Numerous financial incentives have been introduced in order to ease the adoption of solar energy and help it achieve grid parity. These include federal and state tax credits, capital subsidies, feed-in-tariffs, green certificates etc.
Green Certificates (Renewable Energy Credits/ Renewable Energy Certificates (RECs)) are awarded as a proof that a certain amount of electricity is produced by a renewable energy source like solar. Typically, the solar energy provider is credited with 1 green certificate for every MWh of electricity that is produced. Rather than the physical electricity that is produced, green certificates are about taking credit for the environmental benefit brought in by use of solar energy.
How does it work?
Example : Let’s say you own a 10KW solar PV system, and say the yearly energy production by this solar plant is 15MWh (15000KWh). This means that you can avail 15 green certificates in a year. Now if you sell these certificates to someone who is obliged to buy these for $100 per certificate, thus earning $1500. This is the kind of monetary benefit you get with the green certificates.
Please note that this is in addition to the other financial incentives like tax rebates, capital subsidy etc that you have already received.
Why the need?
Note that the utility does not buy the electricity from you, but only takes credit for its generation. Now, this might sound weird. Why would the utility pay you just for producing electricity from your solar panel system? The answer is simple. The utility has an obligation to produced a part of its electricity from a clean energy source. It is much cheaper to pay for clean electricity produced from an existing solar plant that to invest in developing a new one.
Depending on the country, green certificates (also called renewable energy certificates or RECs in some countries) are awarded by ensuring that no single entity gets to earn too much profit from all the different financial incentives. In order to receive a green certificate, the solar energy generator has to apply for accreditation with the relevant authority. Although the success story of green certificates is arguable as these are early days, their main benefits can be concluded as follows:
- Provides proof of solar energy generation
- Can be used with other renewable energy policies or incentives like feed-in-tariffs etc
- Helps utilities maintain transparency in meeting renewable energy obligations
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