July 1, 2019
By Roger M. Freeman & James F. Boyle
Corporate Renewable Energy has reached the big leagues, literally. This past January, a Super Bowl ad “The Wind Never Felt Better” featured the iconic Budweiser Clydesdales pulling their beer wagon across a pastoral setting and through a spinning wind farm. On television and Twitter, Budweiser proudly announced that their beer is generated with 100% renewable energy from Enel’s 300 MW Thunder Ranch wind farm in Oklahoma. This ad is emblematic of an accelerating trend among global corporations willing to lead the transition to a cleaner more renewable energy system. Each week another global corporation joins the parade and announces the establishment or accomplishment of a renewable energy goal. As of today, 186 global corporations have joined the RE100 and pledge to power their worldwide operations with 100% renewable energy. Here in the USA, more than 60% of Fortune 100 companies have made public renewable energy or emissions reduction goals.[1] These leading corporations understand that demonstrating a commitment to renewable energy and sustainability matters to a growing portion of key stakeholders such as customers, employees, investors, and regulators.[2] Bloomberg New Energy Finance calculated that to meet these corporate commitments it would easily require more than 100 GW of renewable energy capacity. With this 100+ GW requirement comes a defining question that each corporate buyer will face as they develop a strategy for meeting their goals. It’s the 100 GW question, namely:
As Corporate Buyers Make Decisions to Advance Towards More Renewable Energy, Are They Causing New Renewable Energy?
The now 186 global companies making up the RE100 and many others with renewable energy goals are answering this question in real time. The answer should be an emphatic: Yes. Every company claiming an increase in their own renewable energy supply should be able to identify specific new incremental renewable energy capacity they have added or been instrumental in causing to be developed. With utility scale renewable energy now the lowest cost source of electricity in the US even before subsidies, this goal is well within reach.[3] As concerns about the accelerating climate crisis increase,[4] it is imperative for their multi-billion dollar global brands and for society that these companies get it right. Their answers will determine whether corporate buyers continue to play both a practical and an inspirational role in the global move to 100% renewable energy, or whether these dramatic commitments will ultimately be viewed as cynical “greenwashing” (i.e. hollow gestures that don’t lead to actual change or worse, cause confusion and justify further dangerous delays).
The Right Choice is: Bundled RECs Representing New Capacity
In the US, Companies will meet and evidence their commitments by purchasing Renewable Energy Certificates (RECs) through a variety of transaction structures. A REC is the certificate of origin or “birth certificate” of a MWh of renewable energy, evidencing the source and time of generation. Whether generated on your roof or a thousand miles across the nation, RECs are the way renewable energy is tracked through a US electricity system comprised of interconnected regional transmission grids. While all properly qualified and certified RECs are fairly said to represent renewable energy, answering the 100 GW question effectively turns on whether a company can document that the RECs they procure and retire (i.e. commit to not reselling) over years will be generated from new renewable energy capacity. If they do not come from new generating capacity, they will represent renewable energy that is already part of the grid. Companies seeking to meet ambitious renewable energy goals buying cheap so-called “unbundled” RECs (RECs purchased in a separate transaction from the transaction that caused the associated physical energy) cannot credibly claim to be adding new renewable energy to the system or increasing their own supply of renewable energy in any meaningful sense. Consequently, companies using “Unbundled RECs” are creating reputational risks for themselves if they are claiming, on the basis of Unbunled RECs, to be “moving to” or achieving “100% renewable energy.”
