Renewable Energy Certificates

What Are Renewable Energy Certificates (RECs)?

Renewable Energy Certificates (RECs) are a market-based instrument in the US that certify the generation of 1 megawatt-hour (MWh) of electricity from renewable sources, such as wind, solar, or hydroelectric power, and its injection into the power grid. Energy buyers can purchase RECs to support and claim their use of renewable energy. These certificates can be acquired alongside physical electricity (bundled) or separately (unbundled) from the actual power purchase.

Similar schemes exist in different regions. They are called Guarantees of Origin (GOs) in Europe and International Renewable Energy Credits (I-RECs) in most of Latin America, Africa, and Asia. Country-specific schemes also exist, including  Renewable Energy Guarantee of Origin (REGOs) in the UK and J Credits in Japan. The global term for all of these certificate schemes is energy attribute certificates (EACs). 

How Do RECs Work?

1. When a wind or solar farm generates electricity, they also create a REC. This REC proves that typically 1 MWh of renewable energy was produced.
2. The producer can sell both the electricity and the REC separately. While the electricity goes into the grid and mixes with other sources, the REC stays with the producer.
3. Businesses and suppliers can buy these RECs to claim they are using or supplying renewable energy. Even if their power comes from a mix of sources, the REC shows that an equal amount of renewable energy was generated and put on the grid. 
4. Once they use (or “retire”) enough RECs to match their consumption volumes, companies can claim 100% renewable energy usage.

How Are RECs Used in Sustainability Accounting?

There are voluntary reporting schemes such as the RE100 and CPD businesses report to declare their electricity emissions and show environmental leadership publicly. A number of mandatory schemes are also coming into force, like the Corporate Sustainability Reporting Directive (CSRD) in Europe, which will require all large, publicly listed companies operating in the region to report on their sustainability, including energy emissions.

When reporting to voluntary and mandatory schemes like this, RECs and other EACs are used to substantiate renewable energy claims. Disclosing businesses must match their electricity consumption volume with the same volume of valid RECs or other EACs globally to claim to be 100% renewable.

How to Manage Your Portfolio of RECs with Flexidao

For global companies, managing clean electricity is a complex juggling act involving tracking consumption, production data, invoices, RECs/ EACs, and contracts. Spreadsheets may seem like a solution, but they fail to provide oversight for global electricity portfolios. Effective data management is essential for accurate billing and compliance with disclosure schemes like RE100 and CDP.

Flexidao simplifies  REC management by acting as a “registry of registries”. It integrates with both online and offline registries to consolidate all REC and other global EAC data on a single platform. This provides better visibility for organizations managing global electricity portfolios and allows for more effective compliance planning to meet disclosure standards. Flexidao also simplifies REC allocation by automating complex calculations, ensuring optimal, audit-ready results for global clean electricity reporting and compliance with standards like RE100 and CDP. 

Find out more