Renewable energy is an alternative to traditional fossil fuels that can aid in the fight against global climate change by helping to curtail carbon emissions. Renewable energy credits (RECs) are a way to track where renewable energy is coming from and how much is entering our power grid. RECs bolster the renewable energy market, so we had to ask: What are RECs really, and could they help us mitigate climate change?

Renewable Energy Credits (RECs) are a tradable commodity that represent proof that 1 megawatt-hour (MWh) of renewable energy has been added to the energy grid. They bolster the renewable energy market and reduce your own carbon emissions. Yet, they do not guarantee carbon avoidance.

Keep reading to find out all about what Renewable energy credits (RECs) are, how they work, what their project life-cycle is, how effective they are, their pros and cons, and how they can help mitigate climate change.

The Big Picture of Renewable Energy Credits (RECs)

Renewable energy is key in addressing climate change because it produces less carbon dioxide (CO₂) than traditional fossil fuels (e.g., coal, oil, natural gas). Renewable energy credits (RECs) can aid in the transition away from fossil fuels and towards renewable energy because they increase the amount of renewable energy being supplied to our power grid.

What Are Renewable Energy Credits (RECs)

Renewable Energy Credits (RECs) are the currency of the renewable energy market in North America, representing the attributes of renewable energy that are generated and delivered to our power grid. They are measured in megawatt hours (MWh) of renewable electricity and target scope 2 emissions, or the emissions associated with purchased electricity. 

How Is Renewable Energy Defined

Renewable energy is an energy substitute for fossil fuels (e.g., coal, oil, natural gas) that can reduce the effects of global warming by limiting global greenhouse gas emissions (GHGs). It is infinite by definition because the resources naturally replace themselves over time. 

“Renewable Energy: energy that is produced using the sun, wind, etc., or from crops, rather than using fuels such as oil or coal | types of energy that can be replaced naturally such as energy produced from wind or water”

Cambridge Dictionary

The 7 most common types of renewable energy are: solar, wind, hydropower, geothermal, tidal, wave, and biomass energy. They are mostly non-polluting, low-maintenance, and promote the decentralization of energy supply but can also come with lower immediate quantities of energy compared to fossil fuels. 

How Are Renewable Energy Credits (RECs) Defined

Renewable Energy Credits (RECs) are the currency of the renewable energy market in North America, representing the attributes of renewable energy that are generated and delivered to our power grid. They are measured in megawatt hours (MWh) of renewable electricity and target scope 2 emissions, or the emissions associated with purchased electricity. 

“REC: a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes of renewable electricity generation”

United States Environmental Protection Agency

RECs can come in two forms:

• Bundled: The REC is sold together with the energy associated with it. 

• Unbundled: The REC has been separated from the physical electricity it represents. 

RECs are a specific type of Energy Attribute Certificate (EAC), which is physical documentation that proves 1 megawatt-hour (MWh) of renewable energy has been added to the energy grid. EACs go by different names in different regions of the world. RECs simply refer to EACs in North American markets.

How Do Renewable Energy Credits (RECs) Work

Renewable energy credits (RECs) are physical documentation that act as an accounting or tracking mechanism for renewable energies as they are incorporated into our power grid. However, they do not curtail energy from fossil fuels, limit their production, or guarantee carbon is being avoided.  

How and When Do Renewable Energy Credits (RECs) Reduce Your Carbon Footprint

Renewable energy credits (RECs) represent the creation of renewable energy to be supplied to our power grid. They directly reduce your carbon footprint as soon as you purchase them because renewables have a lower carbon footprint than fossil fuels. 

How Do Renewable Energy Credits (RECs) Reduce Your Carbon Footprint

When you hear the word “REC”, think about the term “renewable energy”. RECs can reduce the demand for “dirty”, fossil-fueled energies by bolstering the renewable energy market. RECs represent the creation of renewable energy to be supplied to our power grid. 

For example, if you consume 100 MWh per year, then you should purchase 100 RECs to ensure that all of the electricity you use is sourced from renewable energy sources.

RECs act as an accounting or tracking mechanism for renewable energies as they are incorporated into our power grid. When renewable energy enters our power grid, it consists of electrons that cannot be traced to any specific source. But RECs are a way to track when and where renewable energy is generated, who it is sold to, and who is using it. To prevent someone else from claiming it, each REC can be uniquely numbered, tracked, and retired in the tracking system.

When Do Renewable Energy Credits (RECs) Reduce Your Carbon Footprint

RECs directly reduce your own carbon emissions immediately. When you purchase a REC, you source your energy from renewable resources rather than from fossil fuels. Since renewables have a lower carbon footprint than fossil fuels, your carbon footprint decreases as you use RECs.

