REC Markets Background

RENEWABLE ENERGY CERTIFICATES

Renewable Energy Certificate (REC) markets are created through state Renewable Portfolio Standard (RPS) programs. Currently, 31 states and Washington D.C. have implemented RPS programs aimed at incentivizing more energy from wind, solar, hydro power and other renewable sources.

MARKET OVERVIEW

• Almost half of all state renewable targets rise until at least 2030
• Roughly 50% of all growth in US renewable electricity generation and capacity since 2000 is associated with state RPS compliance. (82GW of 174GW)

Source: Berkeley Lab

REC Market Basics

Renewable energy producers, such as wind or solar, generate a REC for each megawatt hour (MWh) of energy they produce. These resources create two sources of value that can each be sold: electricity and RECs. The RECs can be sold to utilities for compliance purposes or other entities interested in them.

States with programs have their own REC market requirements and classes, or tiers, for certain power sources such as wind and solar. How aggressive a state mandate is, is a primary determinant of prices from state to state. There currently is no federal REC market in the US.

Some generating resources qualify in multiple states. Other REC eligibility is stand-alone.

RPS programs have been successful in achieving their goals of increasing renewable electricity production. In some instances, such as Texas and California, states have already exceeded their legislated targets and others are quickly approaching.