attain specific renewable energy objectives, requires defining those objectives, and upon the diligence of the user. The goal of this publication is to increase public understanding of the REC market, to inform advocacy in support of renewable energy transition planning.
The RECs market was developed in the mid to late 1990’s as a way to ensure utility compliance with state Renewable Portfolio Standards (RPS) or Renewable Energy Standards (RES), as they are called in Colorado. These standards require utilities to achieve specified levels of renewable energy in the electricity they provide by specified dates. For example, Colorado’s first standard, approved by the voters in 2004, required Investor Owned Utilities (IOUs) to achieve 10% renewables by 2020. This posed some important questions. If utilities started claiming certain amounts of renewables in their portfolios, how were regulators, or the public, to judge whether those claims were accurate? How are we to tell the difference between legitimate achievements and ‘greenwashing?’ The RECs system emerged as part of the answer to these questions.
A REC is a digital accounting of the actual electricity generated by a renewable energy project. It is not electricity and it is not a direct reduction in carbon emissions for the buyer. Utilities generating their own renewable energy could meet their state mandates, and then sell excess renewable energy and RECs to customers in other states looking to fulfill their own renewable energy standard requirements. This ability to sell the desired new renewable energy commodity (e.g. RECs) affected electricity rates, required certification, tracking and reporting and even led to some competition to profit from renewable energy generation. RECs exist in an intangible world of renewable energy accounting, compliance, and trading in a digital format. Thus, the emergence of the REC market as a tool for renewable energy development requires due diligence on the part of public advocates for renewable energy.
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