Renewable Energy Credits are a relatively new product, created to enable businesses and consumers everywhere to express their preference for clean, green energy. We'll explain in a little more detail later, but first, we want to tell you a little bit about the status of renewables in the U.S., and why we are where we are.
What is the Status of Renewable Energy in the U.S.?
Half of U.S. electricity production comes from coal. Approximately 90% comes from either fossil fuel (including coal) or nuclear sources. Hydroelectric (dam powered) sources account for 6.5%. Other renewable sources (such as wind) make up only 2.3%.
Why don’t we have more Renewable Energy sources in the U.S.?
The reason we don’t generate more Renewable Energy in this country is very simple – it almost always costs more to produce energy this way than through non-renewable means. Combine this with the goal of utilities, regulators, and consumers (up to now) of choosing energy sources based on the lowest cost, and you end up with the energy mix we have now.
We have underinvested in Renewable Energy because -until now - we’ve placed value on ‘Energy’ and not on 'Renewable'.
Change how we buy, change our mix
If we want to change our energy mix and add more renewable sources, then we have to change how we buy energy. In addition to buying the energy that lights our homes and powers our appliances, we have to buy 'Renewable'.
A Renewable Energy Credit (or REC for short) is a product that allows us to buy 'Renewable'. A REC allows us to demonstrate our demand for wind power, and puts a deserved premium on energy generated cleanly and sustainably. Here’s how it works:
1.) A wind power plant produces a unit of energy. We recognize this energy as ‘Renewable Energy’ – something that is superior to the energy produced by fossil fuel and nuclear plants.
- 2.) However, the wholesale power pools, utilities, and energy distributors that are the wind plants’ direct customers do not recognize wind energy as special or premium. They simply buy and pay for ‘energy’, which they sell to consumers as ‘energy’ – putting no value or premium on ‘Renewable’.
- 3.) Here is the role for Renewable Energy Credits, or RECs. When a wind plant produces energy, it also produces RECs. These RECs are then sold by us to consumers that value Renewable Energy and want to promote wind power.
By allowing wind power plants to sell the ‘Renewable’ component of Renewable Energy generation, Renewable Energy Credits help to reward these plants, and they allow consumers to buy the ‘Renewable’ component of Renewable Energy. In essence, RECs allow you to buy Renewable Energy by purchasing ‘Renewable’ (RECs) in addition to ‘Energy’.