Frequently Asked Questions
This page provides answers to common questions asked by consumers and potential renewable energy buyers.
Renewable Energy Basics
Generators and Sellers
Renewable Energy Basics
Renewable energy is energy derived from naturally derived sources that replenish themselves over a period of time without depleting the Earth’s resources. They also have the benefit of being abundant, available in some capacity nearly everywhere, and they cause little, if any, environmental damage. Energy from the sun, wind, and thermal energy stored in the Earth’s crust are examples. For comparison, fossil fuels such as oil, coal, and natural gas are not renewable, since their quantity is finite—once we have extracted them they will cease to be available for use as a viable energy source. While they are produced through natural processes, these processes are too slow to replenish these fuels as quickly as humans use them, so these sources will run out sooner or later.
Electricity generation is the leading cause of industrial air pollution in the U.S. Most of our electricity comes from coal, nuclear, and other non-renewable power plants. Producing energy from these resources takes a severe toll on our environment, polluting our air, land, and water. See also Why Renewable Energy? on this site.
Renewable energy sources (solar electric, wind, geothermal, biomass, and small and low-impact hydro) can be used to produce electricity with fewer environmental impacts. It is possible to make electricity from renewable energy sources without producing CO2, the leading cause of global climate change. There is also relatively little renewable electricity generation in the U.S. (around 2% of total generation) because it is more expensive to build renewable generators and because renewables must be located where there is abundant and reliable sun, wind, or other renewable resources. Because of this, the price for renewables tends to be higher than for electricity generated from non-renewable resources.
Electricity is generated by using a fuel source, like the ones mentioned above (wind, coal, solar energy) in large generation facilities spread across the country. These generators may or may not be close to cities or other places with large electricity demand. These facilities are connected to electricity users (homes and businesses, for example) by a vast network of wires that transmit electricity; this network is commonly called “the electric grid” or just “the grid”. Electricity is bought from generators by electric service provider or electric utilities, who then resell the electricity to users to use in their lights, appliances, and other uses. Utilities often own and/or operate the wires that connect them with users, which is one way delivery to users can be controlled.
Because of the physics behind electricity transmission, generators are able to push electricity onto the grid but cannot choose a specific utility or user to deliver that electricity to. Think of a river made from many smaller tributaries—it is impossible to pull a cup of water out downstream and distinguish which tributary originally supplied it. In the same way, electricity produced from many sources becomes commingled once it’s on the grid and users can’t tell where their electricity was produced. Generators are constantly creating electricity and users are constantly drawing electricity off of the grid, and the path electricity takes is not at all direct.
Utilities often buy electricity from specific generators by signing a contract that specifies the amount of electricity the generator will put onto the grid at a specific time, and the utility pulls the same amount of electricity off the grid at that time. The contract also specifies that the utility is the only entity buying that particular electricity from that particular generator, which allows utilities to know what resources are being used to generate all of the electricity they buy.
Because there is little storage capacity when excess electricity is generated, utilities must match electricity supply and demand as closely as possible in real time, with excess electricity often being “dumped.” Because all electricity gets commingled on the grid, these contracts allow utilities to identify that the electricity they’ve promised to deliver to customers will be available when it’s needed, and allows the utility to report the types of generation used to generate the electricity that customers receive.
Renewable energy is bought just like any other electricity source, in that electricity is generated and put onto the grid, and a contract between the generator and electricity user is signed showing that the user is getting renewable electricity when they pull electricity off of the grid.
A utility delivering electricity to its customers know the mix of resource it has bought, and typically all customers get electricity from the same sources as one another. However, many consumers want the ability to choose a cleaner mix of electricity. Because electricity from wind power, for example, cannot be routed to one customer who chooses green power over another who doesn’t (see “How does electricity get delivered to my home or business?” above), a system needed to be devised to let power customers choose renewables, and send an unequivocal economic signal to build more wind farms and solar arrays.
The idea, first instituted in the late 1990s, was a pretty revolutionary one, and went like this: assign every megawatt hour of clean energy a unique serial number attached to a certificate, and then sell that certificate as the sole claim to that renewable generation, but independent of the actual electrons. This is basically the same idea as allowing an individual customer to buy the contract identifying electricity as coming from a particular source instead of the utility buying that contract. This way the renewable generator has two things it can sell: first, the undifferentiated electricity (it’s not “wind power” anymore, but electricity comingled on the grid with no identifying characteristics, no contract) to the local utility, and second, all the good environmental benefits of that electricity embodied in the renewable energy certificate (REC, the identifying contract), which can then be sold on national commodities markets. The final buyer of the REC has sole claim over the renewable attributes, and once the transaction takes place, the serial number is retired so no one else—not the state it was generated in, or even the owner of the wind farm—can claim the environmental benefits of that megawatt-hour of generation covered by the REC.
There’s no other system quite like it, but it works to provide an additional financial incentive to build renewable generation. Individuals and companies can buy renewable energy whether their utility offers it or not, and renewable energy generators get paid for the electricity they produce as well as for the fact that it doesn’t emit much or any carbon dioxide. The system of renewable energy certificates is effective as both a way to monetize the act of not polluting, and to incentivize new renewable development. All this in a market-based system of commodity trading where the market determines the price.
