Renewable energy certificates (RECs) are paper certificates that represent power generated by a renewable energy source and can be purchased or traded between private individuals or businesses. The certificate itself represents the energy equivalent of one megawatt hour (MWh), and the certificate owner is free to use the power in any way he sees fit. A certified renewable energy plant generates energy and feeds it into the electrical grid, where it can be used by the certificate holder. Renewable energy certificates are commonly purchased by power plants and businesses to comply with laws requiring a certain percentage of their overall power to be renewable or to increase public awareness of the establishment. Wind, solar panels, hydrogen fuel cells, and biofuel are all sources of renewable energy at certified renewable energy plants.
Renewable energy certificates, each representing 1 MWh of power, are printed when a renewable energy plant generates energy. The certificates are labeled with a unique serial number, just like stocks and bonds. The certificate can be purchased and used later or traded after it has been printed.
Although renewable energy certificates can be traded, they are most commonly used by their owners. The renewable energy plant feeds the energy into the electrical grid after it is produced, allowing owners to use it. The electricity is stored in the electrical grid until the owner claims the right to use it. The energy is then channeled to the owner’s specific needs.
Electric companies and general businesses are the two largest customers of renewable energy certificates. Electrical companies are more likely to purchase RECs because most countries have laws requiring them to sell a certain amount of renewable energy to customers; the amount varies by region. Another advantage of using renewable energy is that it makes companies appear more responsible, which can lead to increased sales. Although RECs may be less expensive than non-renewable energy, this may or may not be the case at any given time.
While any power company can store energy in the electrical grid, only a few can generate renewable energy. Companies that produce non-renewable energy can store energy, but they cannot sell renewable energy certificates. Solar energy, geothermal energy, biofuel, and wind are examples of renewable energy that have no restrictions as of 2011. There are restrictions on some energy types. Hydropower, for example, is only feasible in small facilities that do not obstruct water flow, and fuel cells are only renewable if they use hydrogen obtained from another renewable energy source.