Part 2: Purchasing RECs Supports Renewable Energy Projects

Wind Farm in Texas

EDITOR’S NOTE: We’ve decided to write a two-part series on renewable energy certificates (RECs). Read below to learn about how RECs help us fulfill our mission to change the way power is made. Our first blog discussed what exactly a REC is.

Last week, we shed some light on how renewable energy certificates (RECs) work. Today, we want to dig a little deeper and share with you how RECs help us meet our mission to change the way power is made, which has been our goal since our inception in 1997.

First, let’s review: Renewable energy generators, like wind or solar farms, create two products every time the wind blows or the sun shines: electrons that create electricity, and RECs that signify the electricity is generated from a renewable source. The wind or solar farmer can sell the electricity and RECs together or separately.

Now for some new stuff… Each product—RECs and electrons—has financial value on its own. Fossil fuel and nuclear energy producers only have electrons to sell, but renewable energy generators make additional revenue by producing RECs in addition to electrons. This incremental cash flow can be part of the financial motivation to build a new renewable energy project and helps support existing projects, like the hundreds of wind farms and solar energy projects we buy from across the country.

Some renewable energy detractors might highlight the currently low price of RECs to argue that RECs don’t build new renewable energy projects. It’s true that RECs by themselves don’t make or break the decision to build a new renewable energy project; there’s a host of financial considerations, from the appetite of private investors and lenders to available tax incentives, at stake. One of the biggest financial drivers of new projects getting built is the federal government’s production tax credit (PTC) – learn more in this article from Vox. While generous, the PTC is not a reliable funding source, as shown below by the boom-and-bust cycle of new wind energy development that results from frequent expiration of the PTC.

wind-graphic-ptc
Source: American Wind Energy Association

RECs, on the other hand, provide a stable revenue stream that renewable energy project developers and operators can count on. While RECs are just one piece of a much larger financial package, every dollar helps bring new projects to fruition and helps support existing projects!

Every REC we purchase on our customers’ behalf represents one more unit of renewable energy added to the grid. Over time and as more people join us, that means less conventionally produced fossil fuel and nuclear energy is needed, helping us all change the way power is made. Thank you for choosing renewable energy!

Part 1: What the heck is a REC?

Want to learn even more about RECs and renewable energy? Check out these resources: