Buying green power does not mean that it is actually delivered to our meter. Instead of getting green power at our meter, we simply expect the amount of energy we have purchased to be delivered to the electric grid. We still get the electricity we use, and we also get the benefits of more wind or other clean energy source on the wires. Another way to say this is, we buy the electricity "bundled" together with the green attributes that add value to the electricity.
Now imagine that each kilowatt-hour (kWh) produced by a wind plant or other renewable power source has a label or tag attached to it. The label represents the attributes of that energy, such as the avoided pollution from not burning fossil fuels. These attributes can be "unbundled" from the electricity sold and purchased separately from the electricity generation that created them. When unbundled from electricity, these attributes are called "Tradable Renewable Certificates" (TRC) You may also hear them referred to as renewable energy credits (REC), green tags, or green tickets. The price they trade for represents the premium value that markets place on green power. We can buy generic electricity at the lowest possible cost, and buy an appropriate amount of TRCs to "green" that electricity for whatever value the market places on them.
Green tags make it possible for Tri-State to purchase green power for MVEA members. Although what you get at your meter is not necessarily the green power you purchased, Tri-State will have paid the premium for the environmental benefits to the renewable energy generator. By buying green power, you can be assured that the renewable energy is generated – somewhere. The location of the source is not something you normally consider when purchasing renewable energy. It is more the global benefits and the support of renewable energy generation.
TRCs are limited in quantity. A green energy provider (such as a wind farm) is credited with one green tag for every 1,000 kWh of electricity it produces. A certifying agency gives each green tag a unique identification number to make sure it is not counted twice. The green energy is then fed into the electrical grid and the accompanying green tag can then be sold on the open market.
Since the production of renewable energy is generally higher in cost than fossil fuel production, a green tag, or REC, represents an additional payment for producing power from renewable resources. This allows the producer to create and sell electricity at the local market price and enables more clean renewable energy to be made.
According to the Center for Resource Solutions, prices of green tags can fluctuate greatly. They currently run from $0.30 to $300.00 per MWh. Prices depend on many factors, such as the location of the facility producing the green tags, whether there is a tight supply/demand situation, whether the green tag is used for Renewable Portfolio Standards (RPS) compliance or even the type of power created.
While the value of green tags fluctuates, most sellers of green tags are legally obligated to deliver to their customers within a few months of their generation date. Other organizations will sell as many green tags as possible and then use the funds generated to guarantee a specific fixed price to a future wind farm, for example, making the building of the wind farm a financially viable project. The income provided by green tags and a long-term stabilized market for tags can generate the additional incentive needed to build renewable energy projects.