An introduction to REC schemes
•• Facilitating reliable energy claims
Renewable Energy Certificate (REC) schemes explained
A REC is an Energy Attribute Certificate (EAC). Through the use of EACs, end-users around the world can make reliable claims about their energy usage such as: “my factory runs on 100% renewable energy”, “our products are made with 100% wind energy” and “our global electricity usage causes zero end-of-pipe emissions”. Without the use of EACs, it would be impossible to make these reliable claims because electricity is not a tangible product that can be boxed and sent from the producer to the consumer. Instead, a producer injects an electrical charge into the grid in one place and somewhere else, a consumer takes the same amount of charge off the grid. There is no way to track electrons through a grid.
Therefore, the only reliable mechanism for making claims about the use of a specific charge that was taken off the grid is a system that books all injected charges as unique units (megawatt-hours (MWh)). These booked, unique units can be traded independently from the underlying electricity, and only the person or entity that ‘cancels’ (see below) this unique unit can claim the usage of that specific MWh. This mechanism is called a book-and-claim system and is the cornerstone of EACs worldwide. It is an accounting instrument that certifies the production of a MWh of electricity along with factual characteristics of how, where, and when the electricity was produced. These units can then be transparently traded and cancelled.
EAC schemes can accelerate a country’s energy transition by putting an additional, marketable value on the production of renewable energy. Producers of renewable energy can sell both the energy and the related EAC. By providing a complementary income stream, the trade of EACs can reduce the reliance on national public renewable energy support schemes for renewable energy producers seeking to ensure the economic viability of their projects. This means that any public money that is available for supporting renewable energy generation can go to those projects in most need of it, and/or can be spread across more projects.
The use of an EAC scheme to support the generation of renewable energy should not necessarily mean that governments should invest less in the generation of renewable energy. Market participant’s use of a given EAC scheme is either voluntary or mandated by national authorities. Voluntary EAC schemes allow, but don’t require, market participants to trade EACs and/or to cancel EACs in order to make a claim about the use of renewable energy. Currently, most national EACs schemes are voluntary, for example, the schemes used in the European internal market. Mandated EAC schemes are often referred to as “compliance” markets. Generally, in such schemes, a national authority requires market participants to sell or purchase a given volume or percentage of renewable energy and prove that activity through the trade and/or cancellation of EACs. EAC compliance markets are seen in some US States, where they are the tool for meeting a Renewable Portfolio Standard (RPS). EAC schemes can differ based on their legal footing, but the underlying principles of their operation – the issuance, trade, and cancellation of certificates that allow end-users to claim the use of a given unit of energy – are the same.
More information can be found in the documents on the right.