Role of Renewable Energy Certificates in Developing New Renewable Energy Projects

For more than a decade, renewable energy certificates (RECs) have grown in use, becoming a common way to track ownership of the renewable and environmental attributes of renewable electricity generation. In recent years, however, questions have risen about the role RECs play in the decision to build new renewable energy projects. Information from a variety of market participants suggests that the importance of RECs in building new projects varies depending on a number of factors, including electricity market prices, the cost-competitiveness of the project, the presence or absence of public policies supportive of new projects, contract duration, and the perspective of different market participants. While there is no single answer to the role that RECs play, there are situations in which REC revenues are essential to project economics, as well as some where REC revenues may have little impact. To strengthen the role RECs play in both compliance and voluntary markets, there are a number of options that could be considered. In compliance markets, lawmakers or regulators would have to adopt measures that strengthen the role of RECs in the development of new projects, while in voluntary markets, it would be up to program leaders and market participants themselves to implement measures.