What Illinoisians need to know about Renewable Energy Credits

The Archdiocese of Chicago recently made news when it announced its shift to 100% renewable energy. But did that mean the district installed solar on its nearly 400 parishes, schools and office buildings?

No. The diocese’s achievement was made possible by the purchase of renewable energy credits for its entire electric portfolio.

It’s a system that still promotes green-energy goals, but can require some effort and analysis to measure.

As with the archdiocese, when companies or other agencies expand their focus on renewable energy in a short period of time, chances are they’re not buying physical solar or wind energy to power their lights, they’re buying those renewable energy credits or RECs.

RECs are a currency used to represent the social and environmental benefits associated with the production of renewable energy, with one REC equaling one megawatthour of electricity. Once a solar field or wind farm is created, the RECs that come with it can be sold elsewhere in the country. And by law, whoever owns the RECs can claim the environmental benefits associated with those megawatthours of green electricity.

Under that rule, companies, governments and other organizations often purchase RECs to comply with standards or simply to substantiate their environmental initiatives.

RECs are intended to incentivize the renewable energy market and provide revenue for new renewable energy projects. For example, in Illinois, RECs are purchased by electric utilities like ComEd to comply with the state’s renewable portfolio standard policy, which sets goals for those utilities to obtain a percentage of their electricity from renewable energy resources.

The state also administers programs like Illinois Shines and Illinois Solar for All, which provide payments in exchange for 15 years of RECs generated by new solar systems. Illinois Shines supports a wide range of solar projects through these REC purchases, from small residential systems to large community solar developments.

“Our state incentive program is built on the purchase of renewable energy credits,” said John Delurey, the Midwest deputy programs director for nonprofit advocacy group Vote Solar.

And, the program can work for individuals as well as businesses or other agencies.

Delurey, who has a solar array on his home in the Chicago neighborhood of Bridgeport, sold his project’s RECs to the state through the Illinois Shines program. Compared to the open market, Delurey said the state pays much more because its REC prices are designed to generate new construction.

“It's important to note that not all RECs are created equal,” Delurey cautioned.

Because the market has been inundated with cheap RECs — many of them from regions like the Great Plains and Texas where wind energy is booming — one problem with the currency is that buying them doesn’t always encourage the production of new wind or solar farms.

“RECs are kind of an afterthought for some of those bigger projects, so they look to the market to sell them. That tends to be where a lot of market RECs come from,” Delurey said. “In buying that REC, you're not really resulting in new generation or new things being built, unless you confine your purchase. For instance, a buyer can say, ‘I only want RECs generated from projects in Illinois that might not have been built otherwise.’”

Delurey added that for the everyday resident, there are three tiers of renewable energy he typically recommends. In descending order, the first is what Delurey calls the gold standard — rooftop.

“Rooftop is the biggest impact, because you're getting that clean power exactly where it's needed. That is clean electrons flowing into the building and offsetting usage. It's a huge benefit to the grid and to the world,” he said. “It also just happens to save you the most money and provide the most wealth-building opportunities.”

In a reality where a lot of people can’t pursue rooftop solar, the second tier is community solar, which refers to local solar arrays that community members can subscribe to in exchange for credit on their electricity bills.

“In that scenario, there is a chance that those electrons are getting to your home. Those electrons are on this grid,” Delurey said. “And they're additional projects. It's new energy that would not have happened without these REC programs and without your subscriptions.”

The third tier is clean supply, which is where a third party approaches customers as an alternative retail electric supplier and offers to supply you with clean energy.

In this case, the key is knowing where that supplier is getting its RECs.

“Chances are they will have bought RECs from frankly who knows where and call that power clean,” he said. “Some of those suppliers might just be buying those cheap Texas wind RECs, and buying that clean supply might have fairly low impact. There might not be a whole lot to it in terms of the environmental or climate benefit, and they often are not cheaper than your default supply.”

• Jenny Whidden is a climate change and environment writer working with the Daily Herald through a partnership with Report For America supported by The Nature Conservancy. To help support her work with a tax-deductible donation, see dailyherald.com/rfa.