How Can Renewable Energy Certificates Help Companies Meet Sustainability Goals?

August 18, 2021 • Chuck Hurchalla/h6>

Sustainability has become an essential part of business practices within the commercial real estate industry and for the countless industries represented by its wide range of tenants. While there are many ways to demonstrate that your company is committed to sustainability, one of the most common and generally cheapest options is purchasing Renewable Energy Certificates (RECs). This article explores how RECs are created, the options available and why companies might want to buy them.

What Are Renewable Energy Certificates and How Are They Generated?

Electricity can come from clean energy sources, such as wind and solar, or from fossil fuels, such as natural gas and coal. However, once the electricity is delivered to your business, there is no way to quantify how much of it comes from a renewable source. Renewable Energy Certificates (RECs) are a measurement tool for states, utilities and businesses to quantify what percentage of their electricity is generated from clean or “green” resources, like solar and wind.

A REC is created for every 1 megawatt-hour (MWh) of electricity generated and delivered to the grid from a clean energy source. For example, if an organization uses 100 MWh/year and wants to market themselves as purchasing 100 percent clean energy, they will have to purchase 100 RECs to reach their goal.

Purchasing Options

There are many different options when it comes to purchasing RECs. Businesses can purchase RECs from any entity that owns a renewable energy project or has invested in a renewable energy project. This includes utilities, third-party suppliers, third-party brokers or another organization that has invested ownership in a renewable energy project. Organizations that have invested ownership acquire the RECs associated with that project. For example, if a company entered into a solar Virtual Power Purchase Agreement (VPPA), they would receive the Solar Renewable Energy Certificates (SRECs) associated with the project and could sell them to another organization.

Businesses also can specify which state their RECs come from, what the generation source is and the specific renewable energy project it is tied to. For example, if an organization in Philadelphia wants to support local solar energy projects, they can request that their RECs come from a solar project in the greater Philadelphia area.

When it comes to who you should purchase RECs from, the two cheapest options are from a third-party supplier or a third-party broker. Suppliers can bundle RECs in with your supply agreement for a small premium. Third-party brokers have access to renewable projects from all over the United States and therefore can find the most affordable option for your budget. Which state and what resource RECs come from also affects how much an organization pays. For instance, Texas wind and Maine hydropower are two of the lower-cost options due to the overabundance of wind in Texas and hydropower in Maine.

What Are the Benefits of Buying RECs?

First and foremast, purchasing RECs helps businesses reach their environmental goals by reducing the amount of fossil fuel-generated electricity they consume, investing in renewable energy sources that do not emit harmful greenhouse gasses instead.

Purchasing RECs is also considered a lower-cost route toward environmental good, allowing businesses to demonstrate their support for renewable energy projects without having to install their own. Solar projects can cost anywhere from $10,000 to $100,000 to develop and install, plus they can take months to complete. REC purchases can cost a fraction of that, with the added benefit of avoiding construction delays. As an example:

A business that uses 1,500 MWh/year uses 100 percent clean energy by purchasing National Green-E Certified RECs from a Texas wind farm, which cost $0.9/MWh. Instead of paying upwards of $50,000 to install a solar array, this business paid $1,350 (1500 MWh*$0.9/MWh).

In addition to the economic benefits, purchasing RECs allows businesses to market themselves as a sustainable business to potential employees, clients and investors. Sustainability practices are now expected in the workplace and also can lead to higher job satisfaction among employees. A survey conducted by the National Environmental Education Foundation (NEEF) found that 90 percent of salaried workers believe engaging in their business’ sustainability practices enhances their overall job satisfaction.

All in all, the simplicity and lower price tag associated with purchasing RECs make it a compelling option for organizations looking to demonstrate their commitment to sustainability. With the pandemic already accelerating interest in more sustainable business practices, now might be the perfect opportunity for both commercial real estate companies and tenant occupiers to take the leap.

About the Author

Chuck Hurchalla is the President of Evolution Energy Partners. For more information about RECs and how to add them to your current procurement contract, email info@evolutionep.com.