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Key Purchasing Considerations for Renewable Energy anywhere in the world using RECs

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As the world transitions towards a sustainable and greener future, companies are increasingly turning to renewable energy sources to power their operations. One of the simplest avenues for achieving this commitment is through Renewable Energy Certificates (RECsI-RECs, GOs, TIGRs, LGCs, ZNECs, J-Credits). These certificates represent the environmental attributes of renewable energy generation and provide companies with a means to support clean energy initiatives.

To achieve best practices, align the investment with sustainability goals and remove the risk of any claims of greenwashing, companies need to consider a number of criteria when purchasing.

These criteria include the technology generating the energy, the period (vintage) when it was generated, quantity required, location of generation, alignment with global programs or best practices, and risks associated with the registry (the authority issuing the certificates) or issuing country. The latest advance in RECs now includes timestamping the generation period to match load profiles.

RECs globally go by several different names:

RECs Criteria:

  1. Technology

    The technology employed in renewable energy projects significantly impacts the overall environmental benefits. Whether it’s solar, wind, hydro, or other clean energy sources, understanding the technology behind the generation process helps companies assess the long-term sustainability and effectiveness of the RECs they are purchasing. For example, Under RE100RE100 is the global corporate renewable energy initiative bringing together large businesses committed to 100% renewable electricity. The members must be influential based on their either their brand, global presence, significant energy use or other characteristics that bring attention to their commitment. All companies must commit to purchasing 100% of their electricity from renewable sources by 2050 and purchase that power in the same location they are using it. Interim targets are 60% by 2030 and 90% by 2040. The program is led by the Climate Group in partnership with the CDP. More Hydrogen is not recognized because hydrogen is not an energy resource. Rather, it is an energy carrier that is manufactured and has an underlying energy resource as an input. Hydrogen is therefore only renewable if the energy resource used in its manufacture is renewable, Hence it is critical to be aware of the technical criteria of the framework your business is committed to or adhering to GHGGreenhouse gases trap heat in the atmosphere. They all have different global warming potentials (GWP) over different time frames, the higher the number, the worse the impact. For simplicity of accounting everything is referenced back to carbon dioxide which has a global warming potential of 1. There are over 200 GHGs listed in the IPCC fifth assessment report, a sample are below. Note that in current carbon accounting standards the 100 year GWP is used. Greenhouse gas 20 year GWP100 year GWPCarbon dioxide CO211Methane CH48428Hydrofluorocarbon HFC-134a37101300Chlorofluorocarbon CFC-1169004660Nitrous Oxide N2O264265Sulfur hexafluoride SF617,50023,500 Protocol Corporate Standard is considered an excellent benchmark.

  2. Vintage

    The vintage of RECs is a crucial factor, indicating the year in which the associated renewable energy was generated. Companies should consider aligning the vintage of RECs with their reporting year to ensure accurate representation of their commitment to renewable energy in specific timeframes. For instance, recent years have seen significant improvements in the efficiency of solar panels and wind turbines, leading to increased energy output. As technology advances, procuring recent vintages helps businesses make sure their procurement adheres to the latest regulatory changes and demonstrates commitment. For example, RE100 now only recognizes Starting January 1, 2024, RE100 members will need to secure renewable electricity or GOs specifically from power plants constructed or recommissioned within the last 15 years. However, there’s a provision: an exemption applies to 15% of a company’s overall electricity usage.

  3. Quantity

    Assessing the quantity of RECs needed involves understanding a company’s energy consumption and sustainability goals. Careful calculations of your scopes will help determine the number of RECs required to offset a specific percentage of the company’s energy usage or achieve a certain level of renewable energy consumption. Tailoring to energy consumption patterns helps businesses match the right type of RECs. For example, a manufacturing facility with intensive production processes may have distinct energy needs compared to a technology company with extensive data centre operations running 24/7. In this case, the data centre may benefit from procuring new time-stamped RECs or ‘24/7 RECs’ as defined by RE100 Guidelines to match their constant usage.

  4. Location

    The geographical location of renewable energy projects is significant in determining the impact of RECs. Supporting projects in regions with abundant renewable resources not only enhances the environmental impact but may also contribute to local economic development. Companies should consider aligning their RECs with regions that complement their sustainability objectives. Market boundaries are often defined by the framework you are adhering to or as a rule of thumb it is an advisable practice to procure RECs within the country where the emissions took place.

  5. RE100 Alignment

    For companies committed to 100% renewable energy consumption (RE100), ensuring that purchased RECs align with this goal is paramount. RE100-aligned RECs contribute directly to a company’s renewable energy targets, demonstrating a clear commitment to transitioning away from conventional energy sources. Here RE100 Members have another option to procure green power directly from the supplier supported by retirement of EACs corresponding to it.

  6. Registry Preference

    Selecting RECs from reputable registries adds credibility to a company’s commitment to renewable energy. Registries like the Green-e Energy Certification or the International RECRenewable Energy Certificate Standard ensure that the purchased RECs meet stringent environmental and social standards, providing transparency and accountability in the renewable energy market. Some examples of registries are Evident(I-RECs) , TIGR , Certified energy New Zealand , Clean energy regulatorThe Clean Energy Regulator is the Australia Government body responsible for accelerating carbon abatement for Australia through the administration of the National Greenhouse and Energy Reporting scheme, Renewable Energy Target and the Emissions Reduction Fund. More , M-RETS etc.

