The Currency of Renewable Energy: RECs

Across the nation, more businesses, utilities, and municipalities are facing pressure to meet clean energy goals. Oftentimes, the easiest way to do this is by purchasing renewable energy credits (or certificates) called RECs. Think of a REC (pronounced wreck) as a currency of renewable energy. Anyone who can’t install and maintain a solar system or wind turbine can still support green energy and reduce their carbon impact, thanks to RECs.

Before we explain how they work, consider the power grid. All sources of energy — coal, natural gas, renewables, nuclear — feed into the grid. They’re like tributaries flowing into a river. By the time this river of electricity runs through the distribution lines and into your home, it’s impossible to tell where that power came from.

If you can’t track clean energy on the grid, how can you buy or sell it? This is where RECs come in.

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How Do Renewable Energy Credits Work?

Picture solar panels absorbing sunlight and generating carbon-free electricity to power your home. This process creates two sources of value: the electricity itself and the “green” attributes of producing fossil fuel-free electricity.

RECs represent the latter — the environmental benefits of renewable generation, not the actual electricity. Think of RECs as a certificate of property rights over one unit of this “greenness.”

Each time a renewable energy source produces 1,000 kilowatt-hours (one megawatt-hour) of electricity — the average amount of electricity an American home uses in a month — it generates one REC.* Whoever owns the solar system, wind turbine, geothermal facility, etc. may keep or sell each REC.

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Once you buy a REC and say that you’re using green power, that REC can no longer be sold or used by someone else. This is called “retiring” it in the tracking system to prevent someone else from claiming it.*

 

Who Buys and Sells Renewable Energy Credits?

Once the green energy is fed to the grid, the associated REC can be sold to a party that wants to offset its carbon emissions or is betting on the value of energy credits.*

There are different motivations for buying and selling these credits. Most times, buyers include utilities and other generation owners that are required to meet renewable portfolio standards for compliance reasons. Other parties want to claim the environmental benefits and say their company or organization is “100% powered by clean energy,” and these are usually large companies working to meet sustainability goals.

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RECs make it possible to support renewable energy even if you can’t generate it yourself. And, as the demand for RECs increases, so does the need to produce more clean energy.

 

Renewable Mandates and the Ever-Changing Price of RECs

RECs are priced differently depending on whether they are compliance or voluntary markets. Compliance RECs are used to meet a state’s renewable energy mandates. At the beginning of 2022, a total of 31 states and the District of Columbia had policies in place requiring utilities to supply a certain amount of electricity from carbon-free sources.* In these states, if utilities don’t generate enough clean energy on their own, they have to purchase RECs to meet a given state target. The demand is higher for compliance RECs, and so is the price.

RECs are typically less expensive in voluntary markets, where the interest is driven by sustainability goals, rather than mandates. Voluntary RECs appeal to companies eager to tout their positive environmental impact. Prices can range from a few dollars per REC to many hundreds of dollars, depending on where the renewable energy source is located.

 

Sunnova Helps You Sell Your RECs on the Open Market

RECs are complicated, but they can be lucrative — if you know where and how to sell them. Sunnova makes this process easy for all our customers. For those choosing a solar lease or power purchase agreement (PPA), the price of the renewable energy credits is embedded into your all-in rate. For customers choosing a loan offering, in many markets, Sunnova will credit your account annually for the value of the RECs that you generate. Once you sign up, Sunnova will manage your RECs from start to finish.

  • We register and certify your system with the state and applicable registries
  • We obtain an Independent Verifier to validate and submit your production to the state and applicable registries
  • We sell your RECs on the open market
  • Then, you get paid out each year — you won’t have to lift a finger

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How Much Money Could I Get for My RECs?

You won’t get rich from selling your RECs on the open market, but they are certainly worth something. Use the money to install more panels (and earn more RECs) or put it toward an electric vehicle and charge the battery on clean power from the sun.

So, how much are your RECs worth? Keep in mind that prices will vary depending on your state’s market structure. Prices in voluntary markets depend on supply and demand, while prices in compliance markets depend on how much regulated entities like utilities are willing to pay to avoid the penalty of non-compliance.*

For example, based on an average system size, loan customers could potentially earn:

  • Massachusetts: $270 per year with the RPS Class I rate*
  • New Jersey: $810 per year with the SREC II program*
  • Maryland: $620 per year with the SREC program*
 

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This service is available for Sunnova customers in select markets.

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Frequently Asked Questions

Solar Renewable Energy Certificates (“SRECs” or simply “RECs”) represent a way to track the renewable properties of clean energy as that energy flows into the grid. Because RECs are tradable certificates, they are essentially 'proof' that the energy is derived from a clean resource. Think of RECs a legal right to the environmental benefit of clean power. When you have a solar system installed on your roof and you own that system, you’re generating RECs alongside your solar energy. These can be sold on state markets where electric suppliers or other buyers are seeking to meet solar or renewable energy targets.

At Sunnova, we want you to maximize the benefits of your solar system. That is why we administer all aspects of managing RECs and pass along the rewards to you. When you sign your agreement, you will grant Sunnova permission to manage RECs on your behalf. On an annual basis, you will receive either a bill credit or other form of payment for your RECs, minus a management fee.

The price per REC varies widely based on where you live. Your payment will be tied to the current market rate.

On an annual basis in February, we will provide you with either a bill credit or other form of payment based on the RECs awarded for your system’s production and the market rate we sold them for in the market, minus a management fee.

Sunnova administers the entire program on your behalf. This includes registering and certifying your solar system with the state, program agencies, and tracking systems, submitting production to the applicable agencies, maintaining accounts in good standing, verifying the minting of the RECs, and marketing/selling the RECs in the market. We make this easy for you so you can maximize the benefits of your solar system without any of the hassle.

No, at no time does selling your RECs impact the power your system generates and uses to power your home, nor does it impact your utility bill.

 

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