What are the pros and cons of RECs?

Renewable energy certificates (RECs) give companies, institutions, and individuals a simple way to offset their carbon footprint and support clean energy. Purchasing RECs is equivalent to purchasing renewable energy; if your company buys RECs, then you can claim that the energy you use comes from renewable sources.

Because energy enters the grid from many sources—from nuclear power to coal to solar power—there's no way to know exactly where your electricity comes from. Renewable energy certificates provide a solution. RECs always come from renewable energy, so buying them allows you to claim the renewable energy attributes of that electricity.

Electricity generated from renewable resources is "renewable energy." Renewable sources include wind, solar, moving water (hydropower), organic plant and waste material (biomass), and the earth's heat (geothermal). These power sources are "renewable" because they're constantly replenished—there's no shortage of sunlight or wind, for example.

In contrast, fossil fuels such as oil and gas are finite, meaning a limited supply exists. They will run out once we have used them all. Fossil fuels also cause pollution, contributing to climate change. In fact, fossil fuels make up three-fourths of man-caused emissions over the past 20 years. RECs allow companies and individuals to choose renewable energy over fossil fuels.

Buying RECs has many pros for individuals and companies. Some of these benefits include

• Reducing your carbon footprint, contributing less to pollution and climate change.

• Supporting the renewable energy market.

• Choosing exactly where you buy renewable energy from—locally or anywhere else in the U.S.

• Promoting your company's commitment to renewable energy.

• Using renewable electricity without installing costly facilities such as solar panels.

• Building stronger relationships with the community and encouraging dialogue about renewable energy.

Any business or individual can buy RECs from anywhere in the U.S., choosing from different locations and pricing options. They provide a simple way to support renewable energy generation and offset carbon emissions. RECs can also benefit your business by helping you achieve emissions goals and helping promote your commitment to renewables.

Buying RECs also supports the renewable energy market, encouraging renewable electricity on a broader scale. The more RECs are in demand, the more renewable energy must be generated. This weakens the demand for fossil fuels, encouraging a healthier planet.

Businesses increasingly try to become more socially responsible by acting against climate change. RECs provide a simple and effective way to support renewable energy generation without investing in large projects like wind farms or solar panels.

Sixty percent of Fortune 100 companies have set greenhouse gas emission goals. Companies, including Walmart, Starbucks, and Johnson & Johnson have pledged to obtain 100 percent of their electricity from renewable resources. These companies are sensing a shift in public concern over pollution and carbon emissions. Using renewable energy contributes to a positive brand image and builds relationships with the community, employees, and other stakeholders.

While there are many benefits to buying RECs, there are also some things to be aware of.

Where do your RECs come from?

Anyone can buy RECs from anywhere in the U.S. Some electrical utilities buy RECs and charge customers who want to use those RECs a premium. These programs are called green power programs, and while they support renewable energy, not every program is transparent about where in the U.S. the renewable energy came from. If investing in local renewable energy is important, you may want to purchase RECs from outside supplies to check where they were generated.

Bundled vs. unbundled RECs

You also may want to consider whether or not to buy bundled RECs. A REC always represents 1 MWh of renewable electricity. Some RECs have greater potential than others to drive the development of renewable energy projects. Less expensive RECs are typically "unbundled," meaning they are sold separately from the original electricity production they represent. In contrast, bundled RECs are tied to the purchase of electricity. These must come from your regional grid.

Unbundled RECs can come from an oversupplied market—an out-of-state solar farm in California, for example. They will be cheaper because the renewable energy market there is oversupplied. If, on the other hand, you buy bundled RECs from your regional grid, you can drive the development of new solar projects, particularly in states with less renewable energy generation.

In short, you can claim to use renewable energy no matter where your RECs come from. If your primary motivation is to promote the renewable energy industry in your area, buying bundled RECs will typically do more.