Starting nearly a decade ago, a few large companies – like Alphabet, Apple, HP and Mars – started causing new renewable energy capacity by entering long term direct power purchase agreements with Independent Power Producers (IPPs) and utilities. In these transactions the buyers were buying renewable energy from new utility scale renewable energy plants to meet corporate goals and hedge volatile energy costs for large concentrated loads associated with data centers. The Renewable Energy Certificates created by these transactions have for years been called “Bundled RECs,” as the energy and RECs were bundled together and sold in the same transaction. The critically important and defining characteristic of these “Bundled RECs” is that they are contractually integral to a transaction causing new renewable energy capacity to be built and added to the system to displace fossil fueled energy. That, after all, is the whole point. While these direct PPAs are perhaps the most elegant off-site alternative, to this point they have been rarely available or practical due to siting, market and regulatory constraints. To solve these challenges, the Virtual Power Purchase Agreement (VPPA) was developed to enable corporate users to secure the cost and impact benefits of large-scale renewable energy projects while avoiding the inherent transactional complexities of a direct energy purchase. [5]
The Virtual Power Purchase Agreement (VPPA) is described as “virtual” because while the corporate buyer contracts to acquire the RECs and effectively pays for both the bundled RECs and associated physical energy in a single contract, the corporate buyer does not acquire the physical electrical energy created by the new renewable energy project. Instead, the corporate buyer purchases the RECs and ensures that the Seller will receive an agreed VPPA purchase price for both the RECs and the associated physical energy. This is accomplished in the contract through a “contract for differences” pricing mechanism, where the price of the RECs is set as the net difference between the agreed VPPA price and the price the developer realizes when the developer sells the resulting electricity into the local wholesale market. The developer takes responsibility for developing, operating and selling the physical electricity in the local wholesale market and then settles the difference (positive or negative) with the corporate “Off-taker” who contracted for the resulting RECs. By ensuring the seller a contractually established long-term revenue stream from a credit-worthy corporate Off-taker, the VPPA enables the seller to secure financing for the construction of the new renewable energy project. In this way the RECs and energy are bundled together in the same transaction that causes the new renewable energy capacity to be built, just as they are in the direct physical PPA transaction for a new project.
The corporates can use the resulting “Bundled RECs” to mitigate the emissions associated with their electricity consumption throughout their geographically dispersed owned and leased space in both regulated and de-regulated markets. As this transaction is a “Virtual” PPA, it has no effect practically or legally on the physical energy going to the corporate through its existing supply arrangements. Moreover, since a VPPA is legally a simple Contract to Purchase with a Contract for Diffferences pricing mechanism, the corporate buyer is not required to handle the logistics and complexities of financing, developing, operating or selling electricity into the wholesale electric market. All risks associated with those items are properly held by the developer.
Since corporate buyers in a VPPA do not take legal title to both the RECs and the physical electricity, it is understandable that some have confused RECs created by VPPAs with Unbundled RECs. However, Unbundled RECs are problematic because the contract they are procured through is separate from the one establishing the price and financing of the new renewable energy. In contrast, with a VPPA the sale of the RECs and physical electricity are inextricably tied together through the contract for differences pricing mechanism. This means that bundled into a single contract there is means to finance the development of new renewable energy capacity and provide the buyer with the resulting RECs. Which is why VPPAs are said to create more credible “Bundled RECs” with an unquestionable claim to represent new renewable energy capacity.
SR Inc Member-clients and others most experienced with utility scale renewable energy PPAs such as the Rocky Mountain Institute’s Business Renewable Center recognize the RECs created through VPPA transactions are Bundled RECs from a new facility, because the buyer is actually paying for both the RECs and the energy through the VPPA price. See BRC’s 2019 Briefing on VPPAs. And although VPPAs are innovative in that they enable the developer and Corporate Off-taker to benefit from the developer selling the resulting energy into the local market, each REC produced by the new renewable energy project is bought and paid for by (i.e. bundled into) the Corporate Buyer with the physical energy in the same contract that finances the new renewable energy capacity. Consequently, VPPA RECs produced by the same contract that created the new renewable energy are Bundled in the most meaningful sense of the word. These Bundled RECs from a VPPA necessarily represent new renewable energy capacity and are, therefore, a powerfully effective answer to the 100 GW question. Conversely, “Unbundled RECs” which are acquired through contracts that are “unbundled” (i.e. entirely separate from the contracts that finance the renewable energy capacity) have no credible claim to causing new renewable energy. And are, therefore, a much less desirable answer to the 100 GW question. Furthermore, “Unbundled RECs” carry reputational risks if they are represented by the corporations buying them as representing renewable energy the company “caused” or “moved to” which is how they are regularly represented.
