Falling prices, technology advancements, competitive pressures, and ambitious climate action goals have helped drive the rapid growth of renewable energy worldwide, dramatically boosted by the widespread adoption of renewables by organizations in the commercial, industrial, and institutional (C&I) sectors.
C&I buyers have been particularly drawn to the favorable economics of long-term, utility-scale power purchase agreements (PPAs). To date, more than 30 organizations have executed PPAs in the U.S., with others opening markets in Mexico, South America, Asia, the UK, India, and the Nordics.
The flurry of interest around PPAs has led some to dismiss the renewable energy certificate (REC). Long misrepresented as a form of clean energy “mea culpa,” RECs today doggedly continue to battle this reputation, when, in fact, RECs are absolutely critical to renewable energy markets worldwide. It is irrefutable that the market would not be where it is today in the growth of renewables without these important market instruments.
Here are four reasons that RECs should—and do—form the foundation of your renewable energy strategy.
1. RECs underpin the entire global market.
RECs initially came into being in 1999 in California as the means to track and trade renewable energy. As it is impossible to trace renewable electrons once they join the grid, renewables needed a “birth certificate” that would guarantee the creation and distribution of the clean electricity generation. It is this birth certificate—the REC—that conveys the environmental attributes of all clean energy.
As a result, nearly every renewable energy or green power transaction—be it a pure REC purchase, a utility green power program, or a PPA—relies on RECs or other energy attribute certificates (EACs), such as Guarantees of Origin.
Indeed, as renewable energy markets expand globally, a credible REC (or EAC equivalent) trading mechanism and tracking registry are often the first structures to develop. As the foundation of these nascent markets, RECs act as an important indicator for the status of renewable energy development.
2. RECs are a free market instrument that create the demand signal for future development.
Many buyers aren’t aware that RECs are a commodity traded on global markets, just like energy and other commodities. As a result, they are a free market instrument that can experience price and value fluctuations, creating powerful demand signals for regional appetite for expanded renewables.
The Scope 2 Protocol has pushed many C&I buyers to look at new international markets to source renewables in order to meet their market-basis reporting requirements. The availability of RECs (or other EACs) in these regions supports the expansion of the market by providing valuable financial investment in project development and by demonstrating demand to utilities, governments, and other private entities involved in creating renewable energy policy, trading & tracking platforms, and verification guidance.
3. RECs are generally affordable, readily available, and highly credible.
Although their price can vary dramatically depending on supply and demand, RECs are generally within the financial reach of most organizations, and provide a valuable alternative to onsite/distributed generation or offsite PPAs for C&I buyers that are either not ready, or not able, to utilize these other contracting mechanisms.
RECs or their EAC equivalent are now available in more than 30 countries, with markets continuing to develop in new regions every year. Several organizations exist to verify the credibility of these EACs (including Green-e® Energy, RECS International, APX, and others) to ensure that there is no double-counting or double-claiming of the environmental attributes conferred.
4. RECs represent zero carbon electricity—with or without additionality.
Additionality has become sought after by C&I buyers, who are looking to PPAs to help deliver this elusive, material representation of their leadership. However, in the race to secure additionality from PPAs and other projects, some C&I buyers have overlooked or altogether abandoned RECs.
This is unfortunate because, regardless of their source, certified RECs represent carbon-free electricity generation. Additionality can generally only be achieved through new projects, or products backed by verified emission reductions (like GoldPower®) whereas carbon-free electricity claims can be readily made with the application of RECs.
RECs allow buyers to achieve their renewable energy targets immediately. They also form an important bridge mechanism in the journey towards the achievement of a more material renewable energy strategy. For most buyers, RECs will be an evergreen cornerstone of their renewable energy strategy.
To learn more about the value and role of RECs and other global EACs, we invite you to download our new Definitive Guide to Energy Attribute Certificates for Commercial, Industrial, and Institutional Buyers.