United States
Environmental Protection
Agency
Clean Energy Finance: Using Renewable SERA
Energy Certificates to Achieve Local Environmental Goals
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OVERVIEW
Many local governments use renewable energy
certificates (RECs) to demonstrate regulatory
compliance and meet voluntary local renewable
energy goals. RECs are market-based instruments
that represent the property rights to the
environmental, social, and other non-power
attributes of renewable electricity generation.1 Many
local governments purchase RECs through a range
of credible supply options to demonstrate
consumption of renewable electricity. Local
governments have also benefited from self-
generating and selling RECs to electricity suppliers
and other buyers. This brief provides a basic
explanation of what RECs are and how local
governments can use them to achieve their
environmental goals, providing three examples
where local governments have successfully used
RECs to meet their environmental goals.
WHAT ARE RECS?
Renewable electricity has two distinct components:
the underlying physical electricity, and the
associated environmental and social attributes of
that underlying electricity, which are both typically
measured in megawatt hours (MWh).11 The physical
electricity
consumed in	RECs represent
homes or offices Ownership Of
tells us nothing of renewable electricity
its source or	__ _
on a shared grid.
origin. RECs are
market-based
instruments that represent the environmental, social,
and other non-power attributes of renewable
electricity generation. As such, RECs represent
ownership of renewable electricity on a shared grid.
A renewable electricity generator, such as a solar
facility, will produce both electricity and
environmental attributes. The environmental
attributes can be represented by a REC instrument,
and retained or transferred between parties as a
tradable commodity that is separate from the
underlying MWh of physical electricity. The REC
represents a claim of renewable energy use for
whomever owns it
RECs versus Carbon Offsets
RECs are riot the same as carbon offsets, which are
another market-based instrument that local
governments often use to attain environmental
goals. A carbon offset represents the reduction of
one metric ton of carbon dioxide emissions, while a
REC conveys ownership of the environmental
attributes of one MWh of electricity generated from a
renewable source. A REC does not convey to its
owner a defined amount of carbon dioxide
emissions reductions; instead, it conveys ownership
and use of a single MWh of electricity from a zero-
emitting resource.
Types of RECs
Some renewable generators sell electricity and
RECs together; this type of purchase is known as
"bundled RECs." If a government or individual
purchases electricity from one supplier but RECs
from another supplier, this type of purchase is
known as "unbundled RECs."111
RECs can be further classified by the generation
type, such as whether electricity was generated by
wind or solar energy. For example, a MWh of solar
generation produces a Solar Renewable Energy
Certificate (SREC). Some states, such as Illinois,1V
have included specific solar generation
requirements, or carve-outs, in their renewable
portfolio standards (RPS) to help promote the solar
market. To comply with the RPS in states with solar
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Clean Energy Finance: Using RECs to Achieve Local Environmental Goals
carve-outs, regulated utilities can typically supply
the mandated amount of solar power directly,
purchase SRECs comparable to the amount of
required solar energy, or pay the alternative
compliance payment. Therefore, SRECs and other
generation-specific certificates are often more
valuable for local governments to sell than general
RECs because there is a more limited supply to
meet generation-specific RPS targets.
HOW DO RECS WORK?
To claim the environmental and non-power
attributes of renewable electricity, a local
government must own the RECs, whether generated
from a project the government owns or purchased
from a project that is owned and operated by a third
party. When a claim is made on the environmental
and non-power attributes of a REC, the REC is
"retired" and cannot be used to claim renewable
electricity use by another party. For example, if a
government bought RECs from a supplier that also
supplied RECs to a second buyer who claimed them
or counted the RECs toward a state mandate, this
would constitute a double claim or double-counting
of environmental attributes.
Many electricity suppliers use RECs to comply with
states' RPS. Local governments may help support
the state's mandate by selling their RECs to a
regulated entity, which will use them to comply
with the RPS, but the local government cannot then
make a usage claim to the renewable electricity
itself. If a local government wants its investment in
renewable electricity to go above and beyond the
state's legal mandate of the RPS, it would need to
What Is Green Power?
Green power is a subset of renewable electricity that
represents the renewable energy resources and
technologies that provide the highest environmental
benefit. The market defines green power as
electricity produced from specific sources such as
wind and solar. Some state RPS programs include
sources that generate RECs for state compliance
that do not qualify as green power, such as
municipal solid waste or biomass.
own and retire the RECs. The local government will
then be able to claim the use of renewable
electricity from a zero emissions resource. By
voluntarily owning and retiring RECs, the supply of
RECs available to a compliance mandate is reduced.
This ensures that both the state compliance policy
(i.e., state RPS) and the voluntary local actions are
incrementally additive to each other.
PURCHASING RECS
RECs can be purchased directly along with
electricity through an electricity supplier, such as a
wind or solar developer, using a contract called a
physical power purchase agreement (PPA). RECs
are usually purchased for a long-term period such as
10-20 years.v This contract can provide a known
price for the electricity and guarantee that the
purchaser will own the RECs from the same
generator. If a local government owns its electric
utility, then the utility can obtain RECs through a
PPA with developers. The local government may
then either claim the RECs itself or may pass them
on to the municipal utility for incorporation into the
utility's delivered grid mix, resulting in a lower
emissions rate for all customers, but it cannot do
both.
If a local government is in a market that allows