  7. Sovereign Risk

    Companies operating internationally should consider the sovereign risk associated with the countries where their chosen renewable energy projects are located. Assessing political stability, regulatory frameworks, and potential risks related to changes in government policies can mitigate potential challenges and uncertainties in the long-term viability of RECs. For example, Under recent changes in RE100 guidelines 8 countries have been excluded from the single-market boundary of Europe supporting the Guarantee of Origins RECs.

  8. Major Operational Changes in the Past Year

    Companies should investigate whether there have been any significant operational changes in the renewable energy projects associated with the RECs over the past year. Changes in ownership, technology upgrades, or expansions can impact the overall effectiveness and reliability of the certificates. For example, Unbundled EACs cannot be used to decarbonize electricity from a non-renewable project. (e.g., a CHP system) under RE100 Framework when the project is owned by the company (therefore, the emissions from it are in scope 1), or when the project is on-site or when there is a direct line to the project (therefore, the electricity is not sourced from the grid).

As companies strive to integrate sustainability into their operations, the careful selection of Renewable Energy Certificates becomes imperative. This strategic approach not only enhances a company’s environmental credentials but also supports the global transition to a cleaner and more sustainable energy future. Although PPAs (Power Purchase Agreements) and VPPAs are feasible alternatives, most organizations prefer EACs due to their inherent flexibility and accessibility when navigating the intricate world of renewable energy procurement.

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What are Renewable Energy Certificates (RECs) and why do companies purchase them?

RECs represent the environmental attributes of renewable energy generation and provide companies with a means to support clean energy initiatives as part of their transition towards a sustainable and greener future.

What key criteria should companies consider when purchasing RECs, according to Northmore Gordon?

Companies should consider the technology generating the energy, the vintage (period when it was generated), the quantity required, the location of generation, alignment with global programs or best practices like RE100, registry preference, sovereign risk associated with the registry or issuing country, and any major operational changes in the past year at the associated project.

What different names do RECs go by around the world?

RECs globally go by several names including International RECs (IRECs), New Zealand Energy Certificates (NZECs) managed by Certified Energy, Australia's Large Generation Certificates (LGCs) and the future Guarantee of Origin (GO), and the Tradable Instrument for Global Renewables (TIGR), a registry run by APX.

Why does the technology used to generate renewable energy matter when purchasing RECs?

The technology employed—whether solar, wind, hydro, or another clean energy source—significantly impacts the overall environmental benefits, and understanding it helps companies assess the long-term sustainability and effectiveness of the RECs they purchase. For example, under RE100, hydrogen is not recognized as a renewable resource because it is an energy carrier rather than an energy resource, so it is critical to know the technical criteria of the framework a business follows.

What is the significance of REC 'vintage' in purchasing decisions?

Vintage indicates the year in which the associated renewable energy was generated, and companies should align REC vintage with their reporting year for accurate representation. Under RE100 guidelines, starting January 1, 2024, members need renewable electricity or GOs from power plants constructed or recommissioned within the last 15 years, with an exemption applying to 15% of a company's overall electricity usage.

How should companies determine the quantity of RECs to purchase?

Companies should assess quantity by understanding their energy consumption and sustainability goals, calculating their scopes to determine how many RECs are needed to offset a specific percentage of energy usage. For example, a data centre with 24/7 operations may benefit from time-stamped RECs or '24/7 RECs' as defined by RE100 Guidelines, unlike a manufacturing facility with different energy needs.

Why does the location of renewable energy generation matter for RECs purchasing?

The geographical location of renewable energy projects affects the environmental impact of RECs, and supporting projects in resource-abundant regions can also contribute to local economic development. Market boundaries are often defined by the relevant framework, and it's generally advisable to procure RECs within the country where the emissions took place.

What is sovereign risk in the context of REC purchasing, and how does it apply?

Sovereign risk refers to the political stability, regulatory frameworks, and potential policy changes in the countries where chosen renewable energy projects are located, which companies operating internationally should assess to mitigate long-term risks. For example, recent RE100 guideline changes excluded 8 countries from the single-market boundary of Europe supporting Guarantee of Origin RECs.

What role do reputable registries play in REC credibility?

Selecting RECs from reputable registries such as Green-e Energy Certification or the International REC Standard adds credibility, ensuring purchased RECs meet stringent environmental and social standards and provide transparency and accountability. Examples of registries include Evident (I-RECs), TIGR, Certified Energy New Zealand, the Clean Energy Regulator, and M-RETS.

Are PPAs and VPPAs alternatives to RECs, and which do most organizations prefer?

Power Purchase Agreements (PPAs) and Virtual PPAs (VPPAs) are feasible alternatives to RECs, but most organizations prefer EACs (Energy Attribute Certificates, i.e., RECs) due to their inherent flexibility and accessibility in navigating renewable energy procurement.

Who wrote this article and when was it published?

The article was written by Sid Bansal and published on March 22, 2024.

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