Part II of a series. Read Part I here, Part III here, and Part IIII here.
A Renewable Portfolio Standard (RPS) is a state regulatory policy requiring utilities to either produce or procure a certain amount of electricity from clean, renewable resources like wind and solar. The RPS helps set state environmental goals while encouraging the use of cleaner energy to protect the environment and reduce pollution.
Compliance RECs are part of a state’s RPS in that they are policies that require electric suppliers to include a minimum amount of renewable energy in their supply mix. For example, under Massachusetts’ RPS, electric suppliers that operate in the state are required to include 62% of electricity generated from renewable sources in their supply mix. These are driven by regulatory policies made to meet a state’s energy RPS goals.
On the other hand, voluntary REC markets are those where RECs can be purchased regardless of state policy. Many retail energy suppliers go beyond the RPS by offering 100% clean energy products by purchasing and retiring RECs, allowing customers to fully support renewable energy development. Voluntary RECs allow residential, commercial, and industrial customers to support renewable energy beyond what is mandated by state policy.
Voluntary RECs can be purchased using the regional tracking systems in which they were created. Once the REC is created, they are strictly tracked. If the REC gets sold or retired, it is removed from the system to avoid double counting. This allows for the legitimate retirement of RECs generated in places with abundant wind or solar resources and lower costs, ultimately benefiting consumers and retailers by keeping prices more affordable.
Most REC markets, especially those with an RPS, are subject to regulatory oversight, which imposes additional layers of monitoring and auditing. This oversight helps to ensure that each REC is only counted once and is attributed correctly, either to meet regulatory requirements or to substantiate voluntary claims.
RECs play a vital role by sending market signals, fostering regional collaboration, and complementing supportive policies as part of a comprehensive approach towards transitioning to renewable energy sources.
