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Renewable Energy Credits 101

| Wednesday April 23rd, 2008 | 6 Comments

rewnew99.jpgSome of you might have heard of Renewable Energy Credits (RECs), an alternative to carbon offsets. Many companies are starting to buy them to offset their electricity usage, or just to support the production of clean renewable energy sources.
The question is, what are Renewable Energy Credits exactly? How do they work? What are you really owning when you put your name on the dotted line?
First things first: when renewable energy companies create power, they sell it to the nearest utility and it goes out on the grid and gets mixed with all the electricity produced by natural gas, coal, and hydro. There is no telling who actually gets to use the clean energy produced by the small renewable company– it just goes to the next person in range who happens to turn on their lights or run their dishwasher. But, there are a lot of people out there who want to support the production of renewable energy sources, and who would pay a premium to use renewable energy in their homes if such a thing were possible. So, renewable energy providers, like solar or wind power generators, sell Renewable Energy Credits in addition to selling the power they create. RECs are basically the right to claim whatever renewable energy was created. Random McMansion owner A who happened to plug in their Glade PlugIn at the right time does not get to claim the power even if it was actually clean. You, the REC owner get to, even if the energy that powers your LEED certified home is actually regular dirty power.
Now for some fun analogies:


1. You have a friend who has an organic avocado tree. He also has a mean recipe for making guacamole (he’s the renewable energy provider). You have to bring an appetizer to a party you are both attending, but you are a busy business person with no time to cook.¬† You pay your friend for the right to bragging rights to how delicious the guacamole is at the party. Your friend does not get to lay claim, but the money he earns from you allows him to stay at home full time making guacamole, so he is happy to give away the bragging rights. Your friend has the means and the time to make the guac. Your bragging rights purchase subsidizes his efforts, you didn’t have to cook anything, and everyone benefits from the delicious guacamole at the party.
2. Seinfeld fans should recall the episode where Peterman buys the rights to Kramer’s life stories. He didn’t actually live all of Kramer’s antics, but once he pays the premium, he owns them, he claims them, and he can write about them as if they were his own. Kramer sure gets upset when he finds out that he can no longer tell his stories because they belong to Peterman. Here, Kramer is the lucky McMansion owner who happened to use clean power in his light bulbs– he actually experiences the good thing, but he lays no claim to the bragging rights. Remember his dismay when he realizes he doesn’t own his stories? Oh Kramer. You’ll never go out of style.
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Jen slings 100% post consumer recycled paper for the Union of Concerned Scientists as the Berkeley office manager, but she’s not representing said scientists on this blog. Of course, she fully intend to swipe facts and figures from their materials in addition to her own research as an MBA student in Sustainable Management. You can reach her at sustainablejen at gmail.com


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  • Marn

    Nice analogy. They really help in understanding RECs.

  • pat

    I take exception, as if I were to have a residential wind generator, my power company will allow my excess power back onto the grid, but they will only pay with REC’s at less value than what I pay them for dirty power off of the grid. So, if the cost of the dirty power is “truly” worth what I have to pay them, then the “clean” power they receive back is surely worth more than the value of a “piece of paper” called an REC.

  • JL

    How can I bypass UniSource & their “rebate” and sell my solar power REC privately? Instead of taking their “rebate” and signing over for 20 years my power credits? Is it even possible. I am considering solar panels in Lake Havasu AZ but in this state the energy companoes pretty much are setting the rules.

  • JL

    How can I bypass UniSource & their “rebate” and sell my solar power REC privately? Instead of taking their “rebate” and signing over for 20 years my power credits? Is it even possible. I am considering solar panels in Lake Havasu AZ but in this state the energy companies pretty much are setting the rules.

  • Anonymous

    How can I bypass UniSource & their “rebate” and sell my solar power REC privately? Instead of taking their “rebate” and signing over for 20 years my power credits? Is it even possible. I am considering solar panels in Lake Havasu AZ but in this state the energy companies pretty much are setting the rules.

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  • Tom Backman

    I have not met the “people out there who want to support the production of renewable energy sources” by voluntarily purchasing RECs. I believe most companies that buy RECs are doing so to comply with government emmission regulations. The cost, of course, is passed on to the customer. Renewables cost more, period. The only way to make them cost effective is to force higher prices for fossil fuel energy. Let’s just admit it, and go on.