In this series of blog posts, we will help you navigate the ways through which your company can bring new renewable energy online. We will explore how you can use your unique positioning to support new projects. At the end of the series, you will have a good understanding of RECs, PPAs, virtual PPAs, on-site renewables… and which of these solutions is best suited to your company; very often, it lies somewhere between RECs and a PPA.
Renewable Energy Certificates, RECs, allow companies to claim environmental attributes of a project without having to deal with the actual electricity it generates. Unbundled RECs insulate a company from the associated power price risk; the environmental attributes are unbundled and sold separately from the energy generated. In a sense, RECs give the developer a premium for using renewable sources of energy.
However, companies are increasingly questioning whether purchasing commodity RECs is moving the needle. At the time of purchasing RECs, companies often only know the price and the technology type (solar, wind…) but name of—and details on—the project generating the RECs is only disclosed at settlement. REC buyers are often left unsatisfied and with the feeling that their sustainability strategy and renewable energy investment amounted to nothing more than two boxes on an RFP—price and technology type. The fact that a project started in 2004 may generate Green-e RECs for 2018 does not inspire confidence in commodity RECs as an effective vehicle for bringing new projects online. However, in defense of RECs, the ‘party line’ has often been—and rightly so—that RECs encourage future developers to invest in renewables. Even then, we must concede that commodity RECs no longer carry the same weight; between 2006 and 2016, commodity REC prices declined from about 9% to 1% of the total revenue (to the developer) per MWh. Companies want to have a stronger impact; they want to drive renewables now, in the present.
REC buyers are often left unsatisfied and with the feeling that their sustainability strategy and renewable energy investment amounted to nothing more than two boxes on an RFP—price and technology type.
Done right, RECs can encourage new projects and allow existing ones to remain operational. RECs can still have strong causation; strong additionality; or both—your investment can still directly cause the project to happen; but for renewable energy investment, the project would not have happened; or both. It is to this later view of RECs, not commodity RECs, that we at NativeEnergy ascribe. Through our project development team, and rigorous assessment of projects, we are leveraging funding from our clients’ REC purchases to drive new projects and support existing ones for which REC funding is critical to project finances and continued operation.
Many companies want a more significant role in bringing new projects online; with more causation and additionality than commodity RECs seem to offer. Companies want to drive new renewable projects whose environmental benefits they can easily communicate to their customers/stakeholders; ones that also follow recognized standards. However, for a smaller company, navigating the complexities of a 20-year PPA might require resources than are not available within your organization. In addition, for reasons outlined in the previous post, building the project onsite might not be an option either.
For many companies, the solution lies in finding corporate partners with whom to work towards their goal(s). In assessing partners, two things stand out. The partner must have extensive experience in the energy sector, specifically around renewable energy. This track record can be seen through; active years spent in the sector, their partners, and the scale of projects they have previously worked on. Secondly, the partner must share in the risk; they must have ‘skin in the game’, so to speak. The project’s success must be of such importance to them that your incentives are aligned around the project.
For many companies, the solution lies in finding corporate partners with whom to work towards their goal(s).
Since NativeEnergy started about twenty years ago, we have helped our clients bring new capacity online. Combined, our team has over 150 human-years of experience in corporate sustainability and renewable energy. We have partnered with our clients to invest over $30 million in over 80 new projects—unlocking an additional $200 million in investment. To date, the projects have produced over 25 million MWh of renewable energy, reduced GHG emissions by 7 million metric tons of CO2e and delivered over 390 million liters of clean water across three continents. Among the companies that we have worked with are leading brands such as: Herman Miller, Green Mountain Power, Clif Bar, Keurig, General Motors, Estee Lauder… Our track-record of working with companies to bring new projects onto the grid is unmatched; from a wind farm helping power a town recovering from the 2007 EF5 Greensburg tornado, to Indiana school wind projects, to farmer-owned distributed wind turbines in Minnesota, to a municipal biogas energy generator in Vermont, we continue working with clients to add new capacity. Our HelpBuildTM model—by providing upfront project funding—supports projects which would have otherwise not been build. NativeEnergy originates, develops and shares investment in the projects. We have extensive experience building projects as well as assessing and managing risk; we manage each project for over a decade. Please visit the business section of our website for more information on our renewable energy solutions.
Companies around the world are setting ambitious science-based sustainability goals. This corporate movement has led companies to look more closely at how they source electricity. Spurred on by the ever-improving economics, the corporate world is increasingly embracing renewable energy. While it might be tempting to watch this transformation from the sidelines, companies need to take an even more active role in promoting renewable energy. The old maxim that ‘a rising tide lifts all boats’ might need revision here because in this case, companies are the tide. Over the last few years, companies have been responsible for a vast share of new renewable energy projects. Each company oght to take responsibility for how its energy is generated. For some companies, this commitment might translate into building on-site projects; for others it might be RECs or a PPA. However, for majority of the companies, the solution is most likely somewhere in-between RECs and PPAs. NativeEnergy can work with you to find your solution.