Renewable energy credits and their role in financing cleaner “green” sources of power
Many consumers are becoming more concerned about the environment and what individually they can do to help protect it. You may wish to consider purchasing renewable energy to replace or supplement all or part of the traditionally-sourced electricity you use.
Electricity throughout most of the U.S. is been generated primarily by nuclear energy and fossil fuels such as coal, natural gas and oil. In a growing number of states, it is possible to purchase electricity produced from “renewable” sources such as wind, sun, (solar energy), water (hydropower) and plant waste (biomass) and a variety of “alternative” sources. Together, they can be considered a “green” source of power.
What Do the Terms “Renewable” and “Alternative” Energy Mean?
The terms “renewable” and “alternative” have emerged from this increased awareness, generally referring to energy sources that can be replenished naturally and release significantly less pollution – if any — pollution and waste into the environment.
“Alternative” sources of power, generally speaking, are not considered as clean as renewable sources are but still produce less harmful byproducts such as carbon emissions and particulate matter than fossil fueled sources. And, they leave no legacy of highly-radioactive used fuel rods from nuclear power plants and the risks to surrounding communities of storing those fuel rods at the reactor site. Electricity generating plants that rely on fossil fuels and nuclear energy pose certain operational risks one does not find with green power sources. The coal mining accidents in Appalachia and they lives lost there are a testament to what can and does go wrong.
How Does Green Power Work?
Green power is really a change in the way electricity is produced at a generation source, far before it reaches the point of consumption. There is no need to install any equipment or make any other physical changes to your property. Your electricity continues to be delivered to you over the electricity grid. The green power you purchase is simply put into the grid on your behalf in the form of a Renewable Energy Certificates, or “RECs.”
This illustrates how Renewable Energy Credits help pay for and thus incentivize cleaner sources of electric power. Credit: U.S. EPA's Green Power Partnership (http://www.epa.gov/greenpower/gpmarket/rec_chart.htm)
What is a REC (Renewable Energy Certificate)?
If you cannot generate electricity on your own using, for example, solar panels on your roof, RECS are the main way you can choose green power. They can come from clean sources throughout the nation, and can be combined with standard electricity. The federal government, through the Environmental Protection Agency, has developed a system to incentivize investments in renewable sources of electricity by issuing RECs.
A REC puts a dollar value on each unit of electricity that is generated using green sources. This dollar value becomes the Renewable Energy Certificate, which can then be used by renewable energy project developers to add value beyond what traditional fossil fuel- and nuclear energy-supplied power plants can offer. This enables renewable energy project developers to better compete in today’s energy markets.
As renewable generators produce electricity, they create one REC for every 1000 kilowatt-hours (or 1 megawatt-hour) of electricity placed on the grid. If the physical electricity and the associated RECs are sold to separate buyers, the electricity is no longer considered “renewable” or “green.” The REC product is what conveys the attributes and benefits of the renewable electricity, not the electricity itself. As a result, all renewable-based electricity generators connected to the power grid produce two distinct products:
1) Physical electricity
2) Renewable Energy Credits, or RECs
At the point of generation, both product components can be sold together or separately, as a bundled or unbundled product. In either case, the renewable generator feeds the physical electricity onto the electricity grid, where it mixes with electricity from other generation sources. Since electrons from all generation sources are indistinguishable, it is impossible to track the physical electrons from a specific point of generation to a specific point of use.
Why Choose “Green” Power?
Electricity from traditional, fossil fuel power plants is typically cheaper to purchase and supply, but its price does not account for the harmful impacts their operations and emissions have on the environment (e.g., air and water pollution) and human health (e.g., asthma and lung cancer) and worker safety. By purchasing green power, you are helping achieve a cleaner, healthier environment; improving America’s energy independence and reducing the known risks of accidents and waste storage that come with generating plants supply by fossil fuels and nuclear energy.
How Do I Choose Between Various Green Power Options?
Not all green power is the same. Know the differences between your options before you choose.
Sources of Green Power
Which kinds of green power are you interested in buying? Wind and solar energy are the two most typically purchased sources. Some energy suppliers also market alternative sources such as waste incineration and landfill gas. Each source of energy has different attributes you may want to consider.
Some sources, such as wind and solar, can be considered completely free of direct emissions. Others have minimal carbon emissions, but may produce other pollutants. Check the contents of the “renewable“, “green” and/or “alternative” power options before deciding what you want.
Certification and Verification
Some green energy products are independently certified and verified. Some are not. Both types are available for purchase, so you should review products carefully. For example, the non-profit Center for Resources Solutions runs an independent certification and verification program called Green-e Energy (online at http://www.green-e.org/getcert_re.shtml).
Green-e certified products meet certain green standards and are independently verified by a third party audit that ensures the integrity of the green product you are purchasing. The Green-e Energy product content label gives you certainty that the renewable energy that is being marketed to you is actually the renewable energy you are buying. You may wish to check to see whether the green energy product you are interested in purchasing is Green-e Energy certified, or certified and verified by another independent third party.
