Renewable energy has become more important than ever as the world begins to recognize the value of sustainability. We are now in a phase where using renewable energy resources in our daily lives is much more viable, thanks to numerous developments in renewable technologies over the last few years, and even more so now with a 3-4% GDP.

Sources of renewable energy

Renewable energy is generated from resources that continually replenish themselves. Unlike fossil fuels (coal and gas), which may become scarce in the future, renewable energy sources are limitless and will never be depleted.

Renewable energy sources are classified into five types:

  • Solar energy is generated by harvesting sunlight.
  • Wind energy is produced by harvesting wind with turbines.
  • Hydroelectric energy is produced by spinning water stored in dams (or flowing in rivers) in turbines.
  • Geothermal energy is thermal energy (heat) that is generated and stored in the earth.
  • Biomass energy is derived from organic matter (plant or animal). This matter is heated, fermented, or burned to generate various forms of power.
What exactly is a renewable energy certificate?

An REC, also known as a green energy certificate, is proof that electricity (energy) was generated using renewable energy resources. It is a new market-based instrument that allows individuals, businesses, and corporations to reduce the environmental impact of their energy consumption.


Consider this: when renewable energy is produced (via any of the above-mentioned resources), two things occur. They are as follows:

  • Electricity
  • The environment benefits because the electricity was generated without the use of non-renewable resources such as gas or coal.

A renewable energy certificate allows you to track these benefits quantitatively. It is given out when one megawatt-hour of renewable energy is produced for the electric grid. An REC has the following characteristics:

  • ID of the tracking system
  • Type of certificate
  • Certificate Information
  • Location of a renewable energy facility
  • Type of renewable fuel
  • Nameplate capacity of the project 
  • Vintage of the project (build date)
  • Unique certificate identification number
  • Vintage certificate (generation)
  • Renewable resource emissions rate
  • Eligibility for certification or RPS
  • Utility with which the project is linked

Other characteristics may be associated with the REC depending on the market in which it is created.

How does a REC function?

When we receive electricity from utility grids, we have no idea how it was generated or where it came from. However, with a REC, electricity generated from renewable resources is properly accounted for, tracked, and assigned ownership and use.

It should be noted that once a REC has been sold, it cannot be purchased again. All RECs are given a unique number and include information about the renewable source from which they came, where they were created, and the date of generation. Every certificate exchange is tracked and recorded.

The Legal Basis for RECs

In the United States, regional electricity transmission authorities, various levels of government, trade associations, and non-governmental organizations (NGOs) support RECs. These are legal instruments that energy consumers can use to back up their claims about renewable energy generation. If you want to learn more about the legal foundation, read the paper published by the Center for Resource Solutions.

Arbitrage of RECs

Electricity consumers use REC arbitrage to achieve two goals:

  • Reduce the cost of their use of renewable energy.
  • Demonstrate that the electricity they are using is produced using renewable energy sources.

REC Arbitrage is a green power acquisition strategy used by consumers who:

  • Purchase renewable energy directly from a renewable energy project (like a power purchase agreement)
  • Want to set up self-financed renewable energy projects.
The Advantages of RECs

As previously stated, these green energy certificates demonstrate that you are utilizing renewable energy from the electric grid. Furthermore, they provide substantial proof that you are using energy without the need to install renewable energy systems (such as solar panels) at your home or place of business.

RECs provide great flexibility for business owners who have multiple locations or lack the infrastructure to install solar panels. You can reduce your carbon footprint on the planet by doing so.

Purchasing these certificates also benefits the renewable energy market by increasing demand, which encourages increased renewable energy supply and production. As a result, RECs not only assist organizations in meeting their greenhouse gas emission targets, but they also increase renewable energy production.

Here are a few factors to consider when deciding whether RECs are a good fit for you:

  • Do you want to help the renewable energy industry?
  • Do you want to reduce your environmental impact and carbon footprint?
  • Do you want to know where your power comes from?
  • Are you unable to install solar panels (or other forms of renewable energy) at your home or business?
  • Do you have any environmental goals that you want to achieve?

If you answered “yes” to any of these questions, RECs are a great fit for you.

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Environmental advantages

RECs are gaining popularity because they encourage the generation of energy without the use of any fossil fuels. Using renewable energy also significantly reduces greenhouse gas emissions and a variety of other harmful pollutants that harm our planet. In other words, electricity produced from renewable resources is cleaner and better for the environment than electricity produced from coal or gas.

Who is the buyer of renewable energy certificates?

In general, REC buyers are divided into two categories: mandatory and voluntary.

Compliance buyers are electrical utility companies that are required by law to generate a certain percentage of their electricity from renewable sources. Several states have Renewable Portfolio Standards and regulations requiring the use of renewable energy.

Voluntary buyers: These REC buyers are typically environmentally conscious individuals (homeowners) and organizations committed to reducing their greenhouse gas emissions. Corporations such as Starbucks and Whole Foods are examples.

Under these regulations, utilities must demonstrate that they generate a certain amount of electricity from renewable sources. This is where RECs come into play. The utilities must generate the RECs themselves, but if they do not generate enough, they must purchase them.

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