Why purchase “new” renewable energy certificates?
In Massachusetts, the best indicator of how much a purchase will contribute directly to the development of more renewable energy is the percentage of the product that is classified as new. New renewable energy facilities are those created after 1997.
Massachusetts has a Renewable Portfolio Standard, which requires all electricity suppliers (utilities) to get a percentage of the electricity they sell from these new renewable energy facilities. This percentage will increase from 2.5% this year to 4% by 2009, which will cause a gradually increasing demand for new renewable energy certificates (RECs). This increasing demand should lead to the construction of additional renewable energy facilities.
When a consumer purchases new RECs, those RECs are retired. Because these purchased RECs have been taken out of circulation, electricity suppliers can't use these same RECs to fulfill their legal obligation under the Renewable Portfolio Standard. They then need to get RECs from other renewable energy facilities. One goal of voluntary clean energy programs is for more renewable energy facilities to be built than the Renewable Portfolio Standard requires.
Currently, because of a shortage of renewable energy generating facilities, energy suppliers are having difficulty obtaining a sufficient supply of new RECs to meet their obligations. In a situation like this, the Renewable Portfolio Standards law requires them to make an Alternative Compliance Payment which will be used by the Commonwealth to help develop renewable energy facilities. Because of the difficulty of siting and financing renewable energy power plants, it is hard to know how soon renewable energy facilities will be built because of any consumer's renewable electricity purchases. Yet, at a minimum, a consumer's purchase of new RECs increases the amount of money the Commonwealth will have to spend through the Alternative Compliance Payment fund.
The purchase of new RECs remains considerably more likely to lead to increased renewable energy generation than "old" RECs. Consumers should therefore consider the percentage of new RECs in the renewable electricity products they purchase. The higher the percentage of new RECs, the more the consumer is helping to spur clean energy development.
To help encourage consumers to purchase new RECs, the Clean Energy Choice® program provides matching grants for towns and low-income projects. The higher the percentage of new RECs a customer purchases, the more matching funds will be generated for that community, up to a dollar for dollar match. Click here to see what these matching grants can do for communities.