Understanding Renewable Energy Certificates (RECs)

Published October 6, 2025

Organizations around the world are committing to 100% renewable energy, but not every company can directly access or generate clean power. This raises an important question: how can they credibly prove their use of renewable electricity? Renewable Energy Certificates (RECs) are the market instruments that make this possible. They play a central role in corporate sustainability strategies and the clean energy transition, yet their function is often misunderstood. This article explores what RECs are, how they work, and why they matter for transparency and decarbonization.

The Basics: What Are Renewable Energy Certificates?

A Renewable Energy Certificate, or REC, represents proof that one megawatt-hour (MWh) of electricity has been generated from a renewable source and added to the grid. Each REC contains key information such as the generation source, location, and date. RECs are widely used in the United States and other North American markets to track and verify renewable energy consumption.

The system separates the physical electricity, which flows indistinguishably through the grid, from its environmental attributes. A solar or wind generator produces both electricity and a REC for every MWh generated. The REC can then be sold or transferred independently, allowing companies to purchase renewable attributes even if they cannot directly use green power. Once a REC is used to claim renewable consumption, it is retired to prevent double counting.

Registries such as Green-e and WREGIS maintain official records of REC issuance and retirement, ensuring transparency and accountability.

Why RECs Matter

RECs are vital to the clean energy economy because they make renewable energy procurement verifiable and tradable. They allow organizations to:

Claim renewable electricity use under Scope 2 of the Greenhouse Gas (GHG) Protocol using the market-based method.
Support renewable project financing by creating demand for verified green power.
Demonstrate progress toward sustainability and net zero targets with auditable data.
Enhance transparency in corporate energy reporting.

For many companies, especially those in urban or leased facilities, purchasing RECs is the most practical way to access renewable energy markets. This flexibility drives investment into new renewable projects by assigning economic value to the environmental attributes of clean generation.

Limitations and Evolving Standards

Despite their benefits, RECs face some limitations. Oversupply in certain markets can reduce their price and perceived impact. Critics argue that some RECs do not represent additional renewable generation, meaning the projects may have been built regardless of certificate sales.

To address these challenges, companies are increasingly turning toward high-impact procurement strategies such as long-term Power Purchase Agreements (PPAs), bundled RECs, or 24/7 carbon-free energy sourcing. These methods link renewable generation more directly to corporate consumption, strengthening claims of additionality.

Technological innovation is also reshaping the REC market. Initiatives like EnergyTag are advancing granular hourly energy tracking, while blockchain platforms are improving verification and transparency. The future of energy certificates lies in real-time data alignment between consumption and generation.

The Future of Renewable Energy Tracking

As power grids become more digital and decentralized, the next generation of RECs will focus on precision, transparency, and interoperability. Hourly matching of renewable energy use will replace annual averages, offering a clearer picture of corporate carbon footprints.

Digital energy management platforms will play a key role in this transformation by automating certificate tracking, procurement, and retirement. Over time, these systems may evolve into global registries that unify standards and simplify trading.

Ultimately, RECs provide more than a compliance mechanism. They form the financial and informational foundation supporting the renewable energy economy.

Conclusion

Renewable Energy Certificates are essential tools for accelerating the clean energy transition. They provide the transparency, traceability, and accountability necessary for organizations to credibly demonstrate renewable electricity use. As standards and technologies evolve, their purpose remains the same: connecting renewable generation with responsible consumption. With the growing pursuit of 24/7 carbon-free energy goals, RECs will continue to underpin progress toward a decarbonized grid.