Renewable Energy Credits (RECs) are the unbundled environmental attributes created from electricity generated from renewable resources such as wind, solar, geothermal, methane (landfill gas) and biomass. With the momentum building for alternative energy development, RECs provide an additional source of revenue for generators of renewable energy. One REC represents one megawatt hour (MWh) of electricity generated from renewable energy.
ICAP is involved in both the compliance and voluntary REC markets within the United States. ICAP’s regulatory REC market expertise and extensive relationships create a unique position to offer the best services and price discovery to their clients. As the world’s largest inter-dealer broker involved in a wide variety of markets, ICAP offers cross-commodity opportunities including bundled REC and electricity trades. ICAP is Green-e certified, authorized to broker Green-e certified REC trades.
Compliance markets developed as an ever-increasing number of states have passed legislation, commonly referred to as Renewable Portfolio Standards (“RPS”), to require electricity suppliers to sell a percentage of electricity from renewable sources. These suppliers must either generate renewable energy themselves or buy RECs from suppliers in the wholesale market. While some state RPSs are similar, each are unique and have their own set of rules. 28 states have passed RPS legislation and several other states have begun the process of developing standards.
Buyers in the voluntary market range from electricity suppliers that have voluntarily committed to purchase green power for customers, to large corporations who have made a commitment to the environment to buy green power for their operations. The price of a voluntary REC greatly depends on the technology or resource used to generate it, the location of the generation source and when it was generated. Solar and wind RECs are typically traded at a premium to other sources, such as biomass, landfill gas, and geothermal. Some states, such as Texas, offer a dynamic market place in which RECs are sold into both the voluntary and state compliance market.