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Renewable Energy Certificates

What is a renewable energy certificate (REC)?

A renewable energy certificate is essentially a piece of paper that represents proof that 1 megawatt-hour (MWh) of electricity was generated by a renewable source (solar, wind, geothermal, etc.) and fed into an electricity grid serving homes, businesses, and other electricity users (Wikipedia, 2017). The renewable energy generator receives the certificate and, where allowed, can sell or trade the certificate to someone else who wants to buy it. What is being sold and traded are the environmental and social benefits of the renewable energy being generated.

What is the purpose of an REC?

Why would someone want to create a piece of paper or an accounting system to certify that renewable energy was generated and fed into a grid? For starters, many states and some countries have standards or requirements for the amount or proportion of electricity that is generated from renewable sources. An REC certifies a producer generated and supplied 1 MWh of renewable energy. Second, if an REC is tradable, then a producer who generates more than the minimum proportion of renewable electricity can sell the excess to producers who generate less than the minimum. This is the basis of a "cap-and-trade" system of regulating greenhouse gas emissions or other air pollutants. Alternatively, a business or individual may wish to voluntarily "offset" their greenhouse gas emissions by purchasing the environmental benefits of "clean" energy generation. Buying an REC creates demand for the generation and supply of renewable energy, providing an incentive for renewable energy companies.

Is the renewable energy company getting paid twice for its electricity?

The supplier of renewable energy gets paid the regulated or market price for the electricity it generates, just like every other electricity supplier. The sale of an REC does provide additional revenue for the environmental and social benefits, which could be called a subsidy. However, the seller of an REC can no longer claim the benefits of the renewable electricity it produced. The price of an REC varies widely, from 0.5 to 5.0 cents/kWh (US DOE). By way of comparison, electricity itself costs 10-15 cents/kWh at the retail rate in most states. Hawaiian Electric has negotiated to purchase renewable electricity from utility-scale providers for around 12-15 cents/kWh in the past few years (2010-2017), and this price has dropped over time.

What happens to the REC once it is sold?

Once a supplier uses the REC to meets its renewable energy requirements or sells an REC, the benefits are "retired," meaning the REC effectively cannot be legitimately sold again. Certifying bodies assign a unique identifier for each REC generated and keep track of sales.

Can I purchase RECs in Hawaii?

Yes, the US Department of Energy maintains a website listing where and how you can purchase "green power" on a state-by-state basis. There are suppliers all over the country with different programs and prices for RECs. You do not have to purchase an entire REC, since 1 MWh is more electricity than most households in Hawaii use in a month. Some companies will make it easy by partnering with the local electric utility to track customer electricity use, supply an equivalent amount of RECs, pay your electricity bill, then pass on this charge to you plus the cost of the REC.

Can RECs support community solar programs?

Absolutely! A community solar program allows a group of users who cannot individually afford or feasibly host a renewable electricity system like PV panels to buy into a renewable electricity system, getting credit for the environmental and social benefits while supporting the renewable electricity supplier. The supplier can be bigger than a household but smaller than a utility-scale supplier, e.g. a church or school campus. Often, the supplier can generate more electricity than it uses, selling the excess as RECs to individuals or a community, e.g. the members of the church generating the renewable electricity!

Is this happening in Hawaii?

Not locally. But there are other companies, like Arcadia Power, that have developed community solar projects elsewhere in the US and then sold the electricity to any user who wants to buy into the system. These examples will hopefully provide a model and stimulate development of similar projects in Hawaii.

Where can I learn more?

US Department of Energy, Green Power Program
US Environmental Protection Agency, Green Power Partnership
Center for Resource Solutions, Renewable Energy Certificates 101
Wikipedia, Renewable Energy Certificates

Click here for a pdf copy of this primer to print and share.

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