Published by SusCa Group
Content Outline
REC Transaction
Overview
Renewable Energy Certificates (RECs) are digital certificates that evidence the generation of electricity from renewable energy sources. Entities purchase RECs to report clean electricity consumption in a transparent and globally accepted disclosure format. This Cheat Sheet outlines the core transaction structures for RECs, and how to evaluate which structure is right for specific organizations.
PRIMARY TYPES OF REC TRANSACTIONS AND COMMON USES:
Bundled Transactions
Buyers purchase electricity and RECs from the same source. Bundled transactions are most common when electricity buyers are in direct communication with independent power producers (IPPs), utilities, or power retailers. This option is ideal for entities that want to ensure their electricity consumption supports specific physical renewable energy generation, as well as those wishing to make clean electricity consumption claims from assets they own or directly purchase electricity from—such as rooftop solar or power purchase agreements (PPAs). Bundled transactions are often most appropriate for large scale electricity buyers.
Unbundled Transactions
Buyers purchase RECs and electricity from different sources. This option is ideal for organizations who want to support renewable energy, but might not have direct wire access to it. Unbundled REC transactions are most common for grid-connected electricity consumers, and in many cases, are the only option available in electricity markets that do not offer alternative procurement structures such as PPAs or rooftop leasing. Transactions of unbundled certificates are often facilitated by intermediaries such as REC brokers and traders, and can be executed in a large range of transaction sizes, anywhere from 1 MWh and up.
Content
REC procurement, much like clean electricity procurement, can be approached competitively through structured processes such as tendering and bid selection. The degree to which this is aggregated with, or disaggregated from, physical electricity procurement depends on the preferences of the parties, as well as what is permissible withing the market.
For unbundled transactions, end users are encouraged to discuss their preferences with multiple brokers and traders.1 Developing Request for Proposals (RFPs) can be an effective way to ensure that end users have access to a wide range of REC products, and that selection is competitive. The CPC is currently developing a template RFP to support competitive procurement in this context, which will be made available through its resource library.
In bundled transaction structures, while RECs are not bought from a separate entity through an RFP, end users should still ensure that REC components are integrated into clean electricity procurement. End users should evaluate various clean electricity products and negotiate with suppliers on the inclusion of RECs in their procurement. For instance, in markets that allow both virtual PPAs and rooftop installations, end users should evaluate both the electricity procurement terms, as well as the REC rights delivered through the contract. In doing so, it is essential to clarify whether RECs are part of the clean electricity offering and, if included, whether they are priced inclusively or separately from electricity.
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