What Could Prevent Renewable Energy Credits (RECs) From Being Realized

RECs do not have a significant impact on global carbon emissions because they do not curtail energy from fossil fuels, limit their production, or guarantee carbon is being avoided. They simply bolster the renewable energy market and increase renewable energy supply to the power grid. 

Also, to be beneficial, RECs must be additional. This means the carbon emissions reductions would not have occurred without REC interventions. But RECs are often not additional because most projects receiving REC revenue now would have been built regardless. The large demand for renewable energy in general means that the infrastructure would have been built independently of RECs. 

Project Name: An Example Project of Renewable Energy Credits

An example REC project is the Capricorn Ridge Wind Farm project, which is located in Texas, US, and became operational on May 20, 2008. Terrapass currently supports this project and offers RECs that the project generates.

The project consists of 75 wind turbines with a total capacity of 112.5 MW. Each tower has a rated wind speed of 12 meters per second (m/s), 3 rotor blades, and a remote control and monitoring system. The renewable electricity generated by the Capricorn Ridge Wind Farm is supplied to the Lower Colorado River Authority substation in Coke County, TX. 

This project is certified by the Verified Carbon Standard and Green-e® Energy, an independent, third-party verification system and the leading renewable energy certification and verification program in North America. You can visit Terrapass’s website to view more about the project and purchase your RECs.

What Is the Project Life-Cycle of Renewable Energy Credits (RECs)

To fully understand Renewable Energy Credits (RECs), we must assess each stage of their life-cycle. This life-cycle assessment (LCA) is a method to evaluate the environmental impacts of products and materials. Over the years, companies have strategically used LCA to research and create more sustainable products. So, we had a look at the LCA for Renewable Energy Credits (RECs)! 

Building of Renewable Energy Credits (RECs)

In general, the building of renewable energy involves the construction of renewable energy facilities, the construction of electricity delivery mechanisms (i.e. transmission lines, transformers, and substations), and the transportation of necessary building materials. 

Each renewable energy source also has unique needs for its building stage:  

• Solar: Many components are required to construct a solar power plant, including solar mirrors, heat-exchange fluid, receivers, engines, turbines, and generators

• Wind: Many components are required to construct a wind farm, including towers, rotors, nacelles, generators, and foundation of the turbines.

• Hydropower: CO₂ from the construction of hydroelectric facilities and emissions from reservoirs, which produce carbon emissions as a result of the decomposition of flooded organic material.

• Geothermal: CO₂ emissions from drilling geothermal wells and construction of geothermal power plants which require wells, condensers, generators, and turbines.

• Tidal and Wave: Many components are required to construct tidal and wave power plants, including dams, gates, buoys, water columns, penstocks, turbines, and generators.

• Biomass: CO₂ emissions from extracting and processing biomass, and construction of biomass power plants which require fuel storage and handling equipment, combustors/furnaces, boilers, pumps, fans, turbines, generators, condensers, cooling towers, and emission controls.

Operating and Maintaining of Renewable Energy Credits (RECs)

In general, the operating and maintenance of renewable energy produces little to no CO₂ or waste products. 

The carbon footprint of renewable energy ranges anywhere from 11 (onshore wind) to 740 (biomass) grams of CO₂ equivalent per kWh (gCO₂/KWh) of electricity produced. This is significantly lower than the 970, 820, and 490 gCO₂/KWh emitted by oil, coal, and natural gas, respectively. 

Biomass is the only renewable energy source with a higher rate of carbon emissions and waste products. This is mainly due to three reasons:

1. Overall, biomass is not as sustainable as it appears to be at first glance. For biomass to be sustainable, the rate of harvest must not exceed the rate of forest growth. In reality, this rarely happens. 
2. Existing biomass power plants can emit more CO₂ from their smokestacks than coal plants because wood is less energy-dense than coal and therefore requires more wood to generate the same amount of electricity as a small amount of coal can. 
3. Chopping trees to produce wood pellets that are then burned for electricity causes deforestation because it reduces the number of trees that can capture our CO₂ emissions. 

End-of-Life of Renewable Energy Credits (RECs)

The end-of-life of renewable energy generally involves decommissioning and disposing of the renewable energy infrastructure and performing the necessary land restoration.

Each renewable energy source also has a different life expectancy:

• Solar: Solar panels themselves have an average life expectancy of 25-30 years, and this can be extended for many decades with proper maintenance. 

• Wind: Wind turbines require routine maintenance every 6 months and have a life expectancy of around 20 years. The towers, foundations, generators, and gearboxes are also typically recycled.

• Hydropower: Hydropower plants have had a historical life expectancy of 80 years, but they are known to last around 100 years. And if hydropower plants are properly maintained, the civil engineering infrastructure should last almost indefinitely.

