Renewable Energy Certificates (RECs) Explained

Introduced in 2003, Renewable Energy Certificates (RECs) are now a key part of the energy ecosystem. Both electricity suppliers and users benefit from the clean energy they verify, and with the UK government having projected that renewables will account for around 50% of the country’s total energy mix by 2030, there is still room for growth.

At CFP Energy, we provide rapid access to renewable energy certificates. Executed per GHG Protocol guidance, contact our carbon team to see how we can help you meet your carbon compliance or voluntary Scope 2 targets today.

What is a REC (Renewable Energy Certificate)?  

A Renewable Energy Certificate (REC) is a tradable instrument that proves one megawatt-hour (MWh) of electricity was generated from a renewable energy source, such as solar, wind, or hydropower..

Once issued,  RECs can be traded on exchanges, where their environmental attributes—such as the CO₂ reductions they represent—can be bought separately from the physical energy itself.

For example, a company in a high-emitting industry, such as construction, might purchase RECs to both demonstrate its use of renewable energy to shareholders and reduce its Scope 2 emissions, supporting climate action without directly investing in green energy infrastructure.

RECs Meaning: What Are Renewable Energy Certificates?

RECS are market-based instruments that are created, tracked, and traded in a regulated market. Each stage of the journey – from energy generation to their traded attributes – is monitored and verified to ensure full transparency. and traceable origination.

Energy

To qualify as a REC, electricity generators must prove that their power has been generated through renewables, as defined by the UN as “energy derived from natural sources that are replenished at a higher rate than they are consumed.”

Most renewables are derived from solar, wind, and hydro power. A REC can be based on a mixture of renewables, with the ratios determined by the producer.

Tracking

Ofgem, the UK's energy regulator, manages the Renewable Electricity Register (RER).

This scheme verifies the generation of renewable energy through certificate Issuance and tracking, ensuring that all Renewable Obligations (RO) meet the required regulations.

Trading

In the UK, RECs are traded in both voluntary and compliance markets. RECs are traded according to a number of factors, such as the location of the project, resource availability, grid infrastructure, and the adoption and amendment of regulations.

RECs and Carbon Credits – Understanding the Difference

RECs are sometimes compared to carbon credits. However, there are distinct differences between them, despite their superficial similarities.

Units:

RECs: represent 1 megawatt hour (MWh) of electricity generated from a renewable.

Carbon Credits: represent the reduction or removal of 1 tonne of carbon dioxide equivalent from the atmosphere. 

Scope:

RECs: certify the production and provision of renewable electricity.

Carbon Credits: certify a range of sustainable projects, including reforestation, afforestation, methane capture, and cook stove initiatives.

Issuance:

RECs: these are issued under the Guarantees of Origin (GOs) in Europe, while the USA has a range of standards, such as the Green-e Energy Certification programme.

Carbon Credits: these are issued according to standards such as the Gold Standard (GS) and Verra’s Verified Carbon Standard (VCS) scheme.

Figure 1: the GO market operating within the European Energy Certificate System.

How Do Renewable Energy Certificate Purchases Work?

 Although RECs are simple products in themselves, there are several different ways to access them.

Bundled RECs

RECs typically come either bundled or unbundled from a buyer’s electricity. By accessing a REC as part of a utility package, bundled, the buyer can demonstrate that the energy they purchase directly supports renewable energy production.

Unbundled RECs

Buying RECs unbundled – separate from your utilities – means that it is possible to take advantage of their environmental benefits without entering into a new electricity agreement.

Power Purchase Agreements (PPAs)

A PPA is a way of securing energy at a fixed price over a long period. These types of energy agreements are usually based on renewables, and so, in many cases, buying a PPA enables the buyer to access RECs at the same time.

Figure 2: Map depicting the uptake of different types of RECs around the world.

RECs in Action: Compliance vs Voluntary

 The Renewable Obligation (RO) – or Renewable Portfolio Standard (RPS) – is a government mandate that encourages the use of renewables amongst businesses.

These standards ensure that producers and buyers meet their sustainability targets by imposing penalties for non-compliance with renewable production mandates.

RECs, as mechanisms that demonstrate compliance with these standards, are particularly useful as part of the roadmap to ensuring long-term sustainability.

However, RECs can be used to support voluntary, as well as compliance, targets.

Compliance RECs vs Voluntary RECs

 Compliance: many energy producers and electric utility companies don’t generate a high enough percentage of renewables to meet their mandated targets, or Renewable Obligations (RO). In these cases, RECs, purchased separately, ensure compliance.

Voluntary: many organisations, while falling outside the remit of compliance obligations, may have their unique voluntary climate targets. Whether part of an integrated grammar to lower emissions, or to help meet Corporate Social Responsibility (CSR) goals, RECs help organisations to streamline their sustainability targets.

How Renewable Energy Certificates Compare to Carbon Offsets

 Carbon Offset: a carbon offset represents 1 metric ton of carbon dioxide (CO₂) that has been prevented or otherwise reduced or removed from the environment. This can be done in several ways, from carbon sequestration via reforestation or afforestation, to investment in renewable energy projects, such as wind farms and solar energy.

RECs: a REC represents one megawatt hour (MWh) of renewably produced energy. However, because RECs do not remove existing carbon emissions, they have a slightly different role to play. By promoting renewable energy generation, RECs help indirectly reduce future carbon emissions without removing or reducing existing carbon emissions.

Corporate Sustainability and RECs

 RECs, as proof of a renewable energy purchase, are particularly beneficial for corporate reporting (CR). Since RECs represent a verifiable record of renewable energy generation, they provide a simple way of ensuring credible corporate accounting.

One way that RECs can be used to demonstrate climate action is through Scope 2 emissions. According to GHG Protocol Scope 2 guidance, “all electricity consumers have a significant opportunity to reduce their emissions by reducing their electricity use and by buying any power they still need from low-carbon and/or renewable sources”.

In practice, this means that RECs can be used to reduce Scope 2 emissions, in line with the GHG Protocol’s advice on how CO₂ reductions can be demonstrated.

Empowering a Sustainable Future: HOW CFP Energy is Leading on RECs

From large energy producers to retail businesses, RECs are a crucial element in supporting the energy transition.

At CFP Energy, we only source RECs from recognised and fully accredited bodies.

Operating in multiple markets throughout Europe, we provide complex energy users and producers with a single interface for all energy supply and hedging requirements. 

Whether to meet your Renewables Obligation (RO), or help reduce your Scope 2 emissions, we can supply RECs through our extensive market access and team of market experts.

Get in touch with our carbon market specialists to discuss your options.