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Virtual Power Purchase Agreements

Consider How to Manage RECs

Renewable energy certificates (RECs) each represent the clean energy attributes of 1 MWh of renewable electricity and confer those attributes to the owner. Most PPAs give the buyer the option to purchase the RECs associated with the generated electricity. What you choose to do with these RECs determines the claims you can make.

There are four primary REC options to consider: retirement, sale, swap, and opt out.

  • REC Retirement

    When you purchase and “retire” RECs, you claim their environmental attributes and “consume” the REC (i.e., the REC is taken out of circulation and can no longer be sold). You must purchase and retire a REC in order to claim to have used the associated MWh of renewable energy.

  • REC Sale

    Suppose instead that you buy the RECs through your PPA agreement but subsequently sell them. In this case, you will increase your revenue and can claim to have financially supported the project, but you cannot claim to have used the renewable energy that you purchased—this claim can now only be made by the REC buyer. This outcome is not ideal for cities looking to meet clean energy goals.

  • REC Swap

    Swapping your RECs means selling the RECs from your PPA and replacing them with RECs from a different project or market. For example, suppose a city has signed a PPA with a solar project in New Jersey, where solar RECs are particularly valuable. The city could choose to increase their revenue by selling the solar RECs from the New Jersey project and then purchasing and retiring an equivalent number of low-cost wind RECs from Texas. In this case, the city could still legally claim to be using renewable energy—since it retired the Texas RECs—and to have supported the local New Jersey project by signing the PPA. However, the city could not claim to be using the renewable energy from the local New Jersey project.

  • Opt Out

    You can also choose to not purchase the RECs from the project. Opting out of the REC purchase means you cannot claim to use the renewable energy from the project and, unless alternative RECs are purchased, cannot claim to be using renewable energy.

For more information on RECs, see EnergySage’s website and Institutional Renewable Energy Procurement: Guidance for Purchasing and Making Associated Environmental Impact Claims REC Treatment:
Energy Sage offers basic introductory materials explaining RECs. The Institutional Renewable Energy Procurement: Guidance for Purchasing and Making Associated Environmental Impact Claims report by the Boston Green Ribbon Commission also provides considerations that guide the retire/sell/swap decision-making process.
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