Renewable Energy Credit Trading Programs
A common mechanism for complying with the renewable electricity standard is a renewable energy credit (REC) trading program. Under a REC program, a renewable energy facility earns one credit for every kilowatt-hour (kWh) or megawatt-hour (MWh) of electricity that is generated in a given year. These RECs can then be bought and sold by utilities with annual renewable requirements—much like the Clean Air Act emission allowance trading system. This market-based approach provides compliance flexibility while ensuring competition among renewable energy generators and creates an ongoing incentive to drive down costs. A majority of state renewable electricity standards either currently use or are considering a REC trading program to track compliance.