What are REC's, SREC's and AEC's?

REC, or Renewable Energy Credit, goes by many names: Alternative Energy Credit (AEC), Solar Renewal Energy Credit (SREC), and Green Tag. These credits are ways of encouraging “green” energy purchases by making renewable clean energy resources more profitable and more attractive than continued dependence on fossil fuel energy.

REC is defined as one megawatt hour of energy that a renewable resource produces, but the actual electrical energy that is produced is sold in cents per kilowatt hour. What can be constituted as a renewable resource is very much debatable at this point, since it is sometimes difficult to determine what qualifies as an REC, but solar is definitely a green renewable resource.

As a home or business owner, if you have an REC buyer, you are on the path for solar investment payback.

The northeastern zone of the U.S. currently leads the nation as the leading region in the development of an REC market. New Jersey currently performs limited REC marketing internally, while multistate platforms for trading RECs and private aggregator enterprises exist to purchase RECs from homeowners on a direct basis. Many states are trying to break into the market by setting up similar platforms.

RECs at 1MWh have been sold at over $700 per unit or as little as $10-$20 per unit. The vast fluctuation in the REC price is due to the fact that it is a tradable commodity on the open market. Prices can be locked for 5, 10, 15 and even 20 years, with some buyers paying upfront for a five-year production. But this set price is a risk for both buyer and seller if the transaction is worked this way.

Any solar electricity producer would need to produce one REC per kWh per year from the installed PV panels, or more, depending on the solar window position. Most homeowners are small solar electricity producers, hence, they normally sell their RECs to aggregators who work on a commission basis while utility scale solar systems installations are large scale REC producers. The main purchasers of RECs are usually utilities that are required to satisfy the legislated portfolio that confirms that a certain percentage of electricity is generated from renewable resources. Other major REC purchasers are commercial companies like Wal-Mart that wish to impress their customers by actively participating in “green” energy resources in their electricity usage. In point of fact, it is possible to sell your RECs to any willing buyer.

Apart from PV panels that generate RECs for sale, solar thermal systems can also generate RECs but it is more difficult to track the system’s BTU. Moreover, the amount of RECs differs from place to place. A fit-in tariff or rate (FIT) is an extra payment to the PV power producer that is higher than the electricity cost, paid by every kWh. FITs are not tradable like RECs, as the governing utility bodies promote the use of renewable energy, so a premium is paid for every kWh of electricity generated by any home or business. A contract is drawn up