If you recently heard mention of the renewable energy credit market and are curious about what it is and how it operates, then the following questions and their answers will give you a basic overview.
What Are Renewable Energy Credits?
Renewable energy credits, also referred to as renewable energy certificates, or simply RECs, are an electronic energy certificate traded as a commodity in some states. The certificates were created to allow electric generation and supply companies to trade their government-mandated renewable energy amongst themselves to ensure they continually remain in compliance with their state's renewable portfolio standard programs. Each certificate contains vital information about the power generator, the location the power was generated, and the fuel source used to generate it.
Who Is the Seller of RECs?
Power generators generate electrical power and sell it to suppliers on the grid. When they generate renewable energy that can be sold to additional suppliers, they generate a renewable energy certificate. So, the sellers of RECs are power generators with excess renewable energy for sale.
Who Are the Buyers of RECs?
On the other half of the equation are the buyers of RECs. The REC buyers are power supply companies who are mandated to provide a certain amount of their energy from renewable sources. Since they don't generate this power themselves, they have to buy it from the generation companies who do.
For example, Company A generates power using windmills and wants to sell the power to Company B, who is a supplier and is required by the government to provide their customers with power from renewable sources. Company A makes a REC and then Company B purchases it.
This transaction provides a market for renewable power for Company A while keeping Company B in compliance without ever having to install their own windmills.
How Are RECs Traded Between Buyers and Sellers?
There are a variety of different ways RECs are traded amongst renewable energy sellers and buyers. They include the following:
- online bulletin boards
- REC aggregators
- REC brokers
In each state, there are online bulletin boards and marketplaces where RECs can be bought and sold. Some of them are free for both parties to use, while others charge a fee.
For power generators and buyers who don't want to deal with individual RECs, there are also aggregators and brokers for this energy commodity. Aggregators group together many RECs into packages and sell the packages, while brokers work to connect REC sellers with REC buyers in exchange for a brokerage fee.
For more information about energy credits, such as PJM energy credits, reach out to a professional in the energy industry.