Tradable Renewable Energy Certificates

Renewable energy certificates (RECs) represent the environmental attributes associated with one megawatt-hour (MWh) of electricity production. RECs can be traded, bought and sold separately from commodity electricity. In cases where a renewable electricity standard (RES) is in place, compliance can be demonstrated by the use of RECs. RECs can be bundled with the electricity generation itself or unbundled and sold separately, with one entity purchasing the electricity generation itself and the other purchasing the renewable characteristic of the generation (Brown and Muller 2011). Effectively designed REC systems support robust, accurate, and efficient tracking and accounting of renewable energy generation ( REC systems can support a market-based and flexible approach to expand RE investment.

Good Practices

(Adapted from and Cox et al. 2015)

Establish a Robust Higher-level Policy Framework to Support Effective REC Markets and Programs

Renewable electricity targets and standards can provide a strong foundation for development of REC markets. Renewable electricity standards are regulatory mandates that require a specified amount of electricity that is sold or generated within a given area to come from eligible renewable resources. RECs can be linked with renewable electricity standards and provide a mechanism to support compliance. Using unbundled RECs can reduce costs associated with RES compliance, as renewable resources can be sited in areas with the highest resource. Using RECs as a way to prove RES compliance may also lower administration and verification costs (Hurlbut 2008, Leon 2012, Heeter et al. 2014). REC markets can also be established to support voluntary green power purchase programs. At a minimum, RECs can be designed to allow for simple tracking and verification of renewable energy projects in jurisdictions where REC markets may not exist (Bird et al. 2010).

Support Longer-term Contractual Agreements

As noted above, RECs can be established as a compliance mechanism for renewable electricity standards (Wiser et al 2010). In markets where RECs are primarily traded on a short-term basis, policymakers can consider encouraging or mandating longer-term REC contracts. In addition, policymakers can consider developing longer-term alternative compliance payment schedules for complying entities. (Bird et al. 2011, Cox et al. 2015).

Consider Unbundled RECs to Support Policy Flexibility

As noted above, RECs can be unbundled allowing different entities to separately purchase the electricity generation associated with the REC and the renewable characteristics of the generation (Brown and Muller 2011). Unbundling can allow for increased flexibility to support policy implementation and related transactions. (Wiser & Barbose, 2008).

Increase Investor Certainty

In cases where RECs are traded in short term or spot markets, establishing a minimum price floor for RECs can reduce investor uncertainty and potential increases in cost of capital that could stymie upfront investment. (Bird et al. 2011, Couture at al. 2015, Cox et al. 2015).

Case Studies

United States

Tags and Related Instruments

References and Additional Resources


Bird, Lori, and Jenny Sumner. 2010. "Green Power Marketing in the United States: A Status Report (2009 Data)." Golden, CO: National Renewable Energy Laboratory.

Bird, Lori, Caroline Chapman, Jeff Logan, Jenny Sumner, and Walter Short. 2010. "Evaluating Renewable Portfolio Standards and Carbon Cap Scenarios in the U.S. Electric Sector." Golden, CO: National Renewable Energy Laboratory.

Brown, Adam, and Simon Muller, 2011. "Deploying Renewables 2011: Best and Future Policy Best Practice." Paris, France: International Energy Agency.

Couture, Toby D., David Jacobs, Wilson Rickerson, and Victoria Healey. 2015. "The Next Generation of Renewable Electricity Policy: How Rapid Change is Breaking Down Conventional Policy Categories." Golden, CO: National Renewable Energy Laboratory.

Cox, Sadie, and Sean Esterly. 2015. "Renewable Electricity Standards: Good Practices and Design Considerations." Clean Energy Solutions Center.

Cox, Sadie, Walters, T., Esterly, S. 2015. "Solar Power: Policy Overview and Good Practices." Golden CO: National Renewable Energy Laboratory.

Heeter, Jenny, Kathy Belyeu, and Ksenia Kuskova-Burns. 2014. "Status and Trends in the U.S. Voluntary Green Power Market (2013 Data)." Golden, CO: National Renewable Energy Laboratory.

Hurlbut, David. 2008. "State Clean Energy Practices: Renewable Portfolio Standards." Golden, CO: National Renewable Energy Laboratory.

Leon, Warren. 2012. "Designing the Right RPS: A Guide to Selecting Goals and Program Options for a Renewable Portfolio Standard." Clean States Energy Alliance and National Association of Regulatory Utility Commissioners.

"Renewable Portfolio Standards." National Renewable Energy Laboratory.

Wiser, Ryan H., and Galen L. Barbose. 2008. "Renewable Portfolio Standards in the United States: A Status Report with Data Through 2007." Berkeley: LBNL.


Renewable Energy Tracking and Claims: Experience from the United States

Additional Resources

Hamrin, Jan. 2014. "REC Definitions and Tracking Mechanisms Used by State RPS Programs." Clean Energy States Alliance.

Rader and Norgaard. 1996.

Sovacool, B. 2011. "The Policy Challenges of Tradable Credits: A Critical Review of Eight Markets. Energy Policy (39:2); pp. 575-585.