Sustainable By Design: Buying Renewable Energy Certificates
By Anne Cosgrove, TFM Managing Editor
Published in the January 2007 issue of Today’s Facility Manager
Renewable energy certificates (RECs) are a product that virtually any organization can purchase to offset the environmental impact of the energy consumption it sources from fossil fuels. Simply put, an REC is exclusive proof that a specified unit of energy was generated from a renewable source.
By purchasing an REC (also called a tradeable energy certificate or green tag), the buyer offsets the emissions released into the environment by its operations. The organization’s activities still produce the same amount of emissions; however, the purchase of RECs increases the renewable energy production elsewhere.
The most common reasons for an organization to become involved in the purchase of RECs include the desire to offset its energy consumption from fossil fuel sources and to support renewable energy markets. While many facility managers look to buying renewable energy from their existing utility or installing equipment to generate the energy on-site, there can be obstacles to either one of these approaches.
Many utilities do not offer the option to purchase renewable energy through their grids. Even if a facility manager is open to switching to a company that does offer the option, oftentimes there is not one available in the region.
Because RECs represent a unit of energy produced, but not necessarily consumed by the purchasing facility, an organization has the freedom to enter into a contract with suppliers all around the country. A facility in Wisconsin, for instance, can offset its fossil fueled energy consumption by purchasing equivalent RECs generated in New Jersey, if so desired.
Aleka Niedermier, business accounts coordinator for the Center for Resource Solutions (CRS) in San Francisco, CA, says, “There are many options with REC purchases. Facility managers can choose where the energy will be sourced and can also specify which type of energy they want to support, whether solar, wind, or biomass for instance. Facilities can also specify a purchase of a mix of energy sources.” Founded in 1997, CRS is a non-profit organization that works with energy suppliers and consumers toward the development of renewable energy programs and policies.
Whatever the motivation, facility managers should begin evaluating RECs by taking into account a few basic issues. “It is important to determine what the organization’s goals are in terms of this procurement,” advises Niedermier. “Is it to offset 100% of their annual electric load? Is it to offset a certain portion, or a specific facility? Also, do they want to support a certain type of renewable energy-wind, for example-with their REC purchase?”
With regard to the REC market, CRS oversees the Green-e program, which is focused on independent certification and verification of RECs. To qualify for Green-e certification, the supplier must show that the energy originates from eligible resources such as the sun, the wind, geothermal, low-impact hydropower, biogas, or biofuels. Certified product providers undergo an annual verification process audit to document that the provider’s renewable certificate transactions are consistent with its marketing claims.
Looking for an REC supplier acknowledged by Green-e or other certification programs is crucial for consumers who want to be sure they get what they pay for. “Facility managers should make sure the RECs they purchase are valid and certified,” says Niedermier.
“When facilities purchase RECs, they should be able to make sure they are buying a valid product. This is extremely important, since an REC is such an intangible commodity.” The price of RECs can vary widely, from as low as 30¢ to $300 per megawatt hour (MWh). The costs depend on many factors, such as the location of the facility producing the RECs and the state of supply and demand, as well as the type of renewable energy related to the REC.
When considering the budget for an REC acquisition, facility managers can survey their options in terms of supplier and type of energy procured to create a satisfactory arrangement. Also, purchasers can offset any percentage of their energy consumption they would like, whether 10% or 100%.
In terms of recordkeeping, Niedermier points out that a facility’s utility bill is not affected at all by the purchase of RECs. The transaction is a separate contract with the renewable energy supplier. The contract does need to be drawn up with the REC supplier, but that is all for the duration of that contract. “The facility manager will not see a change to the utility bill,” says Niedermier, “since it is a separate transaction with a different supplier.”
Looking at the big picture, the purchase of RECs helps to finance renewable energy producers. This revenue, over time, can make these types of energy a viable economic alternative to traditional fossil fuel energy suppliers.
On the flip side, it could be argued that the green energy production facilities that are already built might still continue producing energy at the same rate even if no more RECs were purchased. However, the overall view of proponents is that, as more RECs are in demand, renewable energy will become a more cost effective market.
Buying RECs may not be a desirable strategy for all facilities. The costs may be prohibitive, and the fact that the facility is not directly reducing its pollution emissions may not be the ideal approach for some facility managers. However, the REC market is another option for building professionals to reduce emissions impacts with a focus on the larger goal of fostering a viable renewable energy market.
The Center for Resource Solutions (CRS) can be found online at www.resource-solutions.org. Other sources of information include Evolution Markets, Inc. (www.evomarket.com) and World Resources Institute (www.wri.org).