Renewable Energy Certificates (RECs)

Renewable Energy Certificates (RECs), also known as Green tags or Renewable Energy Credits, are tradable and sellable environmental commodities in the United States which represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible green renewable energy resource.

The owner of the REC can claim to have purchased renewable energy. Renewable Energy Certificates can incentivize carbon-neutral renewable energy by providing a production subsidy to electricity generated from renewable sources instead of a penalty to those who buy non-renewable power. It is important to understand that the energy associated with a REC is sold separately and is used by another party. The consumer of a REC receives only a certificate.

Typically, a green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces (for reference, an average residential customer consumes about 800 kWh in a month). A certifying agency gives each REC a unique identification number to make sure it doesn't get double-counted. The green energy is then fed into the electrical grid, and the accompanying REC can then be sold on the open market. This income is used to give an incentive to the source of the energy (in this case the wind farm).

Most customers who buy Renewable Energy Certificates do so voluntarily, out of a desire to go green and/or to use the good will created for public relations, advertising, or employee morale.