What are renewable energy credits?

renewable energy credits

According to the International Energy Agency, electricity generation from renewables accounts for approximately 40 percent of the entire renewable energy supply. As the world increasingly focuses on sustainability management, various initiatives are emerging to support this transition. One such initiative includes renewable energy credits, which enable businesses to take the lead in reducing their carbon footprint and tackling emissions. Continue reading to learn more about renewable energy credits and how they work.

How do energy tax credits work 

Ultimately, they represent the energy credited by renewable energy sources like wind and solar power facilities. Purchasing RECs is not the equivalent of purchasing electricity. Instead, these credits stand for renewable electricity’s clean energy characteristics. They are non-tangible, tradable commodities that are credited from these renewable resources and then fed into the shared system of power lines that transport energy. 

The advantages of tradable renewable energy credits 

RECs offer official evidence that a company, person, or other entity is using renewable energy off the grid without having solar panels or other renewable energy equipment installed. They are a tracking system for renewable energy that offers flexibility. 

This is especially the case if your business is situated in multiple different places or is unable to install solar panels due to a lack of the right infrastructure. RECs allow you to reduce your company’s ecological footprint but the procurement of them also supports the renewable energy market by offering a demand signal. 

This in turn drives the production of renewable energy to meet this demand. Through this, these business energy credits not only enable businesses to achieve their carbon emission objectives but also encourage renewable energy generation. 

Who buys them? 

Businesses can purchase renewable energy credits in addition to their energy, and the RECs assure that a specific amount of electricity comes from a renewable resource. RECs are an excellent choice for those who want to support the renewable energy market but cannot install solar panels or other renewable energy technology at their business or home. Business owners who want to reduce their carbon footprint and environmental impact will also benefit from RECs, as well as those who have net-zero goals

How do SRECs and RECs differ? 

Solar renewable energy credits (SRECs) are a kind of renewable energy credit and green power market. They are market-based credits that come from the electricity that is specifically created by solar panels. Similarly to RECs, they are tradable commodities, however, the facilities must be solar facilities. 

Business owners earn one SREC for every one megawatt-hour (MWh) of electricity created by their solar panels. They can then sell these SRECs to electric utilities, and SRECs can be worth €300 or more in specific markets. There are also legal differences between the two, which can be found on the EPA website. 

Summary

Renewable energy credits (RECs) and solar renewable energy credits (SRECs) are crucial instruments in the green transition. They provide a flexible and impactful way for businesses to support renewable energy generation, even without the physical infrastructure for renewable energy sources. 

Moreover, RECs play a vital role in stimulating the renewable energy market by sending a demand signal, thereby encouraging further investment and development in renewable energy projects. Ultimately, leveraging these tools can drive significant progress in our collective efforts to combat climate change and promote a more sustainable future.

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