Renewable energy credits (RECs): A guide for businesses

As news outlets and scientists are quick to remind us, climate change is one of the most pressing challenges facing humanity today. The long-term changes in the average weather patterns are sometimes termed global warming. However, many regions experience global warming as harsher weather extremes, dry and wet, hot and cold, as the total energy held in the earth’s atmosphere increases. This phenomenon is primarily driven by the increase in greenhouse gasses such as carbon dioxide and methane emitted from burning fossil fuels for energy.

The consequences of climate change are far-reaching:

• Rising sea levels
• More frequent and severe weather events
• Loss of biodiversity
• Negative impacts on human health

In response, we are currently experiencing a global push towards renewable energy sources like wind, solar, and hydroelectric power. Compared to traditional fossil fuels, which burn through limited extracted resources, wind, solar, and hydro generate electricity from much less extractive sources that are naturally renewed by the earth’s rhythms, like the day-night cycle and the water cycle. This is why they are termed renewable energy sources.

Transitioning energy systems

Many countries and businesses have ambitious goals to reduce the amount of carbon emissions they produce. However, these well intentioned goals often aren’t easy to meet. Transitioning an energy system away from fossil fuels takes time, money and political will. Renewable Energy Credits (RECs) offer a practical solution for businesses to offset their emissions and support renewable energy development.

The economic role of RECs

One REC in many cases to equal the environmental benefits of generating one megawatt-hour (MWh) of electricity from a renewable energy source. When renewable energy producers generate electricity, they can sell both the physical electricity and the RECs associated with it. By purchasing RECs, businesses can claim the environmental benefits of renewable energy without directly receiving the physical electricity.

How RECs work in practice

Here’s how RECs help bridge the gap between the priorities of urgent climate action and businesses requiring consistent energy.

1. Generation: Renewable energy sources such as wind farms, solar panels, and hydroelectric plants generate electricity. For each MWh of electricity produced, one REC is created.
2. Certification: RECs are certified by independent organizations to make sure they’re actually contributing to carbon capture or reduction in some way. In the United States and Canada, certification bodies include Green-e® as well as Ecologo® and other regional certifying entities.
3. Purchase: Businesses purchase RECs to match their electricity consumption. This purchase does not mean the business is directly using renewable energy. However, as their money supports renewable energy production, they can claim the associated environmental benefits. Therefore, they are offsetting their carbon footprint by reducing overall carbon emissions.
4. Environmental Impact: By purchasing RECs, businesses financially support renewable energy projects, driving demand for more renewable energy production and innovation. This helps reduce our society’s reliance on fossil fuels, rolling in the transition towards a greener energy grid.

Renewable energy credits in Illinois

In Illinois, electric utilities buy and retire RECs to meet the state’s Renewable Portfolio St

andard (RPS) goals. These RPS goals require a certain percentage of electricity to come from renewable sources. The Illinois Power Agency manages programs and procurements that encourage the development of new Illinois renewable energy projects. These programs offer contracts to renewable energy generators, allowing them to sell their RECs to Illinois utilities, providing financial support for new renewable energy projects, and changing existing fossil fuel infrastructure.

Working with renewable energy consulting firms to procure RECs

Navigating the complexities of renewable energy and RECs can be confusing. The systems are evolving rapidly, and not understanding where to invest your money can lead to wasted time and energy. This is where renewable energy consulting firms come into the picture. These firms specialize in helping businesses develop and implement effective renewable energy strategies. A renewable energy consultant can provide valuable insights and guidance on purchasing RECs. They can work with the company’s sustainability goals to make

Consulting firms can also assist in identifying the most beneficial and cost-effective renewable energy projects to support. They provide:

• Expertise in negotiating REC purchases
• Up-to-date understanding of market dynamics
• Experience ensuring compliance with certification standards

By partnering with a renewable energy consultant, businesses can streamline their transition to renewable energy, maximize their environmental impact, and achieve their sustainability goals more efficiently.

Conclusion

Renewable Energy Credits (RECs) offer a practical and impactful way for businesses to transition to renewable energy. These and similar economic levers are key to addressing rapid climate change. The example of Illinois highlights how state policies and programs can drive the adoption of RECs, supporting local renewable energy projects and contributing to broader sustainability goals. However, it also demonstrates how complex RECs can become depending on your local government. Partnering with renewable energy consulting firms can provide the expertise and guidance to make informed decisions and achieve significant sustainability outcomes.