What Are Renewable Energy Credits?
If you generate renewable electricity, you are creating two things: the actual electricity that is tracked by the utility and you are creating an environmental benefit, namely that the electricity is not produced using fossil fuels.
Once the renewably-generated electricity flows onto the grid, it is not possible to tell the difference between electrons that are generated by fossil fuels or by renewable sources, so the renewably-generated power is tracked and accounted for as renewable energy certificates (sometimes called credits), or RECs.
A REC represents one Megawatt-hour (MWh) of electricity generated from a renewable source, such as solar or wind, and delivered to the electric power grid.
Selling your RECs means selling your claim to the environmental benefit of renewable power generation to someone else. If you promote your business or product as “powered by renewables,” or you include your solar installation in descriptions of sustainability initiatives, then you are using the environmental benefits of your renewable generation and the RECs are not eligible for sale.
You should be eligible to sell your RECs if you simply use your solar to offset your electric utility bill but make no claims on your website or in other marketing material about generating renewable power. In addition, you must own your solar installation to be eligible to sell the RECs, or have a contractual agreement in place with the system owner.
Anyone that is interested in reducing their carbon footprint can purchase RECs. One type of buyer is a business with sustainability goals that is unable to generate onsite renewable power themselves. Utilities buy RECs to meet their renewable power requirements. Transportation fuel suppliers buy RECs to augment their emissions reductions programs. By purchasing RECs, all of these companies can demonstrate they are using renewable power and show their support for renewable power generators.
CalCom Energy’s Role
Creating and selling RECs involves administrative layers, fees, and reporting capabilities. CalCom Energy takes care of all administrative tasks and fees needed to have your system approved to generate RECs, finds the buyers, and coordinates all transactions. Customers are paid quarterly.
You can expect CalCom to handle the three items below:
· Registration and Third-party Coordination. CalCom will register your solar installation with the Western Renewable Energy Generation Information System (WREGIS), hire a third party to report your energy production to WREGIS, and pay all associated fees. From there, WREGIS verifies your system’s production and issues the RECs. The process to register the system and begin creating RECs can take 2-3 months.
· REC Creation. RECs are created monthly. RECs are usually created about three months after the energy was generated. For instance, RECs created on August 31st usually represent May energy generation, RECs created Sept 30th represent June energy generation, etc.
· REC Sale. RECs are sold quarterly, and customer payments are likewise quarterly. The quarterly payments are for RECs created up through the most recent month’s end. For instance, customers receiving a Q3 (September) payment are being paid for RECs created through August 31st, which typically includes energy generation through May 31st.
Frequently Asked Questions
Q. My system has been in operation for awhile. How far back in time can my RECs be created?
A. At the time the renewable generator is registered with WREGIS, the reporting will go as far back in time as possible. Usually we find WREGIS issues RECs for production up to 3-4 months prior to registration.
Q. We have been registering our RECs, but not selling them. How far back in time will buyers be interested in our RECs?
A. Generally, we have seen buyers interested in RECs for the most recent 2 available quarters. Some exceptions have been made if the seller will accept a lower price or if the seller is willing to sign up for an agreement over multiple quarters going forward.
Q. What are the requirements to register RECs?
A. Basic requirements are: you are not currently using your RECs (meaning you are not marketing your renewable generation), you own your system or have the contractual right to your RECs, and you have a revenue meter installed to provide system production data. The meter is usually attached to a data acquisition system, such as AlsoEnergy, Deck, or Locus. For most solar installations, we also require a current subscription to a monitoring service, such as AlsoEnergy PowerTrack.
Q. Is the REC market legitimate?
A. “RECs are the accepted legal instrument through which renewable energy generation and use claims are substantiated in the U.S. renewable energy market. RECs are supported by several different levels of government, regional electricity transmission authorities, nongovernmental organizations (NGOs), and trade associations, as well as in U.S. case law.” [from https://www.epa.gov/greenpower/renewable-energy-certificates-recs]
Q. Is there a minimum system size?
A. The pricing favors larger system sizes. Due to costs, we have found that solar installations under 300kW may reduce the price paid per REC, usually by about $1-$2. That said, even at reduced payment amounts, this is still a good marketplace to generate recurring revenue for smaller installs.
Q. How stable is the REC market?
A. The REC market has been stable since its inception, however the pricing has varied. In late 2020, given multiple buyers’ willingness to sign long-term (4-year or 5-year) contracts for RECs at a single price point, we believe the price is stabilizing. The goods news here is that state has created a direct connection between RECs and incentives to reduce the carbon intensity of transportation fuels, so the pressure for certain fuel providers to meet emissions targets and electric vehicle adoption will likely continue to keep this market viable, and pricing stabilized, for several years to come.