Additionality You Can Count On Part II: RECs, Double Counting, and Additionality

5 Oct 2017

Welcome to the second in a series, Additionality You Can Count On, from Colin Murchie tackling the issue of additionality and transparent accounting for environmental claims.

Part I: Additionality, Divisibility, and a Zen Koan

Part II: RECs, Double Counting, and Additionality

Part III: Renewable Energy, Market Transformation, and NASCAR

Part IV: Summing it All Up: Environmental Claims & Additionality for Modern Times 

About the Author: Colin Murchie is Senior Director of Customer Energy Services at Sol Systems
Colin helps Sol Systems’ corporate and institutional customers navigate the wholesale markets to obtain utility-scale solar resources. Additionally, he oversees solar policy analysis and initiatives.

Readers of this entry may be familiar with the renewable energy credit (REC).  In the simplest terms, a REC is the transactional currency of renewable energy compliance. For example, if one part of a state hosts a 200-megawatt (MW) wind project, but the utility needing those 200MW to meet its renewable portfolio standard (RPS) compliance needs is hundreds of miles away, you don’t, ideally, force people to ship the electrons from Windy Acres Cooperative to Sunless Hollow Power and Light, just to comply with a mandate.  Instead, Windy Acres may account for every megawatt hour (MWh) from the wind farm, make them tradable, and ensure that no two people can take credit for the same wind farm. RECs make accounting easy because people can ship certificates much more efficiently than electrons.

However, it has recently come into question whether the buyer of the RECs has, well, done anything. Can a REC purchaser say “the project would not have gone forward without me,” when RECs have become so cheap relative to power that they may represent just 10% of project revenues?  As we mentioned in Part I of this series It’s a sound-of-one-hand-clapping type question.

Summarizing the sides of the argument:

RECs count!

RPS compliance with actual renewables is not a foregone conclusion.  Compliance entities can and do pay Alternative Compliance Payments (ACP) in many states and thereby achieve full legal compliance with the relevant laws, without a single new MW hitting the grid.  That means it’s not entirely correct to say that a project whose RECs were purchased by a utility for RPS compliance would have been inevitably built anyway.

Sol Systems’ hometown of Washington, D.C., with its 50%, D.C. – only solar generation renewable portfolio standard is one such example. Because compliance entities are unable to meet the in-District requirement for solar energy given D.C.’s real estate and geographic constraints, they must pay the ACP. This allows them to meet the RPS with comparatively few new solar megawatts.

RECs don’t come from nowhere.  If corporates and compliance entities need RECs, and the ones out there have been taken up, a new project will need to be built.

State programs do indeed encourage renewable energy investment. It is absurd to claim that because a state program designed to enable you to implement a renewable system because it’s now affordable, and that you implemented your renewable energy system because it was affordable, that you cannot take credit for implementing the system.

Projects aren’t “taking up room” in an existing program – they’re demonstrating its success.  Much as with ACP considerations, our experience has been that it’s not as though there is a fixed MW of renewables that society will tolerate.  The solar you built isn’t taking up fixed room in the hearts of the voters and thereby displacing another.  In fact, it’s the success or full subscription of one clean energy program or milestone that creates the push for the next.

For example, if a corporate customer is interested in installing solar on its facilities, and a rebate for such installation has a waiting list, a corporate may argue that they are not helping new renewable installations. Instead, they’re taking the rebate from another project. However, again, we would argue that a long queue of renewable energy projects, especially from high profile corporate entities, shows the success of such a program and demonstrates to utilities that there is strong demand for renewable energy among its most valued customers.

RECs don’t matter!

Developers can and do finance and build projects and “figure out the RECs later.”   In some parts of the country, at some scales, for some technologies, a project can hit its required financials with RECs serving as a fun upside to the developer (think of a Texas wind farm, for example).   In others, especially the rooftop commercial and industrial (C&I) space in a place like New Jersey, there is simply no chance of a solar project reaching its present-day economics without that additional REC revenue.

Project revenue doesn’t come in a clearing “stack”.  The pro forma for a large, successful renewable project is not a sequence of payments set up in order until one final, frameable, “marginal dollar” comes in the door and the trucks roll out.  It is an unsequenced mix of different revenue and tax attributes, all of which are confirmed and secured at different times at different risk tolerances.  There’s no one dollar that’s the “go forward” dollar.

Of all counterparties, the isolated REC buyer takes the least risk, has the simplest negotiation, and contributes the least revenue.   When one party has signed a 30-year contract with multimillion-dollar termination values, endured months of complex negotiations, and carried out the extensive facilities integration and collaboration necessary to get thousands of panels onto their facility, and another bought the RECs from that system one year, it does get hard to fulsomely claim that RECs latter were the real reason that the project went forward.

The result is that the REC works best for what it was designed for – tracking MWh of renewableness that do exist – but falls apart philosophically when asked to speak to why.


Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.

Over the last eight years, Sol Systems has delivered 650MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.

Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit

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Colin Murchie

Colin Murchie