Understanding Renewable Energy Certificates

Last Updated : June 01 2017

Understanding Renewable Energy Certificates

by Chloe Johnson 2017 May 26

Understanding Renewable Energy Certificates

Any individual or business that buys and installs a solar power system to generate solar electricity can not only lower electricity bills but also reduce their cost of ownership through the benefits of renewable energy certificates (REC) if they live in countries such as Australia, which implements the Mandatory Renewable Energy Scheme. In essence, these certificates are as good as cash payments as they reduce the cost of owning a solar power system and directly promote energy efficiency through the use of renewable energy sources.

Producers of bio-energy come in all shapes and sizes, from homeowners who are re-using frying oil to create a bio-fuel or installing solar panels to capture energy from the sun, to farmers who are setting aside a field to grow corn for ethanol, to major corporations who are setting up facilities to grow algae and so forth. These producers are taking care of their fuel requirements and many times they have additional fuel that's they're not using.

As a homeowner, if you don't use all of the solar energy you're collecting, your local electric company may already have set up a method for you to transfer that extra energy to them and they'll credit your bill. And if you're one of the larger producers, you've already found a way to get your product or energy to market. In any case, if you have a surplus of energy you can sell it to someone.

On the other side of the fence, we have the corporations and business all over the country who are required by law to purchase renewable energy if they want to continue to receive tax incentives or government grants, etc. And for whatever reason, it's not always economically feasible or physically possible for these companies to completely convert their power systems to take advantage of a renewable energy source.

So these companies, large and small, purchase renewable energy certificates, which grant them ownership of a specified amount of renewable energy. They may or may not be in a position to use that energy, but that's not the point. As long as they can present these certificates that show they've purchased the required amount of renewable energy, then they've fulfilled their obligation.

What happens to the energy they purchased that they can't use? Nothing. Most producers only produce energy to meet current demands. For example, your local electric company produces a lot of electricity to keep up with air conditioning demands on a very hot day, but production drops off as the temperatures cool off in the evening.

So by paying for those energy certificates, those corporations are either using those certificates to purchase gas or electricity, or they're subsidizing your energy consumption in exchange for their tax incentives and grants.

Everyone benefits from renewable energy certificates. The corporations are fulfilling their part of the bargain. The power companies can keep their costs affordable and still conduct research into new methods of generating energy. And the people producing the bio-energy are providing for their energy needs plus making a little money off of any surplus they might be generating.

Chloe Johnson
#1 Chloe JohnsonAuthor 18 March, 2014, 12:37 Chloe Johnson is a happily married mother of 2. She loves spending time with her kids and her husband. She loves dogs and enjoys travelling in any places.