VPPA 2.0 & A New Generation of Buyers
While the VPPA was originally developed to virtually replicate the benefits of large scale renewable PPA transactions while limiting the transactional costs and challenges, it has more recently evolved to create a compelling option for the vast majority of companies setting ambitious renewable energy or even Net Zero Energy emission goals. Companies like SR Inc Member-clients Akamai Technologies, American Express, Bloomberg, Intuit, Nasdaq and TripAdvisor are quite different than the giant energy users that led the first round of VPPA transactions from 2012 to 2017. They face several practical challenges limiting their ability to procure utility scale renewable energy. First, many have a wide geographic footprint and occupy some combination of owned and leased space in several markets with disparate regulatory regimes. Second, they often don’t have sufficient energy demand, even on a national basis, to support the procurement of the 50+ MW often necessary to “cause” a new renewable facility to be built. Third, they lack large internal energy teams experienced in investing in long-term, complex, energy contracts. Fortunately, over the last several years the VPPA has been further developed and evolved to enable this second generation of more typical corporate buyers to help cause new renewable energy and acquire the resulting New Capacity Renewable Energy Certificates.[6]
Corporates setting a course to 100% renewables or net zero emissions must consider a host of options for buying renewable energy including the renewable products they are buying such as: Bundled RECs vs. Unbundled RECs, new capacity vs. existing capacity, virtual PPAs, sleeved PPAs, green tariffs and other innovative transaction structures, rates and tariffs, direct purchase vs. direct access, wholesale electricity trading, community solar, on-site, off-site, replacement RECs, etc. Corporates need to be deliberate about both the development of strategy[7] and then messaging of that strategy to ensure they are communicating accurately about the good they are doing when they cause or help cause new renewable energy capacity.[8]
A Deeper Dive Into Corporate Renewable Energy & RECs
When a corporation claims to be using renewable energy, many assume that the actual electrons powering the corporate facilities are generated from renewable sources, like solar, wind, hydro or geothermal. In reality, most corporations will get 75% or more of their energy from the regional electric transmission system where they are located (the Grid),[9] where it is not possible to accurately track the physical electrons as they make their way from generator to end user.[10] Each regional Grid is a power pool, where all the electricity coming in is mixed together and then flows down the path of least resistance to where it is most needed. While the system operators can identify the source of energy coming onto a Grid, once it is mixed into the power pool, they cannot accurately track where it goes, especially as distance increases. To solve this tracking problem for renewable energy in particular, policy makers developed the concept of the Renewable Energy Certificates (REC) in connection with state mandated Renewable Portfolio Standards (RPS) to embody the “renewability” attributes and track the origin of renewable electricity. [11] This allowed the renewability attributes, including emission displacement, to be separated or “unbundled” from the actual physical energy. Unbundled RECs have worked well in state level regulated markets, where RECs are clearly defined pursuant to state law and purchased by utilities and other regulated entities to comply with the state RPS. In contrast, the corporate voluntary REC market is part of a far broader international market for voluntary Environmental Attribute Certificates (EAC)[12]. It is a market shaped by the World Resource Institutes (WRI)/World Business Council for Sustainable Development (WBCSD), Greenhouse Gas Protocol standard and the third-party verifiers such as “Green-E.” These corporate standard setting agencies have concluded that the voluntary market for RECs for carbon emission reduction is appropriately national in scope. In the corporate voluntary market, where the definitions of what qualifies as a REC are more flexible, this unbundling of “renewability” from electricity has caused issues of accountability and impact. [13]
Buying Unbundled RECs Does Not Cause New Renewable Energy
For the first decade of the 21st Century, corporate buyers largely met voluntary renewable energy goals through buying Unbundled RECs on the voluntary market from existing wind, biomass and hydro projects. These RECs were “Unbundled” from the electricity generated by the project and sold through separate contracts unrelated to the sale of the physical energy that supported the financing of the project construction. While Unbundled RECs fairly represent the attributes of a MWh of generation from a renewable source, these Unbundled RECs often come from existing projects representing renewable energy that is already part of the energy system. Buying Unbundled RECs does not mean adding renewable energy to the Grid. Furthermore, there has been such a surplus of Unbundled RECs that the prices have stayed low and are inconsequential in driving new capacity build.[14] Simply put, buying Unbundled RECs does not credibly support a claim of increasing use of renewable energy. In the first decade of this Century there was clear symbolic value in purchasing Unbundled RECs to support renewable energy goals. Those days are gone with the wind.
