Green Energy: How Renewable Energy Credits and Carbon Offsets Work

A wind farm

If you've ever considered green energy for your home, you've likely come across terms like "renewable energy credits" (RECs) and "carbon offsets." These serve as the foundation of green energy, making it possible for energy suppliers like IGS Energy to provide customers with green electricity and carbon-neutral natural gas.

But what are RECs and carbon offsets – and how do they work? In this article, we break down what you need to know about these two concepts and how they're applied.

What are renewable energy credits?

First things first: When we're talking about RECs, we're talking about green electricity.

The American energy grid is composed of electricity that comes from both brown (fossil fuel) and green (renewable) sources. This mix makes it impossible to guarantee that the energy reaching your home is "green," which is where RECs come in.

Renewable energy credits represent the energy generated by renewable energy sources, such as solar or wind power facilities. One REC is equal to about 1 megawatt hour (MWh) of renewable electricity. In short, RECs represent the clean energy attributes of green electricity.

The primary benefit of this system is that homeowners can access green energy without needing to install solar panels on their roof or build a wind turbine on their lawn. It also gives homes and businesses the opportunity to use green energy even if they're located hundreds of miles away from the nearest solar or wind farm.

At IGS Energy, we sell, trade and retire RECs on behalf of our customers. (Many other energy suppliers outsource this work.) RECs are purchased by two types of buyers:

  • Voluntary credit buyers: Environmentally conscious individuals and organizations that want to reduce their greenhouse gas emissions
  • Compliance buyers: Electrical utilities that, due to state regulations, must provide a certain percentage of renewable energy to their customers

How we track and retire RECs

REC tracking systems

To track RECs, an electronic database registers basic information about each MWh of renewable energy generation in a specific U.S. geographical region – and also provides a mechanism for each REC’s retirement.

IGS Energy belongs to the M-RETS, PJM-GATS, NEPOOL, NAR, ERCOT, and NYSERDA tracking systems (see the map above). Each tracking system provides a standard level of detail – such as renewable facility location, generation technology, facility owner, fuel type and the date the MWh was generated.

Once a REC is retired, it's removed from the market and cannot be resold.

What is a carbon offset?

When we're talking about carbon offsets, we're talking about carbon-neutral natural gas.

Unlike electricity, natural gas cannot be generated by a renewable source. By itself, natural gas can't be "green." But by creating a carbon offset, the effects of burning natural gas can be effectively neutralized, hence the term carbon-neutral natural gas.

A carbon offset is simply the method in which a non-green commodity becomes green, effectively counterbalancing a natural gas user's carbon footprint.

So, what is a carbon footprint?

A carbon footprint is the amount of carbon dioxide (CO2) – among other greenhouse gases – that are produced by an industry, company or household through daily activities like driving a car and heating a home. In the U.S., the average carbon footprint is around 16 tons. (You can calculate your personal carbon footprint by tracking what kinds of food you eat, how often you travel, what kind of energy powers your home and the things you buy and then plugging that information into this online carbon footprint calculator.)

How carbon offsets are generated and used

A single carbon offset represents the reduction of one metric ton of CO2. An offset is generated in one of 3 ways:

  • Capturing and destroying greenhouse gases that would otherwise end up in the atmosphere and contribute to climate change
  • Building our supporting renewable energy systems like solar or wind farms
  • Capturing and storing harmful greenhouse gases to prevent them from polluting the atmosphere

Consider this example: A natural gas company produces an amount of gas that, when used, will generate 100 metric tons of CO2. If they were to then support or build a wind farm that prevents – by serving as an alternative to a brown energy source – the same amount of CO2 from being released into the atmosphere, they've neutralized the emissions created by the natural gas.

Some examples of carbon offset projects include:

  • Landfill gas capture
  • Reforestation and conservation
  • Construction of renewable energy technology
  • Development of carbon-capture technology

How to do your part – make the switch to green energy

If you'd like to lower your household's carbon footprint – and do your part to help fight climate change – one of the most effective ways to is by making the switch to green energy.

At IGS Energy, we use RECs to ensure all our residential customers' homes are powered by green electricity. For our residential gas customers, we purchase carbon offsets to neutralize the emissions produced by their usage.

Learn more about the impact your decision could make here.