January 25, 2021
As our economic and environmental landscapes change, so must the ways in which we purchase energy and leverage renewable energy sources. To reduce energy costs and mitigate carbon emissions, many businesses are developing sustainability goals. This usually involves weeding through costly investment options and confusing renewable energy solutions. Without the in-house expertise to source the best renewable energy option for your corporate energy strategy, this can be a daunting task.
Historically, Renewable Energy Credits (RECs), also known as Renewable Energy Certificates, have been the go-to solution for many organizations due to their low cost and ease of purchasing. Compared to more capital-intensive or complex renewable energy projects, such as solar installation, RECs have proven to be a simple fix.
If your organization is seeking a renewable energy solution and considering buying RECs, it’s important to note that the price of RECs continue to have upward pressure due to the potential for greater state requirements, increased market demand, and increased ESG requirements across industries. The cost of a Green-e® Certified REC, for example, recently rose from roughly $1 per REC to almost $8 per REC. Just two years ago, the same RECs were selling at closer to $0.50 each.
With recent carbon reduction mandates in place, and the steady escalation of RECs pricing, many organizations are considering alternative clean energy solutions. In this article, we provide an overview of RECs and some renewable energy alternatives which may be more beneficial to your business.
Electricity enters the grid from many different sources including wind and solar power, natural gas and nuclear power. One Renewable Energy Credit represents one megawatt-hour (MWh) of renewable electricity that is generated and delivered to the grid. The renewable electricity in turn reduces grid emissions.
If a solar array produces 10 MWh of electricity, it has 10 Renewable Energy Credits to either keep or sell. If your business buys those 10 RECs, you are buying the “renewable” attribute of 10 MWhs of electricity from the renewable source. This enables you to claim that 10 MWh of your facility’s electricity usage came from a renewable source. The RECs that you purchase are certified proof that your organization is using renewable energy from the grid. This allows your organization to meet renewable energy goals without having solar panels, or another renewable energy system, installed on your property.
Green-e® is the governing body that tracks and retires certified RECs. Purchasing Green-e® RECs has historically been the easiest and one of the most cost-effective ways for an organization to meet renewable energy and sustainability goals. Green-e® certified RECs must come from renewable resources that are less than 15 years old. Most Green-e® RECs are either a Green-e® Any or Green-e® Wind product which come from wind resources in Texas. With increasing demand for corporations to acquire renewable environmental attributes in order to meet carbon reduction mandates, RECs are becoming a scarce resource. Today, the environmental attributes from new wind and solar plants are being bought outright as part of their development. In addition, many REC-generating facilities have been in service for 15 years or more, which is causing a dramatic reduction in the availability of Green-e® RECs. It is for these reasons that REC pricing is escalating, and organizations are seeking renewable energy alternatives to meet carbon reduction goals.
Today’s large organizations have either developed or are in the process of developing Environmental, Social, and Governance (ESG) criteria which often involves the integration of renewable energy sources into their corporate energy strategies. For some, purchasing Green-e® RECs, regardless of the increased cost, may still be the best option. For others, however, considering alternatives to RECs may be the ideal solution for meeting ESG and sustainability goals. These organizations are turning to carbon offsets, purchases from offsite renewable projects and/or onsite renewables as a cost-effective option for making environmental claims.
Carbon Offset Programs
Carbon offsets are a product that can be purchased to make environmental claims in addition to, or in place of, purchasing RECs. Carbon offset programs allow companies to invest in local or international carbon offset projects to balance their organization’s carbon footprint. There are a variety of accredited carbon offset projects and initiatives that can help organizations decarbonize their operations. Many companies select carbon offset programs based on the type and quality of the project offered, the longevity and transparency of a program, whether or not the program is third-party verified, or based on a program’s cause such as protection of natural resources, prevention of deforestation, or promoting greater social justice.
Onsite Solar Energy
Investing in a commercial onsite solar installation is another viable alternative for many organizations. Onsite solar is a favorable option for medium to large-sized businesses. Because solar is scalable, businesses can start small and add on to a solar installation as the business and its energy demand grows. Commercial solar panels can be installed on company-owned rooftops, ground-mounted on land, or erected as canopies over property or parking lots.
Offsite Renewable Energy
There are several benefits to utilizing offsite renewable energy sources, including the ownership of the environmental attribute. Offsite renewables, such as wind and solar, can help reduce electricity costs, provide greater budget certainty, mitigate energy market price risk, and help your organization meet its sustainability goals. In some cases, it is more cost-effective and better aligned with an organization’s sustainability goals, to purchase renewable energy along with the environmental attribute directly from a new off-site facility.
Organizations working to lower their carbon footprint have a variety of mitigation options available, including activities to reduce their direct and indirect emissions with traditional energy efficiency and demand response programs. Turning off lights and raising air conditioning temperatures, for example, are simple ways to cut costs and carbon emissions.
Whether you are seeking traditional energy efficiency solutions or integrating renewable energy sources, Gexa Energy can help you find the right energy mix to help you achieve your financial, operational and sustainability goals. As part of the NextEra Energy Inc. family of companies, the largest producer of solar and wind energy in the world, Gexa Energy is uniquely positioned to provide insight and expertise in how organizations can reduce energy costs and carbon emissions as well as sourcing renewable energy solutions. If you’d like to discuss renewable energy options and best practices for integrating renewables into your organization’s energy strategy, contact us to start the conversation.