The term “renewable energy credit” is popular with green energy companies that want to announce their environmentally friendly policies.
The reality, however, is some of these companies still use coal, natural gas or other more traditional power sources. If a government utility or private power company buys an equivalent amount of RECs to cover the amount of electricity it uses, it can claim to be 100 percent renewable no matter the actual source of the power.
An example is Denton, which built a natural gas plant in 2018 — and yet still proclaims its power is 100 percent renewable.
Bill Peacock, a veteran power analyst and writer based in Austin, said the phrase is confusing and often contradictory.
“The use of renewable energy credits by a business or city actually means it is using less renewable energy,” Peacock said. “For instance, Goldman Sachs says where ‘renewable energy is not available or economical,’ it will use renewable energy credits to meet its goal of 100 percent renewable by 2020. Thus for every REC it uses, it will be reducing its actual use of renewable energy by 1,000 kilowatt hours.”
Renewable energy credits distort the marketplace by making it seem like renewable energy is more profitable than it really is, he said. That can be harmful.
“Renewable generators that sell RECs get paid twice for each kWh it generates,” Peacock said. “Over time this has shifted billions of dollars of investment away from reliable sources of electricity like natural gas and coal into unreliable wind and solar.
“RECs make electricity more expensive for consumers. They are forced to pay for the government mandated credits. It also means consumers are paying more for consumer goods they purchase from businesses that have bought into false narrative of renewable energy and thus drive up their costs as they spend more on electricity through the purchase of RECs.”
Joshua D. Rhodes, a research associate with the Webber Energy Group at the University of Texas at Austin, said RECs can be beneficial.
A renewable energy credit is generated when a renewable energy facility generates 1 MWh (1,000 kWh) of electricity. These can be sold separately from the electricity itself, Rhodes said.
He said the use of the term “renewable energy credit” doesn’t actually mean a consumer or business is using more green energy.
“It means that they have purchased the right to say that they run off of renewable or green energy, even if the actual electricity they consume has come from a non-renewable source,” Rhodes said. “However, because they have purchased the REC, more renewable electricity has been generated than would have otherwise.”
The credits, however, do have an impact on green industries.
“They can create a secondary stream of income for renewable energy projects, thus making them more profitable,” Rhodes said. “All else equal, it should lower the cost of electricity for others. For those that buy the RECs, it might increase their costs, but those prices have been coming down lately.”
Their use is growing in Texas and across the country.
“Yes, RECs are a popular way to lessen one’s environmental footprint,” Rhodes said. “Because, through RECs, the use of renewable energy is decoupled from the actual delivery of that energy, it allows us to deploy more renewable power plants in the best [sunniest and windiest] locations. RECs are an accounting tool but they do increase the use of renewable energy in the system.”
