What is a renewable energy credit (REC) and how does it benefit the environment?
When a renewable energy generator – for example, a wind power generator – produces one megawatt hour of electricity that is sold into the electricity market, it produces one REC. The REC can then be sold to a buyer, such as an individual or an organization. A REC is a tradable instrument that represents the environmental attributes – for example, reduced carbon emissions – of electricity generated from renewable energy. These attributes are separated from the electricity commodity, allowing the attributes and the actual electricity to be traded separately. The additional value of the REC allows the project developer to charge more for the power produced from renewable sources, since green power typically costs more than traditional power. This extra value helps the economics of renewable projects, and allows more projects to be developed.
