Action to address climate change is key for companies wishing to remain competitive and relevant (not to mention maintaining a habitable planet!). Since energy is a major component of most companies’ carbon emissions, it’s increasingly a question of when and how you green your energy supply, not if.
Essentially, the renewable energy journey involves moving from a ‘brown’ to ‘green’ energy tariff, and then seeking better shades of green via EACs, RECs, CPPAs… And so on.
Alfa helps our clients navigate the acronym-peppered landscape of clean energy procurement and develop an energy strategy to reduce carbon emissions and progress towards net-zero
Renewable energy comes from a source that is naturally occurring and replenishes naturally without human intervention, including sunlight, wind, rain, tides, waves, and geothermal heat. Solar is the most abundant and fundamental energy, and most renewable energy can be considered ‘solar’ in origin. Wind, for example, is caused by sunlight unevenly heating the surface of the Earth; hydroelectric power uses the water cycle as a source of power (the sun’s rays heating and evaporating water); and biomass requires sunlight for photosynthesis. Although most renewable energy is sustainable energy, some is not; some biomass involves burning trees for electricity. Landfill or sewage gas may be preferable, but still emits CO2.
To meet the EU and UK target of net-zero by 2050, renewable energy needs to double by 2030, then double again by 2050. In the UK, this equates to at least 3GW of wind and 1.4GW of solar needing to be build every year from now until 2050 (we’re currently achieving less than half that). For decades, government subsidies helped establish the renewable energy industry. With several key subsidies having ended, the corporate sector must support the deployment of more wind and solar. Especially when only 2% of the money being spent by governments on recovery from the pandemic is going to clean energy investments. So, the green economy needs your leadership and support. Stakeholders, whether investors, customers, or suppliers, will soon demand it.
Flicking on a light switch might be illuminating in one sense, but as to where those excited light-enabling electrons originated from, you’re in the dark. Was it coal, nuclear, natural gas, renewables? To show you are purchasing ‘green energy’ you need a certificate to prove it. Renewable Energy Certificates (RECs), otherwise known as Energy Attribute Certificates (EACs), are an established tradable instrument to document the origin of renewably produced electricity. In the UK a REC is known as a Renewable Energy Guarantee of Origin (REGO), whereas in Europe it is called a Guarantee of Origin (GO).
A REC verifies that one megawatt-hour of electricity was generated and fed into the grid from an eligible renewable source. By purchasing a REC you are entitled to claim the environmental benefits related to green power generation. RECs sold with their associated energy they are known as ‘bundled RECs’. If the RECs are sold separately to the underlying energy, they are known as ‘unbundled RECs’. Since RECs hold a value, they provide additional income to generators and verification that the business added green electrons to the grid.
From an accounting perspective neither bundled or unbundled are ‘better’, nor a REC from one renewable generation source over another (e.g. landfill gas verses wind). However, the true impact on the grid mix, and therefore what you can communicate around your REC purchase, does vary.