RECs Get Real

Deck: 

Green credits are maturing to become real, tradeable assets.

Fortnightly Magazine - November 2007
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By displacing electricity produced from fossil fuels, renewable power plants produce two distinct products—commodity electricity and a set of environmental attributes (particularly avoided emissions). These environmental attributes can be packaged into a product called a renewable energy certificate, or REC, and sold separately from the electricity.

In states or regions that have an REC program, one REC represents the environmental attributes generally associated with one megawatt-hour (MWh) of electricity from renewable resources. REC buyers are not only electric utilities, but now include such large and respected companies as Starbucks, DuPont, Wal-Mart and Whole Foods, which are leveraging public awareness of sustainability concerns to become leaders in this area.

Currently, the United States has two distinct REC markets—the compliance market and the voluntary market.1 The compliance market is driven by state government regulation, while the voluntary market is driven by consumers interested in supporting renewable energy or reducing their environmental footprint.

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