"retail choice," where customers may choose their
energy supplier, it may be able to enter into a PPA
directly with an electricity supplier. If state
legislation allows it, the local government may
choose to set up a not-for-profit entity called a
community choice aggregation (CCA), which may
then enter into the PPA on the government's
behalf.V1 As of early 2021, only seven states have
adopted enabling legislation to permit local
governments to adopt CCAs.vu By aggregating
demand, a local government can gain leverage to
negotiate better rates. If a local government is not in
a market with retail choice, it may choose to enter
into a virtual PPA to directly purchase RECs at a set
price from an electricity supplier that is located in a
wholesale power market.
Learn more about EPA's energy resources for state, local, and tribal governments:
www.epa.gov/statelocalenerqv
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Clean Energy Finance: Using RECs to Achieve Local Environmental Goals
Local governments may also buy RECs from
intermediaries called REC retailers or brokers.
These intermediaries help facilitate transactions
between a local government (i.e., a buyer) and a
renewable energy generator (i.e., a seller) by
matching a buyer's specific REC needs with an
appropriate seller or renewable source/111 While
retailers and brokers may not be required to
purchase RECs, they can be helpful when a buyer
does not have sufficient buying power to engage
directly with large generators.
Benefits of Purchasing RECs
Benefits of purchasing RECs include:
•	Ability to demonstrate use of renewable
electricity regardless of what options are
available through a local provider. Local
governments can use RECs to cover part or all
of their purchased electricity footprint even if
the local electricity provider does not offer
renewable electricity directly.
•	Flexibility to maintain existing electricity
procurement contracts. Local governments do
not always have access to renewable electricity
through their electricity providers, to whom they
are often committed under long-term contracts.
Purchasing, owning, and retaining RECs allows
local governments to claim the benefits of
renewable resources while preserving existing
electricity procurement contracts.
•	Customizable renewable energy criteria. REC
purchase contracts are customizable, in that
local governments can stipulate criteria about
the type of renewable energy (e.g., wind vs.
solar), as well as the location and year (i.e.,
"vintage") of generation. Each of these
three criteria can impact price (e.g., an
unbundled REC bought from inside the local
grid may be more costly than one from outside,
but local governments may still prefer the local
option to influence the local market).
•	Stronger purchasing power. Partnering with
other local governments or organizations can
enable local governments to combine demand to
enable better purchasing power and potentially
obtain better pricing for RECs; this is referred to
as "collaborative procurement."1X
SELF-GENERATING RECS
Local governments sometimes choose to self-
generate renewable electricity (e.g., by installing
solar panels on municipal facilities). In these cases,
their renewable projects will produce two different
and separable commodities: physical electricity and
environmental and social attributes. Local
governments have several options if they choose to
self-generate RECs:
•	Retain the RECs and the claim of renewable
energy use from the project. Over the long run,
generating renewable electricity and retaining
the RECs can enable a local government to
claim use of renewable electricity at a lower
cost than purchasing renewable electricity
products directly from a power provider.
•	Sell the self-generated RECs to a third party
and claim use of the energy that is made up of
the average grid generation mix. Revenue from
REC sales may be used to provide financial
support for other energy or sustainability
initiatives, or to reduce the cost of power
delivered to the local government (e.g.,
proceeds from REC sales could be used to fund
clean energy programs for low-income
residents). While selling RECs to a third party
may help lower the overall delivered cost of
electricity, it does so at the expense of the local
government's ability to claim renewable
electricity use.
•	Sell the self-generated RECs to a third party
and make a replacement REC purchase fi'om
another renewable resource or project (claims
are connected to the source of the replacement
RECs).
Learn more about EPA's energy resources for state, local, and tribal governments:
www.epa.gov/statelocalenerqv
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Clean Energy Finance: Using RECs to Achieve Local Environmental Goals
Local governments usually choose this option if,
due to their state's RPS, REC prices within the
state are higher than REC prices outside of the
state. This practice is often referred to as REC
arbitrage.* When considering the sale of self-
generated RECs, it is important for local
governments to be aware that not all states
permit out-of-state RECs for RPS compliance.
For example, Pennsylvania does not recognize
SRECs from outside of the commonwealth for
the purposes of compliance with Pennsylvania's
Alternative Energy Portfolio Standard.H
To receive RECs generated by a renewable
resource, a local government must register the
project with a regional tracking system. The process
of registration is different depending on the region
or what the owner of the RECs wants to do with
them. For example, if a project is within the service
territory of PJM (a major regional transmission
organization), it must be registered with the PJM
Environmental Information System's Generation
Attribute Tracking System (GATS) for the owner to
receive its RECs. If the owner of the RECs wants
the option of selling the RECs to a regulated entity
that will use them to comply with the state's RPS,
the owner may need to take additional steps. For
example, the owner may need to first register the
project with the targeted state's public service
commission or public utility commission.
Local governments often self-generate RECs on
their own. Alternatively, local governments could
partner with other municipalities or organizations to
develop larger projects, through a process called
"aggregation." Aggregation leads to economies of
scale, making project costs lower and more
favorable for developers. Aggregation enables local
governments to develop larger projects that they
would not be capable of developing on their own.
PROMOTING RECS AT THE LOCAL
LEVEL
Local governments have promoted the use of RECs
in several ways:
r

