Feature Articles

The Federal Energy Regulatory Commission should reconsider its disclaimer of jurisdiction over RECs because it is now clear that they materially affect jurisdictional rates, the monitor said in a quarterly report last month.

The monitor has recommended since 2010 that a single REC product be created on a common set of definitions of renewable technologies, with a single clearing price, trued up to real time delivery.

Analysis by researchers and brokers found disparities in REC markets, driven by the continual evolution of state renewable energy standards in 10 of 14 PJM states.
RECs are the primary currency to meet those standards. Load-serving entities and retail energy providers buy or generate RECs to prove they source a specific percentage of supply from renewables.

One REC represents the environmental attributes of 1 MWh of renewable electricity.

Rising demand from state standards has pushed up prices in recent years.

REC markets are not formally part of PJM. The monitor said that a single, transparent REC market operated by PJM that would meet the standards and requirements of all states.
State renewables programs are not coordinated, are inconsistent with PJM market design and have widely differing implied prices of carbon, the monitor said.

In the absence of a PJM carbon market, a single REC market would contribute to the cost-effective procurement of renewable resources.

RECs provide out-of-market payments to qualifying renewable resources, primarily wind and solar, which may be uneconomic otherwise, and incentivize negative energy offers and to operate whenever possible.

“These subsidies affect the offer behavior and the operational behavior of these resources in PJM markets and in some cases the existence of these resources, and thus the market prices and the mix of clearing resources,” the monitor’s report said.

Wind and solar comprised 7.1% of total generation in PJM in the first three months of 2026.

PJM Recs Fail To Keep up With Demand

REC markets are complex, interdependent among states and driven by rising demand as portfolio standards rachet upwards.

A REC price is typically a locational marginal price multiplied by the REC value factor, or capacity factor, for the given market and tier. Tiers refer to categories such as the technology type, project age, or location.

Average annual RPS compliance costs, or the payments by customers in PJM to the sellers of qualifying resources, were $1.5 billion from 2014 to 2023.

The market monitor said that the RPS compliance cost in PJM for 2023, the most recent year for which there is almost complete data, was $2.9 billion.

RECs do not need to be used during the year in which they are generated, so there may be multiple prices for a REC based on the year of creation. Unused RECs can be banked.

Many states allow load serving entities to submit alternative compliance payments in lieu of RECs.

Renewable projects make up 85% of all projects in PJM’s serial queue, the legacy, first-come, first-served process used to evaluate new power generation.

Most states with mandatory portfolio targets include solar-specific requirements, which can comprise state carve-outs, resources anywhere in PJM or resources located outside the PJM footprint.

The Lawrence Livermore National Laboratory, an arm of the U.S. Department of Energy in California, said in a report last year that the highest compliance costs are related to solar carve-outs in states with high solar REC prices.

The output from PJM renewables did not produce enough RECs to meet state requirements in the first three months of 2026, PJM’s market monitor said.

Load serving entities had to buy RECs from non-PJM resources like behind the meter rooftop solar or from outside of the interconnect.

The Livermore lab said that renewable resource needs in the mid-Atlantic states through 2050 will be driven principally by aggressive targets in Virginia and the ComEd service area in Illinois, and will draw down banked RECs.

Price Pressures Already Exist

Demand for RECs is already placing some jurisdictions under scrutiny, like the District of Columbia.

Local electricity suppliers not only have to meet a renewable portfolio standard, but a portion of that energy must come from solar in the district. That proportion rises to 15% by 2041. The city’s mayor, Muriel Bowser, said this month that all ratepayers subsidize residential solar panels, adding $20 to every electricity bill.

“If the [City] Council takes no action to right-size solar RECs and align their cost with the rest of the country, the $20 on every electricity bill will double to $40 by 2029 and then continue growing every year,” she said.

REC prices in the District of Columbia are the highest in the country.

In neighboring Virginia, online brokerage Flett Exchange said last month that a new state law will raise annual solar REC demand for Dominion Energy from roughly 740,000 to 3.4 million over the next 20 years.

A mandatory distributed REC carve-out jumps from 1% to 5% of retail electric from 2026 to 2045 in a change to the Virginia Clean Economy Act.

A distributed REC in the state is one generated by small, in-state systems, primarily solar panels.

“Virginia’s existing fleet of behind-the-meter solar can supply only about 30% of the new legal requirement,” Flett Exchange said. “The market will remain undersupplied until more small solar projects are installed.

“This demand shock will likely cause Virginia solar REC prices to increase over the next five years … there is a path towards a future value of $65-$70 per Virginia solar REC before the 2026 compliance period ends.”

The exchange posted June 19 that current Virgina solar REC offers were $27.

Not all states require public disclosure of REC prices, but over-the-counter markets exists for all liquid instruments.

Maryland solar REC prices would settle at $40 for vintages 2023 to 2026, based on information published June 19 by Flett Exchange.

New Jersey solar RECs are valued at $170 for the vintages 2022 to 2024 and $180 for 2025 and 2026.

For Pennsylvania, solar RECS are valued at $21.25 for 2024 and $22.50 for the two years thereafter.

For 2026, Washington, D.C., solar RECs were listed on June 19 as being offered at $367.50 on Flett Exchange and bid at $375 on Xpansiv, another exchange.