Renewable Energy Credit Agreement
There are many ways to generate renewable energy on your property, including biomass, fuel cells, geothermal energy, and wind turbines, but the most common are solar panels known as photovoltaic systems. Some famous examples of this are Apple`s headquarters, which has a 17-megawatt solar system on the roof, and the Tesla Gigafactory, which, when completed, will draw all its electricity from rooftop solar panels, as well as geothermal and wind power. A REC that was sold once cannot be purchased again. All REBs are uniquely numbered and generally contain information such as where they were generated, the type of renewable resource from which they originated, and a production date stamp. The REB exchange is tracked and recorded. To learn more about renewable energy certificates, read our other articles in this series: Compliance buyers are utilities or utilities that are required by government regulations, called renewable portfolio standards (RPS), to get a certain percentage of their electricity generation or revenue from renewable sources. These buyers meet RPS requirements either by purchasing REBs or by generating them in their own renewable energy projects. Once a PPA is signed, it can take another year before construction of the project begins, and about a year before the energy is produced. It`s important to keep this in mind if you want to achieve a sustainability goal by a certain date.
However, because unbundled REBs are so easy to acquire, many companies start here before looking for other options that will have a greater impact on new green energy generation. In addition, companies with aggressive schedules may use unbundled REBs to achieve their objectives until REBs enter into long-term power purchase agreements (more on this later). To meet renewable energy targets and reduce Scope 2 emissions, companies must purchase and collect renewable energy allowances (RECs), sometimes referred to as renewable energy credits. There are a handful of ways a company can purchase REBs, and most companies use more than one method to achieve their sustainability goals. In this guide, we cover the different ways to acquire REBs, as well as some pros and cons to help business managers plan for sustainability. In green electricity or “green pricing” programs, the utility typically charges a premium for each kilowatt-hour you buy, which appears as an item on your utility bill. In a block option (a fixed amount of energy), you get a set amount of kilowatt hours of renewable energy for a fixed monthly fee. With a percentage of the monthly purchase, your business is billed per cent per kilowatt hour and you buy a percentage of your monthly electricity in the form of green electricity – for example, 70% renewable electricity, while the rest can come from conventional or brown electricity. Basically, you can subscribe or unsubscribe to a green electricity program at any time, which is a flexible option. REBs are certified by independent third parties. The most common certification standard in the United States is Green-e®, which is managed by the Center for Resource Solutions. Green-e® certified RECs meet strict environmental and consumer protection standards.
This ensures that the electricity and associated RECs are produced by the declared renewable facility in the specified quantity and are not used by more than one party. If your business is large enough, you may be able to negotiate a long-term contract with your green electric utility under a “green tariff” or “sleeved” PPA. In this agreement, the utility enters into a power purchase agreement with a specific renewable energy project and then provides you with the RECs. Execution times are usually shorter than direct PPAs with project developers; They are often 3 to 7 years old, compared to more than 10 years old. This type of contract allows you to support the development of a new renewable project and obtain RECs without having to sign a power purchase agreement yourself. These types of programs are sometimes available in regulated markets where a direct PPA with a supplier is not an option for a corporate buyer. Most on-site systems continue to sell and transmit electricity to the grid; Electrons don`t flow directly to your outlets and you always have an electricity bill. Once the on-site system is registered, a REC is issued for each megawatt-hour of renewable energy it generates. REBs generated by on-site activities should always be removed if you want to use them for your purposes. In some cases, the system may produce more energy than you consume on this site, in which case you can apply the REBs you receive to other parts of your operation or sell them on the voluntary market. Voluntary buyers of REC are typically environmentally conscious organizations that focus on reducing their greenhouse gas emissions.
These organizations may have many motivations for purchasing REBs. They may have emissions targets that they want to achieve as a business, or they may want to know where their electricity comes from. Examples of REC`s volunteer buyers include Whole Foods and Starbucks. Owners can also be voluntary buyers of RECs, meaning anyone can support renewable energy at the individual level. Compliance buyers are electricity suppliers who are required to obtain a certain percentage of their electricity generation from renewable sources. Some states have regulations called Renewable Portfolio Standards (RPS), which set requirements for the use of renewable energy. These laws mean that a utility must provide REBs as proof that it is getting a certain amount of its electricity from renewable resources. The utility can generate the RECs itself using renewable energy sources, but if they don`t generate enough, they have to buy them. REBs give you certified proof that you are using renewable energy from the grid without having to install solar panels or other renewable energy systems in your home or business. This gives you flexibility, especially if your business is based in multiple locations or doesn`t have the infrastructure to install solar panels. With RECs, your company can reduce its carbon footprint.
The utility acquires the associated REBs and then collects them on your behalf in proportion to the amount of green electricity you purchase. This allows you to claim these RECs in your sustainability reports. To provide this service, utilities charge a premium on energy, which means you could pay a lot more for RECs than through other procurement methods. The purchase of CER also supports the renewable energy market by providing a demand signal to the market, which in turn promotes a higher supply of renewable energy. In this way, REBs not only help companies meet their greenhouse gas emission targets, but they also promote the production of renewable energy. In markets with an RPS, REBs may have a higher price, making PPA/VPPA bundles harder to buy. For PPA purchases that are more financially motivated or have an organizational need for renewable energy in a state with a mandatory RPS, the project can replace expensive project RECs with cheaper national RECs. .