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Renewable energy certificates, also referred to as renewable energy credits (RECs), are used to track the energy produced by renewable energy sources like solar and wind power plants. Electricity and REC purchases are not the same thing. Instead, RECs stand for renewable electricity’s clean energy characteristics.

From wind and solar energy to natural gas and nuclear power, electricity is supplied to the grid from a variety of sources. This makes it impossible to determine the precise energy source from which your electricity is generated. You can buy RECs in addition to your electricity if you want to address this issue. The “renewable” elements of renewable energy are transferred to the owner through RECs, which are certifications. This implies that renewable energy that is produced on your behalf is what renewable energy credits and electricity from the grid represent.

The purpose of RECs is to promote the deployment of renewable energy sources, although this objective may occasionally be compromised by the way RECs are handled in a procedure known as “unbundling.” For instance, Georgia Power, which recently increased the size of its 9 GW renewable energy goals for 2035, only buys the zero-power generation from some renewable generating sites that have agreements to sell it to them. In each power purchase agreement, it is stated who owns the corresponding renewable energy credits (RECs). The RECs’ right to use shall remain with the owner of the RECs.

This kind of REC purchase, according to research by S&P Global, might be problematic since it gives the impression that the credit buyer has contributed to the actual development of renewable energy sources, even though this is not the case. Numerous businesses brag about using renewable energy sources and reducing their carbon footprint, but in reality, they haven’t changed anything.

According to Matthew Brander, who is a senior lecturer of carbon accounting at the University of Edinburgh, the acquisition of unbundled credits “may make it look as if a company’s electrical emissions have become zero when they have not.”

According to S&P, the voluntary market is seeing a rise in the selling of unbundled RECs, which are currently the most popular way to buy green power. Corporations make up a significant portion of the market and are often proud of their progress toward “net-zero” objectives, but they may not be making as big of an impact on the energy shift as they might appear.

The use of RECs also enables businesses to continue emitting greenhouse gases while claiming to have decreased their scope 2 emissions by merely making a check, according to S&P.

Some corporates are shocked to learn about non-additionality, according to Brander, “but it’s a mixed response when you tell firms about this. Others choose to disregard it and continue purchasing unbundled RECs so long as they are permitted to do so by current standards and their peers.” When possible, we advise members to source more directly via on-site generation or long-term contracts, according to RE100’s report on RECs.

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