[What is a Renewable Energy Certificate? 1](#what-is-a-renewable-energy-certificate)

[How Do RECs Work? 1](#how-do-recs-work)

[Why Are RECs Important? 2](#why-are-recs-important)

[How Do Carbon Credits and RECs Differ? 2](#how-do-recs-and-carbon-credits-differ)

[How RECs Shape Energy Communities 3](#renewable-energy-certificates-recs-and-carbon-credits-both-play-vital-roles-in-sustainability-but-serve-distinct-purposes.-recs-certify-that-electricity-has-been-generated-from-renewable-sources-while-carbon-credits-represent-the-reduction-or-removal-of-one-metric-ton-of-carbon-dioxide-or-its-equivalent-from-the-atmosphere-often-through-initiatives-like-reforestation-or-methane-capture.-companies-purchase-these-credits-to-offset-their-emissions-and-work-toward-carbon-neutrality.)

[Practical Use Case for RECs 3](#practical-use-case-for-recs)

What is a Renewable Energy Certificate?

A Renewable Energy Certificate (REC) is a market-based mechanism that represents proof that electricity was generated from a renewable energy source. Each REC is equivalent to 1 megawatt-hour (MWh) of renewable energy produced. RECs are issued by certifying bodies, which track renewable energy generation to ensure that the credits correspond to actual, verified clean energy production.

When a renewable energy generator produces electricity, it earns RECs based on the amount of energy generated. These certificates can then be sold or traded, allowing other entities – such as businesses or individuals – to purchase them as a way to support renewable energy production and demonstrate their commitment to sustainability.

How Do RECs Work?

The process behind RECs is relatively simple but plays a crucial role in the renewable energy market:

1. Energy Generation: A renewable energy generator – like a solar farm – produces clean electricity.

2. Issuance of RECs: For each MWh of electricity produced, a corresponding REC is issued to the generator. This certificate proves that the energy came from a renewable source.

3. Trading and Purchase: These RECs can be sold to utility companies, corporations, or even individuals who want to claim the environmental benefits of renewable energy. Purchasing RECs allows them to support renewable energy efforts, even if they don’t directly use renewable electricity.

4. Retirement of RECs: Once an REC is bought, it is “retired,” meaning it can no longer be sold or traded. This ensures that each REC represents a unique and traceable contribution to renewable energy.

Why Are RECs Important?

RECs play a vital role in promoting the adoption of renewable energy and helping to meet global sustainability goals.

Here’s why they matter:

Encouraging Renewable Energy Growth: By allowing renewable energy generators to sell RECs, this system provides an additional revenue stream, which incentivizes the development of more renewable energy projects. This helps to increase the share of renewable energy in the global energy mix.
Sustainability for Businesses: Many companies and organizations aim to meet corporate social responsibility (CSR) goals by reducing their carbon footprint. Purchasing RECs allows them to offset the environmental impact of their energy consumption by supporting clean energy, even if they’re not able to directly switch to 100% renewable power.
Greenwashing Prevention: RECs provide a clear and reliable way for businesses and individuals to substantiate their claims of using renewable energy. Without RECs, companies might make misleading environmental claims – called greenwashing – but the REC system ensures transparency and accountability.
Regulatory Compliance: In some regions, businesses are required to meet renewable energy standards set by governments. By purchasing RECs, they can comply with these regulations and contribute to the renewable energy targets set by national or regional authorities.

How Do RECs and Carbon Credits Differ?

Renewable Energy Certificates (RECs) and carbon credits both play vital roles in sustainability but serve distinct purposes. RECs certify that electricity has been generated from renewable sources, while carbon credits represent the reduction or removal of one metric ton of carbon dioxide (or its equivalent) from the atmosphere, often through initiatives like reforestation or methane capture. Companies purchase these credits to offset their emissions and work toward carbon neutrality.

How RECs Shape Energy Communities

When an energy community (EC) generates renewable energy, it earns RECs for each MWh of clean power produced. These certificates can then be sold or traded, creating an additional revenue stream for the community. This revenue can be reinvested into further renewable energy projects, helping to improve energy access and sustainability within the community.

In ECs, RECs also enable local stakeholders, such as businesses and residents, to claim their environmental contributions. For example, a community-based solar project can sell its RECs to businesses that want to meet sustainability targets, or it could be used to offset the emissions of the local energy consumers. By participating in the REC market, ECs can help drive the transition to renewable energy on a local level, while also benefiting financially.

Moreover, ECs can use RECs to encourage broader participation and investment in renewable energy. Since RECs provide a way to monetize the environmental benefits of clean energy, they help attract investment from individuals, organizations, and even governments that are seeking to achieve their renewable energy and climate goals.

Practical Use Case for RECs

Since 2017, Google has matched its global electricity consumption with renewable energy by purchasing RECs alongside direct power purchase agreements (PPAs). Since Google’s data centres and offices are spread across multiple locations where direct renewable energy sourcing is not always possible, the company buys RECs to ensure that the amount of electricity it consumes is offset by renewable energy generation elsewhere. This approach supports the growth of renewable energy projects and helps Google maintain its carbon-neutral operations while working toward its long-term goal of running entirely on carbon-free energy 24/7.

Table of Contents