Renewable Energy Credits (RECs) are certificates issued by a government agency to a power company that utilize environmentally-friendly methods to generate electricity. The Renewable Energy Credits can, in-turn, be traded and sold on the open market, providing an incentive to companies which produce “green” power. Sources of green power include solar, wind, geothermal, biomass, biodiesel, some fuel cells and low-impact hydropower.
The green energy producer then sells their power into the grid. While it is impossible for the purchaser of an REC to consume electricity solely from a green energy producer (as once the electrons are in the grid, they are irreversibly mixed with electrons from other sources), the purchase of an REC supports green energy production. It is also important to note, renewable energy which makes up the REC may not necessarily be located on the same grid or in a purchaser’s local area. This means that you don’t necessarily get green energy from your neighbour’s micro-generating unit.
For a green energy producing company in a province which participates with the Renewable Energy Credits program, the company is offered one credit for a set amount of energy produced, typically 1,000 kilowatt hours. The credit is given a distinct number so that it can be tracked, the power is fed into the grid, and the company offers the credit for sale.
Renewable energy source power companies benefit from Renewable Energy Credits because they serve as an incentive. Many non-renewable energy sources are subsidized, making it difficult for green energy companies to survive. Being able to participate in Renewable Energy Credits, allows the producer to remain viable in the electricity market. Prices for Renewable Energy Credits vary widely, just like other commodities, and they are available for sale in numerous locations.