When consumers shop for electricity rates, they often encounter plans that claim to be “green” or represent that they contain some percentage of renewable energy. A common question is how does energy flow from renewable generation resources (wind farms, solar arrays, etc.) to customers that have chosen green or renewable energy plans.
The short answer is that unless you have a solar panel on your roof or wind turbine in your backyard, there is no practical way to track energy from any particular generation source to your home. Electrons travelling along the transmission grid, into substations, and through transformers are commingled from multiple generation resources. Electrons are a commodity and are not labelled with regard to whether they originated from fossil fuel combustion, nuclear fusion, photovoltaic cells, wind turbines, or other sources.
Renewable Energy Credits
Given this scenario, how can retail electric providers claim that customers are receiving renewable energy? The answer lies in the concept of Renewable Energy Credits, or “RECs” for short. When a traditional power plant operates, it creates a single product – electricity – and transfers its output to the power grid. However, when a renewable electric generator operates, it creates two products. The first is electricity just like a regular power plant. This product is transferred to the power grid where it is combined with the energy from other power plants. The second product is a REC.
A REC represents the renewable attribute of the power that was generated from a renewable resource. The renewable energy generator, a wind farm for example, is credited with 1 REC for every 1 Megawatt-hour (1,000 kilowatt-hours) of electricity that it generates. The power grid operators issue the RECs and assign each of them a unique serial number. Each REC has a lifespan (three years in Texas) during which it can be bought, sold, traded, used to meet regulatory requirements, or validate product claims. A REC is “used” when it is retired. Once retired, can no longer be traded or transferred again. This limits the environmental benefit of the REC to only being used one time.
Renewable Electricity Plans
Retail electric providers can make renewable energy claims for their products if they purchase and retire the number of RECs that equals or exceeds the requirements for those claims. For example, if a customer signs up for a 12-month 100% renewable energy product and uses 10,000 kilowatt-hours of electricity during that term, the retail electric provider would need to purchase and retire 10 RECs to satisfy their renewable energy obligation. Retail energy providers typically use independent auditors to verify that they are actually retiring the appropriate number of RECs to support their product claims. Some also use well-established certification programs like Green-e so that customers can be certain that their electricity meets the renewable standards.