Renewable Energy Credits Overview
A renewable electricity generator can be thought
of as providing two products: electricity that
goes into the grid, and the environmental attributes
(such as reduced carbon dioxide relative to
fossil-fired generation) associated with the
renewable generation. The concept behind Renewable
Energy Credits is for these two products to
be separated. The electricity itself, contractually
shorn of its environmental attributes, can
be sold into the grid as a commodity. The environmental
attributes, meanwhile, can be represented by
a "Renewable Energy
Credits," which is then traded on a secondary market. Both the electricity itself and the unbundled environmental benefits are easier to buy and sell separately than traditional "bundled" green energy.
Renewable Energy Credits can be used several
different ways:
- A utility with a green pricing program can
simply buy Renewable Energy Credits, rather
than actual renewable generation, to meet
their customers' renewable electricity needs.
- A utility needing renewable generation to satisfy renewable portfolio standards requirements, meet carbon goals, or for other reasons can buy green tags instead of actual renewable generation.
- A utility with renewable generation may
want to sell the associated Renewable Energy
Credits, rather than make use of them internally.
- End-users could buy green tags directly from green tag marketers, rather than going through a utility's green pricing program.
- Consumers could purchase tags to, for example, 'green up' a conference or an energy using facility.
New uses for green tags will continue to pop up as the concept gains acceptance.
