Renewable Energy Certificate

This article was first published in Albuquerque's Local IQ Magazine

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Let's start with a simple definition of a Renewable Energy Certificate.

Imagine you are business that really wants to put Renewable Energy on a building, but there's no wind at the site. Also your building is just to the north of taller building, so you are in the shadow all day. What to do? You could pick another place with a good southern exposure. You could measure your electric output at the home building, and create the same amount of energy at different location. It might be property you own, or one where a nice owner will let you build the solar array you wish you had on her business. If you pay for the installation, you get credit for the renewable energy, in the form of RECs, even if the electricity is not plugged directly into your building.


 RECs also allow renewable energy to work on a smaller scale -- $5-10 dollar a month. If a wind farm is built, and hooked into the grid, there's no way to tell the clean, carbon-neutral wind-electrons from the electrons made from dirty coal. An electricity consumer that prefers renewable energy can't turn off the coal-electric-tap at their house and turn on the renewable-energy-tap. Instead, each megawatt hour of renewable energy is matched with a Renewable Energy Certificate. The utility buys the wind energy and the REC. If you, as the homeowner, want to support renewable energy you pay a little extra on your electric bill. Who's making sure that money goes to the wind farm, rather than the coal plant? The utility uses the money to purchase RECs -- insuring that there is more renewable energy than there would be without your extra purchase.


This leads to an odd situation. It's common in New Jersey or California for businesses to build solar installations on their roofs. Then the accounting department, doing its job to hold the cost of investments down, finds out that some of the money from building the installation could be regained by selling the RECs. They sell the RECs on the open market -- to them it seems quite straightforward, a bit like selling advertising space on the side of a building.


However, the people who bought the RECs are now claiming that their electricity is carbon neutral. Therefore the business who owns the solar panels, installed the solar panels, and is electrically attached to the solar panels, cannot claim that their electricity is carbon neutral -- that would be double counting. Think of it as being a renter that remodels their kitchen -- it seems like you ought to get some of the increase in property value, but in fact, since you don't have underlying ownership, you don't get the benefits. Businesses are floundering for a way to describe this -- shouldn’t they get some credit? Can they say they are "hosting" solar power? The Federal Trade Commission is researching deceptive trade practices in renewable energy. They conducted a study that showed that customers couldn't tell the difference between claims that a business "generated solar energy" and "hosted solar energy".


This article by Kristy Dyer is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License You can reprint it for free, as-is.