Key Resources Available to
Local Governments
•
EPA Green Power Partnership Website:
www.eDa.aov/areenoower
•
EPA Green Power Partnership "Making
Environmental Claims":
www.eoa.aov/areenDower/makina-
environmental-claims 1
•
EPA Local Government Strategy Series - Green
Power Procurement:
www.eDa.aov/statelocalenerav/areen-Dower-

rocurement I
•
Green-e Website: www.areen-e.ora
•
American Cities Climate Challenge - Renewable
Accelerator: httosY/citvrenewables.ora/
•
EPA Toolbox for Renewable Energy Project
Development:
httDsV/www.eoa.aov/reDowertoolbox
•
Local Government Solar Project Portal:
httDs://www.eDa.aov/reDowertoolbox/local-
a
overnment-solar-Droiect-Dortal I
•
National Renewable Energy Laboratory
Renewable Electricity Fact Sheet:
www.nrel.aov/docs/fv15osti/64558.Ddf

•	Adopting local resolutions. Resolutions can
establish renewable energy procurement
requirements for government facilities. The
local government can purchase RECs as an
alternative to purchasing renewable electricity
directly from a provider or generating its own
renewable electricity.
•	Establishing local renewable portfolio
standards. Many states have created standards
that investor-owned utilities must meet. Some
states also require municipally owned utilities to
comply with standards. If a state exempts
municipally owned utilities from its RPS or
does not have a statewide standard, local
governments may consider establishing local
RPS requirements for their utilities. These
utilities can purchase RECs to meet RPS
requirements. The municipal utility in
Columbia, Missouri, for example, purchases
RECs from wind power projects to help meet its
locally mandated RPS.31
Learn more about EPA's energy resources for state, local, and tribal governments:
www.epa.gov/statelocalenerqv
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Clean Energy Finance: Using RECs to Achieve Local Environmental Goals
•	Raising awareness. Local governments can help
businesses and residents understand what RECs
are and how to generate or purchase them.
Businesses and residents may not know the
differences among generating, buying, or
retiring RECs, and which of these options
ensures that their efforts go beyond state
mandates or enables them to claim the use of
renewable electricity.
•	Providing support. Local governments may also
assist constituents who enter into third-party
lease agreements (typically for rooftop solar) to
ensure they understand who owns the RECs, a
commonly misunderstood key provision. A
local government may also choose to participate
in programs such as the U.S. Environmental
Protection Agency's (EPA's) Green Power
Partnership.
What Is the Green Power
Partnership?
The Green Power Partnership is a cost-free,
voluntary EPA program that assists organizations
with procuring electricity generated from renewable
resources. The EPA can provide technical support in
purchasing green power and in communicating the
economic and environmental benefits of green
power use to stakeholders and constituents.
Partners will be networked with like-minded
communities, colleges and universities, businesses,
and organizations across the country.
I	U.S. EPA. (n.d.). Renewable Energy Certificates. Available:
www.epa.gov/greenpower/renewable-energv-certificates-recs.
Accessed 10/12/2020.
II	Ibid.
III	U.S. EPA. (n.d.). Unbundled Renewable Energy Certifications
(RECs). Available: https://www.epa.gov/greenpower/unbundled-
renewable-energv-certificates-
recs#:~:text=Unbimdled%20Renewable%20Energv%20Certificates
%20(RECs)%20refer%20to%20RECs%20that%20are.one%20selli
ng%20them%20the%20REC. Accessed 11/4/2020.
lv NC Clean Technology Center, (n.d.). Illinois, Renewable Portfolio
Standard. Available:
https: //pro grams, dsireusa.org/sv stem/pro gram/detail/5 84. Accessed
2/4/2021.
v U.S. EPA. (n.d.). Physical Power Purchase Agreements. Available:
https://www.epa.gov/greenpower/phvsical-power-purchase-
agreements-phvsical-ppa:. Accessed 11/4/2020.
V1U.S. EPA. (n.d.). Community Choice Aggregation. Available:
https://www.epa.gov/greenpower/communitv-choice-aggregation.
Accessed 11/4//2020.
™ Ibid.
vm National Renewable Energy Laboratory. 2011. The Role of
Renewable Energy Certificates in Developing New Renewable
Energy Projects. Available:
https://www.nrel.gov/docs/fvllosti/51904.pdf. Accessed
11/4/2020.
1XU.S. EPA. (n.d.). Collaborative Procurement Initiative. Available:
https://www.epa.gov/greenpower/collaborative-procurement-
initiativt. Accessed: 11/4/2020.
x U.S. EPA. Renewable Energy Certificate (REC) Arbitrage.
Available: https://www.epa.gov/sites/production/files/2017-
09/documents/gpp-rec-arbitrage.pdf. Accessed 11/3/2020.
H NC Clean Technology Center, (n.d.). Pennsylvania's Alternative
Energy Portfolio Standard. Available:
https://programs.dsireusa.org/svstem/program/detail/262. Accessed
2/5/2021.
Columbia Power and Light. 2020. Renewable Report. Available:
www, como. gov/utilities/wp-
content/uploads/sites/20/2020/01/RenewableReport2020-Final-
Draft.pd .Accessed 11/3/2020.
Learn more about EPA's energy resources for state, local, and tribal governments:
www.epa.gov/statelocalenerqv
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Examples
Greenfield, Massachusetts
•	Community Choice Aggregation (CCA)
supplied RECs
•	Green power used since 2017
•	Over 50 million kWh of green power per
year
•	Wind and solar resources
Greenfield, a city of approximately 18,000 people, established the Greenfield Light & Power program in
January 2015. This CCA program purchases and retires RECs on behalf of participating residents and businesses,
offering these community members the option to have 100% of their electricity provided from renewable resources.
At least 65% of the community has been enrolled in the aggregation since 2015. The CCA enables the city to
negotiate a long-term, fixed rate for electricity from renewable sources.
The CCA offers different products to participating residences and businesses, including a budget (new in 2021),
standard, and local green product option. The local green option is 100% renewable electricity, all from Class I
renewable electricity generated in New England. The standard and budget options offer competitive rates to the
local utility offering with varying levels of environmental benefits (e.g., one option stipulates that all power comes
from local wind; another allows other types of RECs).
For more information, see: www.masspowerchoice.com/qreenfield.
w
Houston, Texas