When a corporation buys Unbundled RECs and claims to be “renewably powered,” it typically continues using the physical energy from its regional Grid, which is as clean, or dirty, as all the sources going into the regional Grid power pool. While it is very difficult to determine exactly which generating sources the Unbundled RECs would have displaced, it can fairly be thought of as displacing an average MWh from the same grid where the renewable energy is located.[15] An Unbundled REC from an existing facility represents renewable energy that is already on the system and already incorporated into the fuel mix and emission characteristics of the Grid. When a company buys an Unbundled REC from an existing facility, they are not making the Grid any cleaner than it was the day before or after. They are taking credit for the clean energy that is already on the Grid. This is in every way different than putting solar on your roof and using that energy to replace or displace energy you would have used from the Grid. Companies that continue to buy their electricity from the Grid and then purchase Unbundled RECs from a long ago developed renewable energy plant thus cannot credibly claim to be moving to “renewable energy” or achieving “100% renewable energy.”
Unbundled RECS Can Carry Reputational Risk
As reported in Greenpeace’s Clicking Clean: Who Is Winning the Race to Build A Green Internet?: “Most IT companies have already shifted away from pursuing Unbundled REC products as a central strategy due to the lack of impact in displacing fossil fuel generated electricity from the grid and the lack of any economic benefit in the form of a hedge against rising electricity prices to the buyer.”[16] The Report continues with an example: “Microsoft, who had previously relied heavily on Unbundled RECs as a means of achieving its “carbon neutral” claim, has been gradually shifting to higher impact purchasing strategies such as PPAs, where the electricity and the RECs are sold together, providing sufficient guaranteed revenue to drive new renewable energy deployment.” (For more detail on the value of Bundled vs. Unbundled RECs, see our blog post on the subject here).
Many leading corporations in America have concluded that buying “Unbundled” RECs is not a credible path to 100% renewable energy or net zero emissions. In the past 5 years, a diverse and rapidly growing group of corporate buyers including the likes of InBev Anheuser Busch, AT&T, GM, Facebook, Cisco, Intuit, and 75+ others have purchased more than 15 Gigawatts of new renewable energy capacity and supply.[17] But these companies are the vanguard and many others remain who are meeting their renewable energy commitments solely through the purchase of “Unbundled” RECs from existing renewable energy facilities. Most all SR Inc Renewable Energy Procurement Services (REPS) corporate clients have concluded that buying Unbundled RECs without more creates exposure to claims of greenwashing and brand harm. It also is not an effective means to de-carbonize our energy system. Unbundled RECs may have a continuing role as a transitional step when other more salient means are unavailable. But without a commitment to continuous improvement, Unbundled RECS are ineffective or even detrimental to the overall goal of reducing fossil fuel emissions. Voluntary REC standards and certifications allow for existing projects to sell their RECs to allow others to claim the “renewability” benefits, including emission reductions. The problem is that Unbundled RECs from existing projects are already factored into the emission profile of the electric system. And the ease and limited expense with which they can be bought can cut into the motivation to do the work necessary to help cause new renewable energy to be created through direct or Virtual PPAs.
