Sometimes they go by Renewable Energy Credits or Renewable Energy Certificates, more often they’re called RECs or Carbon Credits, and even Solar Alternative Energy Credits, SAECs, Solar RECs, SRECs but every once in a while you might even hear Tradable Energy Certificates or TRCs — and that’s not an exhaustive list — but what the heck are they? Why do they exist? And more importantly: What do they mean to you and me?
A REC is basically a unit of renewable energy equal to one Mega Watt hour of electricity. Clear as mud, right?
“but the lightbulb icon doesn’t…” — hey, just stop using incandescent bulbs
Ok, one Mega Watt hour (MWh) of electricity is the same as 1,000 kilo-Watt hours (kWh), or, in household terms, it is the equivalent of forgetting that you left your 1,100-Watt iron on for 38 days, running an 800-Watt energy-efficient air conditioner for two-thirds of the summer or leaving on 24 of those frightful, 60-Watt incandescent light bulbs for one month. The difference is, rather than using electricity, a REC is awarded to folks that generate it using our favorite renewable energy technology: Solar.
So do I frame the REC and hang it on the wall?
Once you generate a MWh of electricity with your solar energy system you earn a REC which you can sell to a utility company — or anyone else willing to buy it, for that matter — for cash!
Let’s go over that again: You install a solar PV system that generates electricity which you can use immediately or pump onto the grid earning you credit with the utility. The electricity produced offsets your annual consumption such that you have no electricity bills (saving you money) AND accumulates RECs which you sell (earning you money). Now that is a win-win.
Why would the Utility companies want to do that?
All states are required to achieve what is called a Renewable Portfolio Standard, or RPS, of 20% by the year 2020; that is to say, 20% of all energy generated in each state must come from renewable means by that target date. In certain states like New Jersey, Pennsylvania and Delaware the RPS is enforced by giving the utilities three choices:
- Generate their own renewable energy
- Pay an often hefty fine
- Buy renewable energy credits to offset their non-RPS energy production
It just so happens that it is really expensive for the utility to develop its own renewable energy plants and the fine is designed to be higher than the price of the REC.
Ahh… Door number #3, please Monty.
So, what’s a REC worth?
Well, unfortunately you might as well be asking, “how long is a piece of electrical cord,” because there is no real price for a REC. To start, it varies from state to state and even after that, RECs are traded in an open market, so the seller and buyer must agree on a price.
Pricing is extremely important to the whole process, but is unique to the governing state programs. To learn about REC pricing in your state, read one of the entries below:
- New Jersey
- Pennsylvania
- Delaware
- Check back for updates on other states, including Massachusetts, Maryland, Ohio, and DC
The following chart will give you an idea of where recent auctions have been priced:
Summary
That’s all there is to it! Install a solar system to offset your electricity costs and start earning money.
Hopefully we haven’t overwhelmed you with numbers and new ideas, but here is one more: A home in PA might consume about 8MWh of electricity in one year. Power in PA is fairly cheap (lots of coal) and the cost of residential power is about $0.13/kWh, so, a solar PV system that offsets the annual demand saves the owner $1,040/year ($0.13 x 8,000) and earns an additional $2,400 per year (assuming a constant $300 x 8 RECs per year); a total savings of $3,440/year.
In New Jersey the savings and earnings are much more significant; in the order of $6,680 a year.
The thing to remember is that the incentives are always dropping or changing, so the time to act is, as always, now!
