Every renewable energy project creates two products: electricity and renewable energy credits. It’s important for business owners and consumers interested in renewable energy to understand the basics of how renewable energy and renewable energy credits relate.
Renewable energy credits defined
Renewable energy credits, also known as Renewable Energy Certificates (REC), “represent the property rights to the environmental, social, and other non-power qualities of renewable electricity generation” according to the EPA. This means that all the positive social characteristics of renewable energy get captured in a renewable energy credit document, allowing the characteristics of the credit to be tracked back to the source that created the renewable energy.
Renewable energy credits provide their owner with the right to claim credit for the social benefits provided by the energy associated with each particular renewable energy credit. The owner of the renewable energy credit need not have created the renewable energy, or even used it; they need only own the renewable energy credit.
Since the actual use of renewable energy is restricted by geography and transmission systems, separating the renewable energy credit away from the actual energy produced allows businesses more options for buying renewable energy or for generating income from the selling of renewable energy credits.
How renewable energy credits work
As mentioned, every renewable energy project produces two outputs. One is electricity and the other is a renewable energy credit. Both can be used by the owner or sold to another party.
Renewable energy credits accrue at the rate of one renewable energy credit per mega-watt hour of renewable energy produced, which converts to one thousand kilowatt-hours and is equivalent to ten thousand 100-watt light bulbs burning for one hour. That’s over six hundred tons of carbon dioxide.
The marketable aspect of renewable energy credits has created a market in which businesses and individuals can buy and sell renewable energy credits. The growing demand for renewable energy credits has actually created a higher demand for renewable energy, thus helping to increase revenues and promote growth in the renewable energy industry.
It’s important to note that if a business installs renewable energy production equipment at its facility, but sells the renewable energy credits associated with that equipment then they cannot publicize or claim credit for the renewable energy equipment. All credit for the renewable energy production would then belong to the owner(s) of the renewable energy credits. That said, the owner of the system can keep some of the renewable energy credits and still stake a claim on the benefits of the energy created in that credit’s period of time.