It’s all about RECs
Updated: Dec 11, 2020
I’m surprised no one has asked what does it means when you opt up to get electricity with a higher percentage from clean local renewable sources. Does it actually change the mix of electricity going through your meter? No. Here is the definitive answer to the question from Marlana Patton, the person from Peregrine, the company that manages Chelmsford Choice for the town.
How does buying renewable electricity through Chelmsford Choice increase the amount of clean electricity that is coming into my house?
The electricity coming into your house is from the New England electricity grid. The electricity on the grid is a mix of electricity from both renewable sources and traditional sources. Just as it’s impossible to separate rainwater from spring water in a pond, it’s also impossible to separate the electricity generated by one particular renewable energy project from all the electricity on the grid and then direct it to your house. So the short answer is that buying renewable electricity through Chelmsford Choice does not impact the electricity coming into your house.
But it is still accurate to say that your electricity supply includes more renewable electricity than someone who does not participate in one of the clean-electricity options in Chelmsford Choice. The mechanism for increasing the amount of renewable energy in your electricity supply is the purchase of RECs, or Renewable Energy Certificates. RECs are an accounting system that was designed to quantify and create a market for electricity generated from renewable sources. The purchase of RECs is the accepted method of increasing the renewable energy content of electricity.
One REC is minted for each megawatt hour of electricity that is produced by a renewable energy project. Each REC is given a unique serial number, and it aligns with the electricity generated by that renewable energy project within a given period of time. RECs are sold separately from the electricity itself. They are purchased by Chelmsford’s electricity supplier in a quantity that matches the portion of electricity use that should be counted as renewable.
When Chelmsford’s electricity supplier purchases RECs on your behalf, it gives you the right to claim that your electricity use was from the portion of electricity on the grid that was generated by renewable energy projects, and not the portion of electricity on the grid that was generated by fossil fuel energy sources.
For example, if you want to say that 50% of your electricity was generated from renewable sources:
- Add up the amount electricity you used for a given time period, such as a year, and divide it in half. If you used 2,000 kWh of electricity in one year. Half of that would be 1,000 kWh, or one megawatt hour.
- If one REC is bought on your behalf, it allows you to say that half of your electricity was generated by renewable sources because one REC equals one megawatt hour of renewable electricity generation.
The RECs you your electricity supplier buys on your behalf are retired and cannot be bought/sold again. The RECs are tracked in a central database that is managed by the New England grid operator to ensure their tracking is transparent and honest.
How are the additional RECs bought for the clean-energy options in Chelmsford Choice?
The cost for the additional renewable electricity, or RECs, is embedded into the price for each clean-electricity option. Specifically, the price for each option is the sum of the base cost of the electricity from the grid plus the cost of the additional RECs associated with that option.
How does the electricity supplier for Chelmsford Choice buy the additional RECs for Chelmsford Choice?
Chelmsford’s electricity supplier will calculate the total electricity use for customers in each option in the program and, based on the percentage of use that needs to be covered by additional RECs, they will buy the corresponding amount of additional RECs. For example:
- Chelmsford Choice Greener adds another 40% clean electricity, in addition to the minimum amount required by state law. Chelmsford’s electricity supplier would then buy RECs that equal 40% of the use for Chelmsford Choice participants enrolled in the Greener option.
- Chelmsford Choice Greenest adds RECs in addition to the minimum amount required by state law up to 100%. In 2021, the minimum amount required by state law will be 18%, so Chelmsford’s electricity supplier will buy RECs that equal 82% of the electricity use of participants in the Greenest option.
These additional RECs are typically bought in batches during the term of the contract between your electricity supplier and Chelmsford, often annually.
What is the value of buying RECs?
The value of buying RECs is that they are a market-based mechanism for creating and increasing demand for electricity from renewable sources. There are a limited number of RECs available, particularly MA Class I RECs which are from newer renewable energy projects in New England. As a result, the more we buy, the more pressure is put on the market to generate more. In that way, buying RECs is a long-term strategy for increasing the amount of renewable energy projects that generate electricity on the New England electricity grid.
What happens if there are not enough RECs or we run out of RECs?
The electricity supplier will be required to provide the additional RECs promised to Chelmsford even if there is a shortage of RECs. The supplier is obligated to buy RECs for two purposes: to fulfill the promise to Chelmsford and to meet the requirements of state law, the Renewable Portfolio Standard (RPS). The RPS contains a safety valve in the case of a REC shortage. Electricity suppliers can satisfy the RPS by either buying RECs or making a Compliance Payment to the state. If there is shortage, the supplier will continue to fulfill its promise to Chelmsford and may satisfy the RPS by making a Compliance Payment.