By Cassandra Sweet September 21, Buying renewable energy is getting easier. Show comments for this story. View the discussion thread. Share this article Twitter Facebook Linkedin. Cassandra Sweet Contributor.
More by This Author. Governments and businesses seek resilience in a changing climate. Salesforce, Microsoft, Apple push Virginia utility to use more renewables, less gas. Puerto Rico sets the stage for microgrids. This approach is known as an on-site power purchase agreement, and removes the burden of financing, operating, and maintaining the system.
Most on-site systems still sell and transmit the power to the grid; the electrons don't flow directly to your outlets, and you still have a utility bill. Once the on-site system is registered, a REC will be issued for every megawatt hour of renewable energy it generates. RECs generated from on-site activities still need to be retired if you'd like to use them toward your goals. In some cases it's possible that the system produces more energy than you use at that location, in which case you could apply the RECs you receive to other parts of your operations, or sell them on the voluntary market.
According to data from the National Renewable Energy Laboratory, PPAs, unbundled RECs, and utility renewable contracts tend to be purchased in large quantities by larger nonresidential electricity customers. In contrast, CCAs, competitive suppliers, and utility green pricing programs primarily serve small electricity buyers such as residential and small commercial customers. The data shows that green power sales are driven by corporations, and thanks to corporate sustainability commitments, sales will continue to grow.
Ultimately, more demand for RECs means more demand for clean megawatt hours, so we commend all corporations for purchasing RECs, no matter where they come from. If you're considering a power purchase agreement as part of your overall REC procurement plans, contact us for a free consultation to discuss your needs. Jessica joined LevelTen from a year tenure at Avangrid Renewables where she acted most recently as director of origination for the Western markets.
Jessica received a B. Advisors Energy Buyers Developers. Log In. A Guide for Corporate Renewable Energy Buyers To meet renewable energy targets and reduce Scope 2 emissions, companies need to acquire - and retire - renewable energy certificates RECs , which are sometimes called renewable energy credits.
Pros: They're inexpensive, fast, and relatively easy to purchase. Cons: The environmental impact is questionable and there's no potential "upside. In addition, RECs are a cost, and will only ever be cost. Unlike power purchase agreements, there is no potential upside, like the opportunity to acquire RECs and earn revenue at the same time, or use the agreement to hedge energy costs. Power Purchase Agreements A power purchase agreement PPA is a contract between an "off-taker" like a corporation and the developer of a renewable energy project.
Pros: High impact when it comes to reducing carbon emissions: PPAs result in new renewable energy projects coming online. In addition, PPAs enable a corporation to achieve renewable energy usage targets and Scope 2 emissions reductions at a large scale and over a long period of time.
Cons: There are financial risks involved, which is why it's critical to have a good advisor or a large internal team of energy experts who can properly analyze each PPA opportunity. PPAs for corporate customers are not available in all areas. Posted by. Continue reading. Subscribe to the Acceleration Blog. Contact Us Privacy policy. Solutions Advisors Energy Buyers Developers. About Leadership Careers Company News.
LevelTen Energy, Inc. The information contained herein is provided for general informational purposes only and does not constitute investment advice regarding the value of or advisability of entering into any particular renewable energy transaction.
Utilities banked a bunch of those RECs to comply with future RPS targets and released the rest of them to the voluntary market. As you'd expect, that flood resulted in rock-bottom prices. And that's how things remain today. First, in almost all regions of the country with the exception of the Northeast, where wind expansion has been choked by transmission constraints and local opposition , there's a massive oversupply of RECs, which has yielded extremely low prices.
Second, as you can see in that box on the bottom right, this has also resulted in ridiculously low prices in the voluntary market. The key thing about the voluntary market is that it is not bound by any region, so it tends to sync up with the lowest prices in any region.
Anyway, RECs are cheap, so cheap they have become all but irrelevant to the financing and investment decisions of the power industry. People who voluntarily buy RECs want to know that they are getting "financial additionality. Additionality is notoriously difficult to establish, but in the present case, RECs are so oversupplied and so cheap that it's pretty easy to conclude they're providing virtually no financial additionality at the moment.
They're just not a big enough revenue source to make the difference on a large power project. Most projects receiving REC revenue now would have been built regardless. Does that mean RECs are worthless?
I don't think so. But everyone should be clear what they're getting. It's unlikely that RECs are currently providing much direct financial additionality, but it can still be argued that they provide indirect additionality. In other words, the availability of this modest second revenue stream may not make the difference on any individual project proposal, but on a total market basis, the additional revenue, combined with the tangible demonstration of a demand for clean electricity, favorably changes economic conditions for renewable energy.
On the other hand, that's a pretty modest effect relative to a lot of green claims. It's incredibly cheap now for a business to be "powered by percent clean electricity," but by the same token, it's probably not doing all that much for renewable energy. There are some ways businesses can more directly help renewable energy, but it can be difficult for consumers to pick those signals out of all the green noise. The door is open to all kinds of greenwashing.
So should you buy RECs? I'll discuss it more in my next post, but the short answer is, sure. They're cheap! Just be aware that under current market conditions, they don't have a very big impact. That's why they call it cheap. If you want a bigger impact, buy more expensive, higher-quality RECs and reward businesses that do the same. The problem with the REC market now is that it's out of balance; supply exceeds demand. Thus RECs are cheap, and thus have little market-moving impact.
The obvious solution is either to constrain supply or boost demand. If you want to buy clean electricity in the US, you need to know what you're getting, so you need to understand RECs. In my next post, I'll review a few different ways that people can support green power these days. Most involve RECs.
Having slogged your way through this background, you will now be better equipped to evaluate those options. Our mission has never been more vital than it is in this moment: to empower through understanding. Financial contributions from our readers are a critical part of supporting our resource-intensive work and help us keep our journalism free for all. Please consider making a contribution to Vox today to help us keep our work free for all.
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RECs, which put the "green" in green electricity, explained. Reddit Pocket Flipboard Email. Shutterstock When people find out I'm an energy journalist, they often ask me how ordinary people can support clean energy. There is no such thing as clean electricity, which makes buying clean electricity tricky RECs are, above all, the answer to a need: the need to buy green electricity.
So there's demand for green electricity. But there's a problem. So you can't buy green electricity, not literally. RECs are the US electricity system's answer to that question. What are RECs? As you can see here, greenness is on the rise. Shutterstock Once you've got a system of RECs established, you make it possible to buy green electricity.
What are RECs used for? Don't freak out, but I'm going to blow your mind a little bit with a spaghetti graph of where RECs come from and where they end up: Bloomberg New Energy Finance You don't have to decode all this. Just a couple of things to note. What are RECs not? Not to scale. EPA Big-picture-wise, the growth of renewable energy does affect fossil fuel use. Do RECs actually lead to more clean energy? Bloomberg New Energy Finance Again, two main things to notice. That's a problem.
Shutterstock So should you buy RECs? How can RECs be improved?
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