• Geothermal: Geothermal heat pumps can last more than 20 years, and the underground infrastructure has a historical life expectancy of up to 50 years. 

• Tidal and Wave: Tidal power plants have an average life expectancy of up to 100 years, and if tidal plants are properly maintained, the civil engineering infrastructure should last almost indefinitely. Little is known about the life expectancy of wave power plants because the technology is still in development.

• Biomass: Biomass power plants have a historical life expectancy of 20-30 years.

How Effective and Efficient Are Renewable Energy Credits (RECs)

In terms of effectiveness, renewable energy credits (RECs) reduce your own carbon emissions and bolster the renewable energy market. However, they often lack additionality.

In terms of efficiency, renewable energy credits (RECs) are cost-effective and increase the efficiency of the power grid. However, they also may have intermittent energy production problems associated with renewable energy.

RECs are effective at mitigating climate change because they:

• Reduce your own carbon emissions by having a lower carbon footprint than traditional fossil fuels
• Bolster the renewable energy market by creating new renewable energy

However, RECs can also lack effectiveness because additionality is not guaranteed. Renewable energy projects are already in high demand and would have been built regardless.

RECs are efficient at reducing carbon dioxide (CO₂) emissions because they:

• Are a relatively cost-effective method of carbon emission reduction when compared to other methods
• Increase the efficiency of the power grid by promoting energy decentralization

However, RECs can also lack efficiency because they share some of the overall problems associated with renewable energy including intermittent energy production, geographic limitations, and ever-fluctuating quantities of energy.

How Could you Offset Your Own Carbon Footprint With Renewable Energy Credits (RECs)

Unbundled RECs have seen rapid growth in the past decade, increasing from 19.8 million MWh in 2010 to 86.4 million MWh in 2020, and they are now the most common form of green-power procurement in the voluntary market.

Because RECs are cost-effective and directly reduce your own carbon emissions, they are predicted to make up an increasingly larger share of this market.

How Can Renewable Energy Credits (RECs) Help Mitigate Climate Change

Climate change is a severe and long-term consequence of fossil fuel combustion. Renewable Energy Credits (RECs) can help mitigate climate change because they increase the market for renewable energy and incentivize the switch away from traditional fossil fuels, which emit billions of tons of carbon every year. Atmospheric carbon can remain in circulation for tens of thousands of years and exacerbate the negative effects of climate change.

How is Climate Change Defined

Climate change is arguably the most severe, long-term global impact of fossil fuel combustion. Every year, approximately 33 billion tons (bt) of CO₂ are emitted from burning fossil fuels. The carbon found in fossil fuels reacts with oxygen in the air to produce CO₂. 

“Climate change: changes in the earth’s weather, including changes in temperature, wind patterns and rainfall, especially the increase in the temperature of the earth’s atmosphere that is caused by the increase of particular gasses, especially carbon dioxide.”

Oxford Dictionary

Atmospheric CO₂ fuels climate change, which results in global warming. When CO₂ and other air pollutants absorb sunlight and solar radiation in the atmosphere, it traps the heat and acts as an insulator for the planet. Since the Industrial Revolution, Earth’s temperature has risen a little more than 1 degree Celsius (C), or 2 degrees Fahrenheit (F). Between 1880-1980 the global temperature rose by 0.07C every 10 years. This rate has more than doubled since 1981, with a current global annual temperature rise of 0.18C, or 0.32F, for every 10 years. 

As outlined in the 2015 Paris Climate Agreement, we must cut current GHG emissions by 50% by 2030 and reach net zero by 2050. 

How Do Renewable Energy Credits (RECs) Generally Help Mitigate Climate Change

Levels of carbon in our atmosphere that cause climate change have increased as a result of human emissions since the beginning of the Industrial Revolution in 1750. The global average concentration of carbon dioxide in the atmosphere today registers at over 400 parts per million. RECs can help prevent these levels from increasing even more.

When you hear the word “REC”, think about the term “renewable energy”. RECs represent the creation of renewable energy to be supplied to our power grid. RECs can reduce the demand for “dirty”, fossil-fueled energies by bolstering the renewable energy market. 

RECs that are certified by verified third parties and are a part of renewable energy projects that are carried out until the end of their lifespan have the best chance of reducing carbon emissions and therefore mitigating climate change. 

When we reduce CO₂ emissions we also slow the rate of global temperature rise, which in turn minimizes the effects of climate change. 

How Do Renewable Energy Credits (RECs) Specifically Help Mitigate Climate Change

Renewable energy credits specifically help mitigate climate change because they bolster the renewable energy market, which reduces the demand for fossil fuels and subsequently reduces carbon emissions.