This is not to say that Unbundled RECs no longer have a place as part of a developing and comprehensive renewable energy strategy. As the market continues to evolve, there will be instances where buying Unbundled RECs is the only way to meet renewable energy or net zero emission goals. An overarching point is that the path to 100% renewable energy involves a process and a journey that is dynamic and evolving in real time.
New Capacity Bundled RECS Are Better
In stark contrast to Unbundled RECs, Bundled RECs representing new capacity are a credible and impactful means to increasing renewable energy. The defining characteristic of a Bundled REC is the intrinsic and inextricable contractual tie together with the physical energy in a power purchase agreement (physical or virtual) that enables the Developer/Seller to secure financing and construction of a new renewable energy project. Defined this way, a Bundled REC can truly be said to have caused new incremental renewable energy capacity to be built. The Bundled REC is a relatively new creation that springs from innovations in energy transactions that enabled corporate buyers to invest and support additions of new renewable energy capacity without actually investing in the ownership of a large scale facility and without taking responsibility for wheeling wholesale power from the point of generation to the point of consumption. The genius of these transactional innovations is that they allocate risk and responsibility to the parties that are most expert and can manage those risks most efficiently. Most corporate buyers don’t have the demand or wherewithal to set up a licensed wholesale market participant subsidiary. While these transaction structures have continued to evolve over the course of the past decade, the most important development for our clients has been the rise of the VPPA.
Significantly, corporates are now organizing themselves into Buyer Organized Aggregated VPPAs that enable more regular sized corporations and other high-credit enterprises to enter into VPPAs that earlier were only available to the world’s largest and most sophisticated energy users like Apple, Amazon and Alphabet. Through Buyer Organized Aggregated VPPAs – what SR Inc has called VPPA 2.0 – the cost advantage and transaction sophistication of large scale renewable energy is now available to every high credit enterprise. See SR Inc’s blog on Renewable Energy for Every Enterprise.
Location, Location, Location
Another important consideration is the location of the new Renewable Energy project. The original RPS laws for state compliance RECs often included a requirement that the source of the renewable energy be located within the state or at least connected to the same regional Grid. A more recent example is the New York City emission reduction regulations that allow RECs, but require physical delivery into the New York City load zone.[18] The location of a new renewable energy project can be an important distinction to draw in cases where (a) the company must comply with a law or makes a policy decision to impact the emissions of their local grid, or (b) the company has concentrated demand in a specific region and seeks a precise price hedge. At an intuitive level, closer is better. Renewable Energy purchased from a project located on the same distribution line as a business facility can reasonably be assumed to be actually supplying the physical energy to that facility. And a renewable energy generator operating on the same regional Grid can be more closely associated with the displacement of fossil fueled generation serving that Grid. So, while geographic location can be an important factor to consider when making a renewable energy procurement decision, there are other factors that are equally if not more important.
It’s Called Global Warming for a Reason
First, global warming is a global phenomenon without geographic constraints. Carbon and other greenhouse gas emissions are diffused throughout the Earth’s atmosphere, land and oceans. Carbon emission reductions in China or Africa have the same universal impact as those in New York or Texas. It is clear that to get to 100% renewable energy, we will need to bring renewable energy to all points of consumption. It makes sense to begin a real transition to renewable energy by generating electricity where it will have the highest impact – i.e. most cost effective and offset the dirtiest energy. The system of Renewable Energy Certificates for voluntary corporate compliance has been created as a system of nationally applicable RECs to effect this needed process. Recognizing that energy policy is set – or can be set – at a national level and the effective transition to low carbon economy requires national level laws, regulations and initiatives to facilitate it.
Comparing the economics and environmental impacts of solar and wind power installed in Texas vs. New York and New England brings home the power of national as opposed to local markets to effect change. $1 million invested in a large scale solar project in Texas will produce 2.5 times the solar energy as $1 million invested in an on-site commercial project in New England.[19] In addition, even at utility scale, a MWh of solar power or wind power in Texas will be displacing more fossil fuel emissions than a MWh of solar in New York or New England because the Texas Grid is dirtier because it is more reliant on coal. For example, a large-scale wind project in Texas can deliver energy to the market at around $18/ MWh. A large-scale wind farm in New York will cost more like $36/ MWh. As far as emissions go, a MW of wind in ERCOT will displace 1,970 Metric Tons of Carbon Emissions. A comparable MW of wind in New York will displace 1,130 Metric Tons of Carbon Emissions.[20] This means that today, $1 million dollars invested in wind in Texas will displace roughly 3.5 times the carbon emissions of a similar investment in New York.
