Introduction to Renewables – Part One

By Patrick Ngai, CPA, Audit Manager
ASL Renewable Energy Group

The U.S. Renewable Energy Market has been around for some time. According to the U.S. Energy Information Administration (EIA), renewable energy accounted for about 12% of total primary energy consumption and about 15% of the domestically produced electricity in the United States during 2016. Regardless of the current political climate, there is no denying that public interest in renewables is growing exponentially.

In a nutshell, the ultimate goal of purchasing renewable energy is to lower the carbon footprint by addressing the greenhouse gas (GHG) emissions produced from the generation of electricity. The two main ways to address GHG emissions are Renewable Energy Certificates and Carbon Offsets. In Part One of this multi-part introduction, we will explore what exactly is a renewable energy certificate and why it is important.

What is a Renewable Energy Certificate (REC)?
A Renewable Energy Certificate, or REC, is created when 1 megawatt hour (MWh) of energy is generated from a facility using a clean, renewable source. Sources such as wind, solar, hydro or certain eligible types of biomass all qualify as renewable sources. It is noteworthy that a REC is the most prevalent and preferred term. It can also be referred to as “green tags,” “tradable renewable certificates (TRCs),” or “renewable energy credits”. These RECs can be sold separately or be sold as a “bundle” with the electricity it generated.

Why is this important?
Picture the electric grid as a lake and various facilities as rivers that feed into this lake. These facilities can use any type of resources, such as fossil fuel, nuclear or renewable. Because of the intangible nature of electricity, you are not going to be able to distinguish the actual source of this electricity once it is fed into the lake. And this is where RECs come in. Whether it is purchased separately, or “bundled” with the actual electricity produced from a renewable source, the ownership of a REC represents the contractual rights to the non-energy attributes of 1 MWh of renewable energy generation. Furthermore, since the renewable energy resources generate little to no carbon as they produce this “cleaner” form of energy, a REC can also represent an indirect emissions reduction.

Stay tuned for Part Two of our Introduction to Renewables. In the meantime, please reach out to our Renewable Energy team with any questions you may have.