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Renewable Energy Certificates Overview

Renewable Energy Certificates (RECs) verify that the electricity is produced by a renewable energy source and can be traded or sold to fulfill renewable energy commitments. SRECs exist in states that have Renewable Portfolio Standard (RPS) legislation, which requires the state to increase the production of energy from renewable energy sources. Often, utilities are required to get a certain percentage of their electricity from renewable energy systems. (Click here for a list of these states.)

To meet the various state requirements, utilities can purchase RECs from certified system owners who have produced enough energy to qualify for a REC.  One REC is awarded for every 1,000 kilowatt-hours (kWh) of electricity generated.

The value of RECs vary as supply and demand fluctuates. There is also no central REC marketplace, so price varies state to state.

REC owners have three options for selling their RECs:

  1. Sell all of the system’s RECs with an upfront cash payment
  2. Sell RECs using a contract over set amount of time over a range of a few years.
  3. Register RECs for trade on the spot market

According to Environmental Protection Agency, “A REC represents the property rights to the environmental, social, and other non-power qualities of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source.”