Second, a large majority of corporations occupy mostly leased space and have their related energy demands spread over a large geographic, multiple grid, area. As they consider the impact of the Scope 3 emissions of their suppliers and customers, the geographic range extends further. It isn’t practical or even feasible to serve load at every location with new renewable energy capacity and supply. New York City, for example, is a transmission constrained area, and there are substantial physical and financial barriers to delivering energy into the City.
For most companies with these characteristics, which includes the majority of Sustainability Roundtable Inc. Member-clients, a Virtual Power Purchase Agreement for the output of a project in a market that is economically and environmentally responsible, regularly presents the best risk adjusted opportunity to advance towards their environmental goals. It is necessary, however, to go through a diligent process to identify the best risk adjusted opportunity a VPPA for a well sited utility scale renewable energy facility can present a remarkably compelling value proposition for the corporation and for society, precisely because large scale renewable energy has become the lowest cost source of energy in the country and in the world when optimally sited.
Conclusion: Seizing the 100 GW Opportunity
This is all happening right now. Large corporations are investing billions of dollars in new renewable energy projects throughout the country. The Rocky Mountain institute reported recently that in 2018, corporate renewable energy procurement in large scale projects led to the addition of nearly 6.5 GW of new renewable energy capacity. This is nearly 25% of all new energy generation capacity added last year in the US. While these numbers demonstrate impressive and accelerating growth of US corporate renewable energy procurement, there is a much bigger opportunity lying ahead. Currently, US corporate renewable energy procurement accounts for just 10% of overall commercial and industrial energy load. This means to complete the transition to 100% renewable energy, 90% of corporate load must be transitioned. Corporate commercial and industrial market accounts for 44% of all carbon emissions in the US. In addition, the C&I sector now accounts for 50% of electricity demand. There are thousands of companies that will be looking to meet goals in the years and decades ahead. It is critically important that we meet these goals in an environmentally responsible and meaningful way and that means with new renewable energy capacity and supply.
The answer to the 100 GW Question is that Corporate commitments to 100% renewable energy should be grounded in causing new renewable energy. If done responsibly, these commitments can add more than 100 GW of new renewable energy capacity. For the most sophisticated buyers with large energy loads, buying bundled energy directly from a utility scale project may be a viable solution. This, however, is not feasible for the vast majority of corporate buyers. Instead, well advised corporate buyers are purchasing Bundled RECs, through VPPAs structured as a Contract for Differences, where the Bundled RECs are “Bundled” into the same contract that finances the development of the new renewable energy capacity. Bundled RECs can thus be distinguished from the less impactful “Unbundled RECs,” where the RECs fairly represent renewable energy, but they have no credible claim to representing new renewable energy the buyer has caused. So, although purchasing Unbundled RECs can support a claim of renewable energy use [21], Simply put, if your decision is not causing new renewable energy capacity your decision is not actually making a meaningful difference. As our Earth moves from “climate change” toward “climate crisis/breakdown,” we are beyond the point where symbolic gestures are sufficient. For these sophisticated corporates, Unbundled RECs still have a role to play but are a last resort when better options are not available.