Renewable energy can be sold to residential, commercial, and wholesale customers as RECs or renewable electricity (where the REC is bundled with the actual electricity), and can be purchased from REC marketers or electric service providers, through utility green pricing programs or a broker, or directly from a generator.
Please see RECs 101 on this site.
What is the difference between a REC and Renewable Electricity?
A REC is documentation of the environmental benefits, but not the electrons, of a MWh of renewable electricity. A MWh of electricity with the REC stripped off of it is known as “null electricity” and takes on the average emissions associated with electricity generated the region in which it was produced that is not being used for RECs or other voluntary programs (see also “What is the difference between the Compliance and Voluntary Markets for renewable energy?” below).
Renewable electricity is a REC and a MWh of null power bundled into a single product. An electricity provider can combine RECs with an equivalent amount of electricity and offer their customers the resulting renewable electricity. Renewable electricity can be created with RECs and non-renewable electricity, or directly sourced from a renewable generator as a bundled electricity product.
What is the difference between a REC and Carbon Offset?
This is a complex question, but in general, the difference is that a REC represents the environmental benefits of a MWh of renewable electricity generation, and so it can be said to “offset” the emissions of a single MWh of average electricity generation. A carbon offset can be matched with emissions from other sources of greenhouse gas emissions (not just electricity generation), like flying and driving.
A REC is a measure of the overall environmental benefits associated with the generation of 1 MWh of renewable electricity. These benefits include the fact that few if any greenhouse gases and other pollutants are being emitted from this generation.
A carbon offset is a reduction of greenhouse gasses measured in tons of carbon dioxide avoided, sequestered or destroyed. Because of issues of additionality (whether the action causing carbon dioxide to not be emitted is considered to be business as usual), only certain renewable energy facilities are eligible to sell carbon offsets as well as RECs from their generation.
What is the difference between the Compliance and Voluntary Markets for renewable energy?
The Compliance Market refers to the purchase of renewable energy in order to comply with a specific law or mandate. The compliance market is mostly comprised of sales made to meet Renewable Portfolio Standard (RPS) requirements that many states have implemented. These RPSs are goals for renewable energy generation. For example, California has a goal to increase its renewable portfolio to at least 33% by 2020.
The Voluntary Market refers to purchases of renewable energy that are made above and beyond the minimum amounts that states require. A residential homeowner, for example, can sign up with their electric service utility to buy 100% renewable energy, instead of simply receiving the smaller amount of renewables they would get as part of the regular system mix. This additional renewable energy that was specifically purchased through the green pricing program does not count towards the electric service provider’s RPS obligations. These renewables purchased on the voluntary market can only be claimed by the purchaser, not the state or the utility with RPS obligations to meet. This same principle applies to RECs—that the final owner and user of the REC is the only entity that can claim the benefits of that renewable energy.
For Green-e Energy Certified renewable energy options, please use our renewable energy product search. This search engine allows you to describe what type of customer you are (residential if you’re buying for your home, or commercial if you’re buying for your business or institution) and what type of renewable energy product you are looking for. It then generates a list of marketers, electric service providers, or utilities that offer products with the characteristics you have selected. You can then contact the companies listed to inquire about purchasing a renewable energy product they offer. Green-e Energy doesn’t sell renewable energy or recommend one certified product over another.
The U.S. Environmental Protection Agency, along with the Department of Energy (DoE), Center for Resource Solutions and World Resources Institute collaborated to write a Guide to Purchasing Green Power, which is useful for individuals and companies considering buying renewable electricity or RECs. The DoE also maintains a list of all sellers of renewable energy, including those that do not offer a Green-e Energy Certified option, through its Green Power Network.
Renewable electricity is an important element in addressing our overall environmental impact, but it is not the only tool we all have to address climate change. The first step is becoming more efficient and using fewer resources. This could mean driving less, using less electricity, buying fewer new things, composting, and recycling. The next step is using renewables for the electricity we do use, and other renewable energy sources for non-electricity energy use (for example, biodiesel or solar water heating). Using renewables is the best way to avoid the negative impacts of fossil fuel extraction, processing, burning, and disposal that come along with traditional sources of electricity. For other sources of emissions or pollution that you cannot avoid, most commonly from flying and driving, carbon offsets offer an option. Green-e Climate Certified offsets come from quality projects and retail products that have been certified under the same rigorous standards as Green-e Energy Certified renewable energy products.
Generators and Sellers
You can look for marketers who sell Green-e Energy under our renewable energy product search. Choose “Wholesale” as the Customer Type in the search criteria. Please read the Green-e Energy National Standard to assure that you have a renewable energy source that is eligible. Also see “What is the difference between Green-e Energy Certified and Green-e Energy Eligible?” above.
A REC marketer (seller) purchases renewable energy from a generator or a wholesale renewable energy provider, and then “markets” (sells) that energy to retail or wholesale customers who wish to buy a renewable energy product. A marketer takes title to the renewable energy and resells it, but at no time claims the environmental benefits of that renewable energy—only the final buyer can make those claims. A broker connects a buyer and seller of renewable energy, but does not purchase or take title to the renewable energy being traded.