By Chelsa Oren, Ethanol and Biodiesel Services Director, EcoEngineers | coren@ecoengineers.us 
Renewable Energy Certificates (RECs) play an increasingly critical role in ethanol production as producers seek to lower their carbon intensity (CI) scores under the 45Z Clean Fuel Production Tax Credit. Each REC represents one megawatt-hour of renewable electricity generated and delivered to the grid. When properly matched to the energy consumption of an ethanol facility, RECs can meaningfully reduce the calculated CI of a fuel pathway. However, the value of these certificates and their contribution to lowering CI depend entirely on precise carbon accounting and documentation.
The Importance of CI Accuracy
Accurate CI scoring under 45Z determines the dollar value of the tax credit earned per gallon of ethanol. Because the credit value is directly proportional to the verified CI reduction, producers must carefully calculate how many RECs to purchase to offset electricity emissions. Overestimating CI reductions by purchasing too few RECs can result in leaving potential credit value on the table, while over-purchasing RECs wastes capital and erodes project economics.
For example, if a 100-million-gallon ethanol facility miscalculates its grid electricity CI by just 5 kgCO2/mmBTU, the resulting tax credit variance could exceed several hundred thousand dollars annually. Precision in modeling power consumption, renewable energy sourcing, and REC retirement is therefore essential to optimize both environmental and financial outcomes.
Additional Watchouts in REC Procurement
Ethanol producers should be cautious of several recurring pitfalls when integrating RECs into 45Z compliance strategies:
- Geographic and temporal matching: RECs must be generated within the same region and year as the facility’s electricity consumption to ensure validity.
- Double counting: RECs cannot be claimed simultaneously by the generator and the fuel producer. Ownership and retirement documentation must be auditable.
- Vintage limitations: Credits from prior years may not qualify for current-year CI calculations under U.S. Internal Revenue Service (IRS) or Department of Energy (DOE) guidance.
- Verification alignment: Only RECs from qualified registries, such as Western Renewable Energy Generation Information System (WREGIS), Midwest Renewable Energy Tracking System (M-RETS), now CleanCounts, or Pennsylvania-New Jersey-Maryland Generation Attribute Tracking System (PJM GATS), and properly retired for use in CI calculations, will withstand third-party verification.
- Market volatility: REC prices fluctuate based on renewable portfolio standards (RPS), regional supply, and policy incentives, creating risk for long-term cost projections.
Governance of REC Markets
REC markets are governed primarily by state-level RPS, regional tracking systems, and federal frameworks that define eligibility and certification. The U.S. Environmental Protection Agency (EPA) and DOE provide additional oversight for emissions accounting standards, while the International Organization for Standardization (ISO) and the ANSI National Accreditation Board (ANAB)-accredited verification bodies ensure data integrity.