The Corporate Energy Buyers at Anheuser-Busch clearly reached the right answer to the 100 GW question as they helped cause the 300 MW of the Thunderhead Wind Farm in Oklahoma. Many other leading corporations have reached a similar conclusion. These savvy leaders understand that they will do well to align with the interest of their customers, employees, investors and the broader community who are all watching to see how corporate renewable energy commitments are met. Laws and technologies are not the only factors shaping markets. The power of culture, which includes often unacknowledged assumptions and expectations also change and shape markets. What influential corporate buyers assume and demand and what their customers assume and demand all is part of what shapes the market for corporate renewable energy procurement. Which is a particularly, important, and visible part of a larger mosaic of actors and actions necessary to transition our society to ultimately drawdown carbon from our atmosphere. See Drawdown.org. Incredibly it is only too accurate to say everything may depend on corporate decision makers getting their procurement of renewable energy right, but they are not alone. Leading market influencers such as the Renewable Energy Buyers Alliance, the RE100, Bloomberg New Energy Finance and standard setting agencies like the World Resources Institute, World Business Council for Sustainable Business and others can all play vitally important roles framing the issues, setting the standards and facilitating a 100 GW answer to the 100 GW question.
References:
[1] Ceres. (2017). Fortune 500 Companies Accelerating Renewable Energy, Energy Efficiency. Retrieved from: https://www.ceres.org/news-center/press-releases/report-fortune-500-companies-accelerating-renewable-energy-energy
[2] Blackrock. (2019). Larry Fink’s 2019 Letter to CEOs: Purpose & Profit [BlackRock CEO letter]. Retrieved from: https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
[3] Lazard. (2018). Levelized Cost of Energy and Levelized Cost of Storage 2018. Retrieved from: https://www.lazard.com/perspective/levelized-cost-of-energy-and-levelized-cost-of-storage-2018/
[4] The Guardian. (2019). Guardian Spurs Media Outlets to Consider Stronger Climate Language. Retrieved from: https://www.theguardian.com/environment/2019/may/24/media-outlets-guardian-reconsider-language-climate
[5] These direct or “physical” PPAs were largely entered as wholesale transactions or through so-called “sleeved PPAs” in regulated markets where a regulated utility steps into the middle of the transaction. Direct PPAs require transmission service to deliver energy from the project to the Buyer’s facility. Some of these large corporate buyers formed licensed energy trading subsidiaries to participate in the transmission markets.
[6] We are using the term New Capacity RECs to distinguish them from RECs that are not generated from new renewable energy caused by the corporate purchaser.
[7] Sustainability Roundtable Inc. (2014). Member-Briefing: Advanced Off-site Renewable Energy. (Confidential for SBER Member-clients only)
[8] Sustainability Roundtable Inc. (2016). Member-Briefing: Impact of Renewable Energy Purchases on Energy & Greenhouse Gas Goal-setting & Reporting. (Confidential for SBER Member-clients only)
[9] The North American energy system is comprised of regional transmission systems, referred to as “the Grid.” Retrieved from: https://www.enbridge.com/energy-matters/energy-school/grid-101
[10] The only way to ensure you are actually using renewable energy is to generate the energy on-site, on the customer side of the utility meter, or if your facility is located close to a larger renewable energy system on the same distribution circuit.
[11] Technically speaking, a renewable energy certificate is a tradeable commodity that represents one megawatt hour of renewable energy generation attributes (distinct from the physical electricity). RECs are best thought of as the “birth certificate” of new renewable energy. RECs provide utilities more flexibility in meeting RPS requirements that a certain % of their energy comes from a renewable source. RECs used to meet state RPS requirements are referred to as “Compliance RECs.” Compliance RECs typically have well defined requirements – such as: new project; located in the same control area; defined technologies, etc. Most states with RPS now have RECs as part of their RPS programs. In contrast, some states, like California required utilities to meet their RPS obligations buying all the output from renewable energy projects and incorporating that load into their systems. In this way, the energy and all attributes including renewability were bundled together into the same PPA. For a good discussion of RECs, see SR Inc’s blog on: “Not All RECS Are Created Equal”
[12] EACs are, in regard to renewable energy, the international descriptor of RECs.
[13] WRI/WBCSD Greenhouse Gas Protocol allowing RECs from 14 year old plants for purpose of mitigating Scope 2 emissions.
