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A recs primer

The Renewable Energy Certificate System (RECS) aims to provide a support system for renewable energy production which will not distort electricity prices and is thus compatible with a liberalised market.

To do this it separates renewable energy into two products which are then sold on two markets: electricity produced, which is sold on the open electricity market; and green added value, which is sold on a green certificate market. The total revenues from the sale of the electricity and of the green certificate should cover the production costs of the RES facility. Physically, the green certificates can be traded in specially created marketplaces or, separately, on existing power exchanges.

Demand for certificates can be stimulated by a number of means: through voluntary demand for renewable energy fuelled by energy consumers wanting to improve their "green profile;" through an obligation to buy renewable energy by requiring quotas of electricity in the supply mix (a push solution); and the use of incentives to use renewable energy via tax breaks (a pull solution).

Volume is important so that the certificate market can create adequate trading (liquidity) as quickly as possible. Different certificates and obligations for different renewable energy sources (RES) would hamper this aim. Instead, all RES which contribute to lower CO2 emissions will be included, although certificates will be earmarked allowing the market to judge the value of certificates from a particular source.

Control of the issuing, registering, monitoring, and redeeming of certificates will be done by independent national Issuing Bodies (IBs). To enable international trade, these IBs will join an Association of IBs (AIB) which will ensure compatible certification systems.

Validity is important and certificates should, in principle, be valid indefinitely (until redeemed). Practical considerations, however, suggest a life of five years.

Verification requires that where there is an obligation to buy certificates there will be a procedure to demonstrate to the authorities that sufficient TGCs are held in respect to the particular commitment period. When compliance has been confirmed, the TGCs will be deemed to have been consumed.

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