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• RECs supplied through a competitive
• Supplies nearly 90% of local government's
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electricity supplier and offsite PPA
annual electricity usage

• Green power used since 2008
• One billion kWh of green power per year
As the fourth-largest city in the United States with more than 2 million people, Houston is the largest user of green
power among local government partners within EPA's Green Power Partnership. In 2017, it won EPA's Green
Power Partner of the Year award. Houston was an early leader in green power purchases, beginning its REC
purchases in 2008 through a contract with its local utility. The city purchased more than 1 billion kWh in 2020
through a combination of competitive retail supply and a physical PPA contract that provides the city the necessary
RECs to substantiate voluntary claims of renewable electricity use. According to the EPA's Green Power
Partnership, the city's purchases accounted for nearly 90% of the local government's annual electricity usage in
2020. The city intends to eventually power their entire government with 100% renewable energy.
For more information, see: www.qreenhoustontx.qov/qreen-power-proqram.html.
r/',
Washington, DC's Solar for All Program, which began in late 2016, aims to increase the consumption of renewable
energy in the city; expand the city's solar capacity; and provide benefits of locally generated solar energy to low-
income households, small businesses, nonprofits, and seniors. The program oversees a grant program that has
multiple objectives, including providing low-income households with the benefits of solar energy, either the energy
itself or the financial benefits, for at least 15 years. Projects applying to the grant program must meet one of these
stated objectives. The grant funds multiple proposals each year for a three-year period. One currently funded project
is the Neighborhood Solar Equity organization, which installs solar energy systems on large, public-sector
institutions such as local university rooftops; sells the Solar Renewable Energy Certificates (SRECs) that are
generated; and uses the revenue generated from the project to benefit low-income residents. While solar project
recipients cannot claim to be using solar power due to the sale of the SRECs, they benefit from the shared
environmental benefits of complying with the District's RPS.
For more information, see: www.doee.dc.qov/node/1226501.
1
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Washington, DC


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• Self-generate and sell RECs
• Project funded in 2017

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• Revenue benefits low-income residents
• More than 1 billion kWh used by the
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community in 2020
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Learn more about EPA's energy resources for state, local, and tribal governments:
www.epa.qov/statelocalenerqy

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