What is Renewable Energy Certificate (REC)? How it works? Definition, Benefits, Types, Price and Examples

How Google purchases and uses renewable energy certificates (RECs). Image: Google

When renewable energy like Solar Power is produced, it goes into the local power grid like TNB Malaysia and becomes indistinguishable from energy generated by other non-renewable sources. Renewable Energy Credits (RECs) were created to help energy buyers to distinguish between renewable energy (RE) and non-renewable energy sources, by accounting for and assigning ownership to the RE generated & used.

Renewable Energy Credits (RECs), also called Renewable Energy Certificates, are tradable instruments that represent the clean energy attributes of renewable energy and give the owner the legal right to claim renewable energy use from a specific source. One REC is created for every one megawatt hour (1MWh) of renewable energy generated from sources such as solar, wind, hydropower, and geothermal energy.

Each Renewable Energy Credit is uniquely identified, and includes data such as where it was generated, when it was generated, and by what source. When the owner of a REC makes a renewable energy claim based on that REC, it is then retired and no longer a tradable asset.

In the Renewable Energy Credits market, REC purchases fall into two categories: Compliance and Voluntary.

Compliance REC Market
Compliance buyers are utilities or electric suppliers that are required by state regulations called Renewable Portfolio Standards (RPS) to have a certain percentage of their electricity generation or sales from renewable sources. These buyers satisfy the RPS requirements either by buying RECs or generating them at their own renewable energy projects.

Voluntary REC Market
Voluntary REC buyers are environmentally conscious organizations or individuals interested in reducing their carbon footprint or greenhouse gas emissions. These buyers purchase RECs to offset carbon emissions associated with their purchased electricity, or to meet commitments for purchasing renewable energy. Example company like Google, Microsoft, Amazon, Apple, Facebook(META) purchase RECs annually.

Power Purchase Agreements (PPAs) and Virtual Power Purchase Agreements (VPPAs) are much stronger in terms of additionality than the purchase of unbundled RECs. The long-term contract to buy a project’s renewable energy is a critical factor in enabling the financing and construction of a new renewable energy project. The purchase of bundled RECs along with their underlying clean energy through the PPA/VPPA enables the buyer to objectively claim the purchase of clean energy from a specific project, often located within proximity to the organization’s load, and to claim additionality.

How much is REC worth in 2022?

REC also named as SREC prices in United States. The open market value of an SREC varies from USD$10.00 to nearly USD$400, depending on the market and locations. Just like the stock prices, SREC prices are dictated by supply and demand in the market and tend to fluctuate over time. When there’s an oversupply of credits, prices tend to fall. When there’s a shortage, prices tend to rise. For example, for a 5MW system generating 9,786,672 kWh of electricity per year (equivalent of 9,786 REC credits), a year’s worth of REC income could range from USD$34,251 in Ohio to $3,620,820 in Massachusetts, USA.

How to buy REC in Malaysia ? Please fill up your contact information at go.MaqoSolar.com or Whatsapp us

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