Common Points of Confusion on California RECs

By: Adam Gerza, Founder/Principal of Leaf Exchange LLC

So what exactly is a Renewable Energy Certificate (REC)?
A REC is essentially the right to say that “I made one megawatt-hour of clean electricity happen.”  Another way to think about it is that a solar system has dual outputs: (1) generic electricity or electrons, (2) REC certificates, which represent the “green environmental attributes” of the generation.  A REC certificate can be unbundled from the electricity and sold separately.

Here are some more common points of confusion:

Confusion: Who wants to buy my RECs? Clarification: There are two types of buyers: voluntary and compliance.  Voluntary buyers are progressive organizations like Whole Foods, Intel, and PepsiCo that purchase RECs to offset their energy consumption and greenhouse gas emissions.  Compliance buyers of RECs are utilities, which are required to get a certain percentage of their electricity from renewable sources; this is called a Renewable Portfolio Standard (RPS).

Confusion: What am I giving up if I sell my RECs? Clarification: If you sell your RECs then you are effectively selling the positive environmental attributes of your renewable energy generation.  You are selling the right to make that claim to the buyer.

Confusion: I don’t think I’m eligible for this program, because I use more energy than my system produces. Clarification: RECs are created solely based on how much energy your system produces; how much electricity you consume is irrelevant.  Again 1 REC is created for every megawatt-hour (or 1,000 kWh) of renewable energy you generate.

Confusion: This all sounds like some sort of scam. Clarification: This is certainly not a scam, RECs act as the primary incentive for solar system owners in states like New Jersey, Massachusetts, Pennsylvania, Maryland and Ohio.  In these established REC markets utilities are actively buying RECs to satisfy their RPS requirements, and to avoid paying penalties for non-compliance.

Confusion: Okay this is all starting to make sense, so how much can I get for my RECs? Clarification: RECs in California haven’t really started trading yet in an RPS market.  Furthermore we are waiting for the California Energy Commission (CEC) to issue a ruling that Distributed Generation (i.e. residential and small commercial solar) facilities are eligible to sell their RECs into an RPS market.  We expect that to happen later this year.

In Closing
Even though you can’t sell your RECs quite yet, you can register your system into the Western Renewable Energy Generation Information Systems (WREGIS), the state chartered REC registry for California.  Several thousand solar systems have already been registered in WREGIS and are officially creating RECs.  You can only retroactively create RECs going back 90 days in WREGIS so it makes sense to get registered now.  We believe California RECs will have monetary value soon, and offer solar system owners a supplemental revenue stream.

About Leaf Exchange: Leaf Exchange is a Renewable Energy Credit brokerage & exchange service for California solar system owners.  We provide solar system owners REC market education, certification services, and a venue to sell their Certificates.  Leaf Exchange registers systems into WREGIS for no cost, so system owners can start banking their RECs to potentially sell at a later date.  For more information visit www.theleafexchange.com