[14] While it can be argued that if everyone purchased Unbundled RECs, the surplus would be taken up and prices would rise and facilitate new build, the reality is buying Unbundled RECs for the past two decades is akin to pulling on a rope with lots of slack. The point is not to pull the rope, the point is to ring the bell.
[15] In most cases, the renewable energy will be displacing the last generating source dispatched to serve the demand and that is typically the least efficient (and most expensive) fossil fuel source. However, there are times when there is a surplus of wind or solar and the REC should be thought of as displacing another renewable source. While this time of use tracking may become a reality, for the time being the displacement of the average MWh is a reasonable basis for determining emission reduction impacts of a REC.
[16] Greenpeace. (2017). Clicking Green: Who is Winning the Race to Build a Green Internet? Retrieved from: https://www.greenpeace.org/usa/global-warming/click-clean/
[17] Business Renewables Center. (2019). BRC Deal Tracker. Retrieved from: https://businessrenewables.org/corporate-transactions/
[18] The New York City Council. (2019). Commitment to achieve certain reductions in greenhouse gas emissions by 2050 (§ 28-320.6.1). Retrieved from: https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=3761078&GUID=B938F26C-E9B9-4B9F-B981-1BB2BB52A486&Options=ID%7cText%7c&Search=1253
[19] Large scale solar is roughly 50% the cost of commercial scale on-site solar and TX insolation is 25% more output than NE.
[20] SR Inc Renewable Energy Procurement Services 2018 Aggregated Renewable Energy Procurement RFP and EPA 2016 eGrid Database
[21] The World Resource Council (WRI)/World Business Council for Sustainable Development (WBCSD), Green House Gas (GHG) protocol – which governs what third party verifiers will consider legitimate for the purposes of the Corporate Sustainability Reporting in accord with the Global Reporting Initiative and CDP – allows companies to use Unbundled RECs to mitigate “Scope 2” emissions.
Jim Boyle is CEO & Founder of Sustainability Roundtable, Inc. For more than ten years, Jim has led full-time teams of diverse experts to assist nearly 100 Fortune 1000 companies on a multi-year basis in their move to more sustainable high-performance. Specifically, SR Inc has helped world-leading corporations, real estate owners and federal agencies to Set Goals, Drive Progress & Report Results in greater Corporate Sustainability. Mr. Boyle led in the creation of SR Inc’s Renewable Energy Procurement Services (REPS), which advises and represent Fortune 1000 Member-clients and fast growth technology companies across the U.S. and internationally in the development of Renewable Energy Strategies and the procurement of both on and off-site advanced energy solutions. Before founding SR Inc, Mr. Boyle co-led Trammell Crow Company Corporate Advisory Services in San Francisco and returned to his native Boston and Trammell Crow Company’s market leading team in Greater Boston where he received the Commercial Brokers Association’s Platinum Award for the highest level of commercial real estate transactions. Jim is a graduate of Middlebury College where he co-captained the football team and Boston College Law School, who early in his career served as a federal law clerk, an aide to John F. Kerry in the U. S. Senate and on Vice President Al Gore’s campaign for President.
Roger Freeman is the Managing Director of Sustainability Roundtable Inc.’s Renewable Energy Procurement Service (REPS), a dedicated consulting service providing Buy-side Only Advisory for on-site and off-site corporate renewable energy procurement. Mr. Freeman has led at the intersection of alternative energy development, procurement, law and regulation for more than twenty years. He has personally led in developing hundreds of megawatts of wind and solar throughout the United States and has served as the lawyer, financier and advisor to institutional and Fortune 500 clients on renewable energy globally. As Managing Director of Energy Ventures for Citizens Energy, he managed renewable energy and energy efficiency businesses. As the founder of a solar development firm he personally led in developed more than a dozen solar energy projects. He is a graduate of Oberlin College and the University of Virginia School of Law. Mr. Freeman served on the Board of Advisors of Distributed Energy Magazine and is an elected member of the Power & Light Board in Hingham, MA.
