Renewable Energy Credits (RECs) for Businesses: 7 Promising Benefits

As the global community intensifies its efforts to combat climate change, a key tool that has emerged is renewable energy credits (RECs). Far more than just a market mechanism, RECs benefits range from ensuring regulatory compliance to promoting a sustainable future.

But what exactly are RECs? And why are they becoming essential in today’s business landscape?

Whether you’re new to the concept or looking to deepen your understanding, this comprehensive overview will equip you with everything you need to know about renewable energy credits.

Read on to learn how to harness the full potential of RECs in your sustainability strategy.

Understanding Renewable Energy Credits (RECs)

Every day, we rely on electricity to power our lives. But not all energy sources are created equal. As the world continues shifting towards sustainability, understanding the origins of our electricity—and the tools available to promote cleaner sources—becomes increasingly important.

RECs provide organizations one such tool, acting as a means to track clean, renewable energy versus energy produced by other means.

Let’s delve into them in more detail.

What are RECs?

Renewable energy credits, commonly known as RECs, are tradable certificates that represent renewable electricity generation.

In practice, one REC is created for every megawatt-hour (MWh) of electricity generated from a renewable energy source, such as:

• Wind
• Solar
• Hydropower
• Geothermal
• Biomass

These credits can then be sold separately from the electricity itself, allowing businesses and individuals to financially support renewable energy projects and offset their carbon emissions, even if they aren’t directly consuming the sustainable power.

How RECs Work for Businesses

RECs offer businesses a straightforward and effective way to reduce their environmental impact and meet their sustainability goals.

Here’s a closer look at how the process works:

• Generation – Renewable energy facilities produce both electricity and RECs.
• Tracking – Each REC is given a unique identification number and tracked in a database.
• Purchase – Businesses can buy RECs from renewable energy generators or brokers.
• Claiming – By purchasing RECs, a company can claim the environmental benefits associated with that amount of renewable energy generation.
• Retirement – Once used to claim the environmental benefits, RECs are "retired" to prevent double-counting.

Therefore, RECs’ benefits circle back to each other. Buyers can purchase them to support sustainability endeavors, even if they can’t directly use or access renewable power themselves. And sellers can use the profits to fund further renewable energy generation.

7 Promising Benefits of Renewable Energy Credits (RECs) for Businesses

Realistically, not all businesses can directly invest in and develop their own renewable energy infrastructure. This is where RECs come into play, allowing businesses to unlock a variety of benefits that extend far beyond simple energy consumption.

Here are seven key advantages that RECs can bring to your organization.

1. Enhancing Corporate Sustainability

By purchasing RECs, companies can offset non-renewable energy usage and effectively reduce their carbon footprint.

According to the US Environmental Protection Agency, REC owners have the right to claim their operations are powered by the renewable energy associated with their REC.

This is particularly relevant from a corporate sustainability reporting (CSR) perspective. RECs allow you to achieve sustainable operations regardless of your actual energy infrastructure, allowing you to report lower Scope 2 (indirect) emissions.

2. Meeting Regulatory Compliance

As governments worldwide implement stricter environmental regulations, businesses are under growing pressure to meet renewable energy mandates and carbon reduction targets. RECs provide a flexible solution for companies navigating this evolving regulatory landscape.

By purchasing RECs, businesses can:

• Demonstrate compliance – Renewable Portfolio Standards (RPS) require a percentage of electricity to come from renewables. RECs allow you to meet that requirement without directly altering your energy infrastructure.

• Support state-specific initiatives – Many states offer unique incentives or mandates for renewable energy adoption. Investing in RECs keeps you compliant and may qualify you for other financial benefits.

• Future-proof against regulatory changes – The regulatory environment is continuously evolving, with more stringent carbon reduction laws on the horizon. Investing in RECs positions companies to adapt quickly, stay compliant, and avoid potential penalties.

RECs thus offer a practical and cost-effective way to meet today’s regulatory requirements while preparing for the future.

3. Cost-Effective Path to Carbon Neutrality

RECs are also a great option for businesses that may not have immediate bandwidth for a large-scale renewable energy investment. You would simply need to:

1. Purchase RECs equivalent to your energy consumption.
2. Claim carbon neutrality for electricity use.
3. Consider leveraging tax credits and incentives.

This approach allows businesses to allocate resources efficiently while still making meaningful strides toward sustainability goals.

4. Improving Corporate Image and Brand Value

RECs benefits extend to your overall sustainability strategy, too. By purchasing RECs, businesses can publicly claim the environmental benefits associated, signaling a strong commitment to sustainability. This resonates deeply with today’s consumers and investors, who increasingly prioritize environmental responsibility when choosing brands to support.

5. Flexibility and Scalability

Since renewable energy credits can be both bought and sold, they offer a unique way for businesses to balance sustainability and financial goals. This flexibility can be leveraged to:

• Scale up REC purchases to match rising energy consumption or more ambitious sustainability goals.

• Downsize REC holdings during periods of financial constraint, maintaining a baseline level of environmental responsibility.

This flexibility is particularly valuable for businesses operating across multiple regions with varying energy regulations. RECs can be strategically acquired to meet local compliance standards, ensuring that sustainability efforts are both effective and adaptable.

6. Supporting Renewable Energy Development

Beyond meeting regulatory requirements, RECs prove crucial to driving growth in the renewable energy sector. This circles back to the original intent behind the system of renewable energy credits:

• Revenue generated from the sale of RECs supports renewable energy projects.
• Financial support encourages further investment and expansion.
• This, in turn, contributes to the broader goal of transitioning to a low-carbon economy.

By participating in this REC market, businesses not only offset their carbon emissions but also help accelerate the global shift towards clean energy.

7. Reducing Risk and Enhancing Resilience

As with any market, the energy landscape is subject to volatility and price fluctuations. Whether due to supply and demand imbalance or the impact of new regulatory policies, RECs can act as a hedge against these risks.

For example, if oil prices were to spike or a new carbon tax was introduced, companies invested in RECs will be less affected—secure via the commitment to renewable energy.

Furthermore, as global regulations tighten in pursuit of net-zero emissions by 2050, early adopters of RECs can better position themselves to adapt to new standards, enhancing their resilience in an increasingly sustainability-focused market.

Renewable Energy Credit Where it’s Due: FASTECH’s Role in a Low-Carbon World

The path to carbon neutrality is paved with complexities, but RECs offer a practical, scalable, and cost-effective solution to bridge the gap between current energy practices and future sustainability targets.

To get the most out of these incentives, expertise becomes your most valuable resource. With hundreds of projects under our belt, FASTECH is uniquely qualified to help businesses capitalize on the benefits of RECs.

Whether your goals involve building new energy infrastructure, upgrading existing facilities, or simply gaining a deeper understanding of renewable energy adoption, FASTECH provides the guidance and support necessary to achieve your sustainability objectives.

Start planning your next renewable energy project with FASTECH.