Karma, For Sale: Meet Renewable Energy Certificates

Scope Correspondent

The Altamont Pass east of San Francisco holds a surprise for the unsuspecting driver. One moment, the hills appear bare except for a grazing cow or two—then the road curves and the wind turbines come into sight. As a child, I was always awestruck by these windmills, spinning away in eerie, majestic unison.

The Altamont Pass Wind Farm in California. (Image from Wikimedia Commons)

They represent a tiny slice of the country’s wind power, which generates enough energy to fuel 11 million American homes every year. Windmills as a whole are also only one player in a larger team, which includes steaming geothermal plants, solar panels in fields and rooftops, hydropower and biomass plants, and other renewable sources. Together, these sources produce about 13% of the nation’s energy, converting the power of nature into electricity that can be funneled into a power grid and to our lights and devices.

Solar panels. (Image from climate.nasa.gov)

But clean energy is not the only thing that renewable plants produce. As they churn out electricity, they are also making a second product—renewable energy certificates (RECs). These certificates, sometimes called “green tags,” are the currency of the country’s clean power market. A REC is, in essence, a birth certificate—for energy. Every time a renewable energy source creates one megawatt hour of power, a single REC is created to represent this energy. (Just for reference, the average American used about 91.4 megawatt hours of power in 2011). A REC contains basic information about this power, including the source of generation (i.e., wind or solar), the location of generation, and the year of production (also called the “vintage”).

Aside from this certificate, it is impossible to distinguish the output of renewable energy sources from that of more common, nonrenewable sources like petroleum or coal. That’s because the electrons that make up electricity are all identical. It doesn’t matter whether they were generated in the cleanest solar plant or the dirtiest coal plant; once they flow together onto a power grid, they are indistinguishable from one another. Only RECs are left behind to prove that some of those electrons were conceptually (if not physically) different from the others.

This “proof” becomes a flexible product for those with interest green energy. How is it flexible? RECs make it possible to “claim” renewable energy production without generating or even using renewable energy at all. Clean electricity and RECs are produced together, but don’t have to be purchased together. They can be; if you buy green electricity, you own its RECs as soon as it flows to your home. But you can also buy RECs separately from their energy if you don’t live near any renewable plants, or you want to contribute additionally to green power production. As the Environmental Protection Agency (EPA) states on their website, a REC embodies “positive environmental impacts, and convey[s] these benefits to the REC owner.” In essence, buying a REC is like buying good environmental karma. You have paid for clean energy to be produced on your behalf.

The separation between a REC and its physical energy can seem strange. A homeowner could buy green tags to “use” more renewable energy without even switching their electricity provider. If companies purchase RECs to increase support of renewable energy, it can be easy to see that they have. For example, the EPA lists national corporations that use the most green power, and shows that companies like Kohl’s, Whole Foods Market and Staples use more than 100% green electricity. How does a company use, say, 107% renewable energy? They simply buy more RECs than the power they consume. This ability, to buy RECs separately from their power, becomes essential for many electricity companies. Many states now require electricity providers to obtain a certain portion of their electricity from renewable sources…and many states allow the purchase of RECs to meet such standards.

While many companies use RECs to meet mandates, and the EPA considers them key players in the green energy market, not everybody is convinced they are beneficial. For example, Auden Schendler, the Vice President of Sustainability at Aspen Skiing Company and the author of Getting Green Done, sees RECs as terribly flawed. There are too many available, and for too low a price, to drive any serious green development, he says. Meanwhile, he thinks RECs distract us from pursuing real environmental advances. He feels consumers would be better off spending money on donations to groups that promote environmental policy and education.

Whether RECs provide incentives for and access to clean power, or serve as a dangerous environmental red herring, they are essential players in the renewable energy market. The demand for clean energy in the US is increasing—and one way or another, it seems that RECs will be part of green power’s next chapter.