The response to the climate change crisis is slowly gaining momentum and companies worldwide are starting to have an impact. Companies can have a positive impact in a number of ways but green energy procurement is the single greatest opportunity they have to make a difference. However, there are many ways of procuring green energy and each method has its advantages and disadvantages. A common method to do this is through the purchase of renewable energy certificates.
One of the easiest and most straightforward ways for a company to green their energy supply is to purchase Energy Attribute Certificates (EAC’s). EAC’s allow a company to claim zero carbon emissions on their electricity use in Scope 2 reporting, according to the GHG Protocol. These certificates go by various names in different regions of the world such as Guarantees of Origin (GO’s) in Europe and Renewable Energy Certificates (REC’s) in North America.
How do Renewable Energy Certificates Work?
Whilst there are many different types of renewable energy certificates, they all have the same fundamental concept. That is, that one certificate represents the production of 1 MWh of renewable electricity, be it from solar, wind or other forms of clean power.
Renewable energy certificates have been designed to work as a tracking mechanism for any renewable electricity created. Tracking is required once the renewable power has been transmitted to the grid, because it becomes indistinguishable from any other form of electricity. The electrons generated by a solar or wind farm mix with other sources such as coal and gas derived electricity. REC’s solve this issue by unbundling the renewable aspect from the physical power. This allows for bilateral purchasing of renewable electricity outside the scope of a physical power contract.
The illustration above shows how the process works. A business will take power from the grid which will be designated as non-renewable or “Brown Power”, irrespective of the source. If the business wants to use green electricity, they will need to purchase the renewable certificate in addition to the “Brown Power”.
These types of tracking mechanisms are open to exploitation so a high-degree of auditing and compliance is required. Historically, many certificate system’s had issues with double-counting but with strong system oversight, this issue has largely been rectified.
Why is Transparency of Renewable Certificates an Issue?
Find it out here!
