Why are renewable energy credits (RECs) sold separately from the power?
Renewable energy projects are often located in regions where there are not enough people nearby who are willing to pay the premium price that the project needs – the price that reflects the environmental value of its power. In addition, transmitting its power a longer distance to markets where people are willing to pay that premium adds even more cost (and in fact, it wouldn’t even get there – if you transmit power from one grid to another, the power that actually moves is the power that happens to be closest to the “bridge” at the time). Splitting the project’s output into two separate commodities – the power itself, and the environmental attributes of that power (the RECs) – enables the project to sell its power locally at market rates as “regular” or “generic” power, and recover its premium cost by selling the RECs to buyers in other markets or regions who are willing to pay the premium to support renewable energy. This system adds flexibility and efficiency to the renewable energy
