However, some industry analysts question how effective RECs are. They note that buying RECs doesn’t necessarily result in more clean energy being produced. That’s because power generators don’t have to spend the money they receive from selling RECs on new energy capacity. A related problem is that RECs are relatively easy to come by. The sales price of a REC is often a fraction of what it costs to produce one megawatt-hour of electricity. The end result is that even if an energy generator relied on its earnings from RECs alone to expand its clean energy production, it wouldn’t have the money to do so. In other words, RECs don’t currently provide enough additionality to power generators.
Increased demand for RECs may help solve this problem. According to SP Global, REC trading has risen dramatically in the US over recent years. In 2010, RECs accounting for 19.8 million megawatt-hours were sold. By 2019, that figure increased to 68.7 million megawatt-hours.
Big companies buy the largest portion of RECs to offset their use of fossil fuels. Matthew Brander, a lecturer at Edinburgh University, feels this approach is problematic. Companies can claim they use 100 percent clean energy by purchasing enough RECs to match their energy use. However, they continue to get their power from coal or natural gas plants.
Some companies reject RECs, preferring instead to invest more directly in renewables. “We do not have confidence that offsetting instruments alone are sufficient to drive new renewable projects, as opposed to simply shifting around ownership of existing renewable electrons,” Walmart notes in a document on its renewable energy policy.