Renewable Energy Credits

Xcel Energy's Ponnequin wind farm.

Xcel Energy's Ponnequin wind farm.

There isn’t much in the world of green energy that’s more confusing than understanding a renewable energy credit. (After all, how can you pay someone $15, and suddenly be able proclaim yourself wind-powered for six months?) Read on to unravel the REC Web:

Buying a renewable-energy credit allows an individual or business to financially support wind energy even if it is not available locally. The credits technically represent the environmental benefits of using renewable energy instead of traditionally produced power.

To understand how the complicated concept works, it’s helpful to realize that the various attributes associated with producing electricity can be separated into parts.

In the case of wind power, there is the actual electricity generated — which is fed into a power grid where it is mixed with electricity that may have been generated by coal, natural gas or even nuclear reactions — and there are the environmental benefits of the way the electricity is produced.

Unlike burning fossil fuels, wind generation does not produce dangerous particulates, sulfur dioxides, nitrogen oxides or carbon dioxide. Renewable-energy certificates represent the value of not dumping those pollutants into the atmosphere.

Separating the electricity from the environmental benefits allows people who are actually receiving the wind power — but who don’t want to pay the added costs of renewable energy — to pay the same rate they would pay for traditionally generated electricity. It also gives people who do not have direct access to wind-generated power the ability to purchase renewable-energy credits, which helps the wind company to stay competitive even without willing customers in the area of the wind farm.

One renewable-energy credit is created for each kilowatt-hour of energy generated from a wind farm. Those credits are often sold by the wind farm to a third-party broker, who then resells it to customers for a profit.

Businesses or residents who buy the same number of kilowatt-hours’ worth of renewable-energy credits that they use each month often say they are 100 percent wind-powered. The electricity they actually are using, however, probably comes from traditional sources, such as coal or natural gas.

What the critics say:

Renewable-energy credits are just a form of checkbook environmentalism, which allow people with money to soothe their consciences without making any real efforts to reduce environmental problems.

Many companies aren’t transparent about where the RECs are coming from and how much of the consumer’s money actually makes it back to the wind farm.

They allow the middle man to make a handsome profit without substantially benefiting the wind farms.

They advertise benefits that aren’t real in the short term — like eliminating carbon dioxide and adding new wind power to the grid.

What supporters say:

Renewable-energy credits provide important revenue for wind farms, which must compete with the heavily subsidized oil and gas industry.

They are a first step for the concerned public in the fight against greenhouse gases — they give the individual some power instead of waiting for the local utility to develop renewable energy.

Once you’ve taken all the energy-efficiency measures you can, it makes sense to buy credits to cover the electricity you have to use.

They are bringing the discussion about wind energy into the mainstream dialogue.