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4 June, 2021

Let’s say you want to use X amount of green electricity. Maybe you’ve committed to a certain proportion in your sustainability strategy, or are just concerned with the environmental impact of traditional energy production. You’re not generating it yourself, so you’re relying on grid-supplied renewable energy.

The tricky thing is that once renewable energy is dumped in the grid, it mixes with non-renewable energy, making it virtually impossible for one to measure which they’re using, and how much. So how can you track green energy use? There are two acronyms central to this process.

Meet the REC. Energy.gov defines a renewable energy certificate (or REC) as “a market-based instrument that represents the property rights to the environmental, social, and other non-power attributes of renewable electricity generation. RECs are issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource.” In plainer words, a renewable supplier gets one REC for every MWh of renewable energy it generates – and it can sell that REC.

So to “consume” green energy, you purchase whatever mix of energy is available on the grid, plus RECs. Then those RECs must be retired from circulation and can no longer be traded or sold. They have unique numbers for tracking purposes. If you see a company claiming they use X% renewable energy, and aren’t generating it themselves, they’re likely buying RECs. Where can you buy one? Many utilities sell them, and there are specialty companies that do too.

How much is a REC you ask? That’s a bit of a complicated answer – prices vary, and like fine wine, that can depend on the REC’s vintage. Also note that there’s a subsector called solar renewable energy certificates or SRECs, which can command a higher price.

Also meet the PPA. A PPA is a contract between two parties: one of them generates energy and the other purchases it. It’s often a long-term agreement and today, most often applies to the supply/purchase of renewable energy by a larger corporation. For example, Amazon entered a PPA in late 2020 with Engie, purchasing energy generated by the company’s wind and solar facilities in the U.S., France and Italy.

What are the benefits? First, PPAs allow you to lock in to energy prices for the duration of the agreement, protecting your business from volatile energy prices. While a good budgeting move, PPAs also allow you to power your operations in a green fashion, helping you boost your ESG profile and progress on sustainability benchmarks. The benefit for the seller is financial – but it also makes renewable energy projects more viable and can drive their proliferation in the future.

If you’re looking to procure renewable power, get in touch! Energy CX helps customers reach their sustainability goals via RECs and PPAs

 

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