What is a Renewable Energy Credit?
A Renewable Energy Credit (REC) represents the environmental and renewable attributes of renewable electricity. A REC can be sold either "bundled" with the underlying energy or "unbundled", as a separate commodity from the energy itself, into a separate REC trading market.
California law (Public Utilities Code §399.12[f]) defines a REC as:
"a certificate of proof, issued through the accounting system established by the Energy Commission… that one unit of electricity was generated and delivered by an eligible renewable energy resource.
‘Renewable energy credit’ includes all renewable and environmental attributes associated with the production of electricity from the eligible renewable energy resource, except for an emissions reduction credit issued pursuant to Section 40709 of the Health and Safety Code and any credits or payments associated with the reduction of solid waste and treatment benefits created by the utilization of biomass or biogas fuels.”
The CPUC further defined the attributes, including the avoided greenhouse gas (GHG) attributes, associated with a REC in D.08-08-028. Pursuant to this decision, the GHG attributes associated with the RPS energy generation are transferred to the buyer of the REC.
What is the role of RECs in California?
In California, RECs are used to show compliance with the RPS, and they can be traded in voluntary markets.
For the RPS, electric retail sellers must buy eligible renewable energy and its associated RECs to comply with the state RPS requirements. The California Energy Commission (CEC) tracks the RECs, and at the end of a compliance year, verifies how many RECs each retail seller has procured for compliance with the RPS. The CEC provides that information in an annual verification report to the CPUC, and then the CPUC determines whether a retail seller is in compliance with the RPS.
There are three types of transactions involving RECs – “bundled”, “unbundled”, and “tradable”. Bundled power purchase agreements are for both the RECs and energy associated with an eligible RPS facility. Unbundled REC transactions are for only the RECs. Once the RECs are unbundled from the energy, the energy is considered null (non-renewable) power and no green claims can be made for use of this null electricity. Tradable REC transactions are also for only the RECs, but then the RECs can be traded to multiple participants before ultimately used for RPS compliance. The CPUC is considering whether to allow retail sellers to procure unbundled and tradable REC transactions for RPS compliance. If the CPUC were to allow these options, it could create additional flexibility for the regulated retail sellers to comply with the RPS. For an update on this proceeding, please see the RECs webpage.
In the voluntary market, any company (e.g. a grocery store chain) that is not regulated by the state to buy green power can buy RECs to make claims that it is powered by clean energy.
How are RECs tracked?
In the Western region of the U.S., RECs (both voluntary and compliance) are tracked using the Western Renewable Energy Generation Information System (WREGIS). WREGIS was launched in mid-2007. For more information about WREGIS, please see the WREGIS website.
Who owns the RECs associated with DG facilities?
In D.07-01-018, the CPUC determined that facilities that serve onsite load (e.g. facilities receiving incentives from the California Solar Initiative or Self-Generation Incentive Program) own their RECs. In other words, the facility owner owns the RECs, and they are not transferred to the utility. That means that a facility owner can either make green claims (e.g. “our company is powered by solar”) if it retains the RECs, or the owner can seller the RECs so another entity can make green claims. The CPUC does not regulate who the facility owner sells its RECs to.
What are some other terms used for RECs?
Some terms used interchangeably with "renewable energy credits" include: Green Tags, Green Credits, Green Tickets, and Renewable Certificates.
Can tradable RECs be used for RPS compliance in California?
Please visit the RECs section for more information.