Renewable energy is important to meet Paris Climate Agreement targets because it reduces our dependence on fossil fuels, which produce carbon that can remain in our atmosphere for tens of thousands of years.

What Are The 6 Pros and 4 Cons of Renewable Energy Credits (RECs)

Renewable energy credits (RECs) reduce your own carbon emissions, bolster the renewable energy market, are cost-effective, promote the decentralization of our energy supply, are a low-maintenance form of carbon emission reduction, and are environmentally-friendly.

However, RECs often lack additionality, do not guarantee carbon avoidance, occupy an oversaturated market, and may have intermittent energy production problems associated with renewable energy.

What Are the 6 Pros of Renewable Energy Credits (RECs)

RECs have various pros that go beyond simply reducing carbon emissions, they also contribute largely to the advancement of the renewable energy market.

What Are the 4 Cons of Renewable Energy Credits (RECs)

Understanding the drawbacks of RECs is important when implementing this strategy on a large scale in order to mitigate climate change.

What Are Better Alternatives to Renewable Energy Credits (RECs)

If used correctly, renewable energy credits (RECs) can provide environmental, economic, and social benefits beyond reducing carbon emissions. They have the potential to instigate meaningful environmental change and begin to reverse some of the effects of climate change. 

However, we can’t let this method be a guilt-free way to reduce carbon emissions. Relying on RECs solely is impractical because they are so cheap that they have become irrelevant to the financing and investment decisions of the power industry. Instead, RECs must be used in conjunction with direct carbon reduction measures. 

These reduction measures don’t have to involve drastic changes either. Actions that may seem small can have a big impact because those small changes add up! You can reduce your carbon footprint in three main areas of your life: household, travel, and lifestyle. 

Reduce your household carbon footprint:

• Wash with cold water: Washing clothes in cold water could reduce carbon emissions by up to 11 million tons. Approximately 90% of the energy is used to heat the water, so switching to cold saves also saves energy.

• Replace incandescent bulbs with fluorescent bulbs: Fluorescent bulbs use 75% less energy than incandescent ones, saving energy and thus reducing electricity demand and GHG emissions.

Reduce your travel carbon footprint:

• Fly less: Aviation accounts for around 1.9% of global carbon emissions and 2.5% of CO₂. Air crafts run on jet gasoline, which is converted to CO₂ when burned.

• Walk or bike when possible: The most efficient ways of traveling are walking, bicycling, or taking the train. Using a bike instead of a car can reduce carbon emissions by 75%. These forms of transportation also provide lower levels of air pollution.

Reduce your lifestyle carbon footprint:

• Switch to renewable energy sources: The six most common types of renewable energy are solar, wind, hydro, tidal, geothermal, and biomass energy. They are a substitute for fossil fuels that can reduce the effects of global warming by limiting global carbon emissions and other pollutants.

• Recycle: Recycling uses less energy and deposits less waste in landfills. Less manufacturing and transportation energy costs means fewer carbon emissions generated. Less waste in landfills means less CH₄ is generated.

• Switch from single-use to sustainable products: Reusing products avoids resource extraction, reduces energy use, reduces waste generation, and can prevent littering.

• Eat less meat and dairy: Meat and dairy account for 14.5% of global GHG emissions, with beef and lamb being the most carbon-intensive. Globally, we consume much more meat than is considered sustainable, and switching to a vegan or vegetarian diet could reduce emissions. 

• Take shorter showers: Approximately 1.2 trillion gallons of water are used each year in the United States just for showering purposes, and showering takes up about 17% of residential water usage. The amount of water consumed and the energy cost of that consumption are directly related. The less water we use the less energy we use. And the less energy we use, the less of a negative impact we have on the environment.

Because the market for RECs is oversaturated and they do not curtail fossil fuel production, RECs alone will not be enough to reduce global carbon emissions significantly. Reducing individual energy use and consumption are better alternatives to RECs.

Final Thoughts

Renewable energy credits (RECs) are physical documentation that proves 1 megawatt-hour (MWh) of renewable energy has been added to the energy grid. They target scope 2 carbon emissions, the emissions associated with purchased electricity. CO₂ reduction occurs immediately upon purchase of RECs, because renewable energy has a lower carbon footprint than traditional fossil fuels.

Although RECs can shift focus away from fossil fuels and increase the amount of renewable energy entering our power grid, they should not be seen as the only solution to climate change. They are effective at reducing CO₂ in the short term, but in the long term, they fail to reduce CO₂ enough. Market oversaturation limits their long-term effectiveness, and RECs also do not guarantee carbon is being avoided.

When used in conjunction with direct CO₂ reduction measures, RECs can be much more effective. We should reduce our own carbon footprint as much as possible first, and only then choose the most effective RECs.

Stay impactful,

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