How Corporations Buy Their Way to Green
The renewable-energy certificate system has gotten more transparent, but improvements are still needed.
Commercial and industrial users account for nearly one-third of total U.S. greenhouse gas emissions.
This week nine large corporations including Starbucks, Walmart, Procter & Gamble, and Johnson & Johnson said they have joined the RE100, a registry of companies that have pledged to obtain 100 percent of the energy they consume from renewable sources. That brings to 36 the number of large companies that have joined the program, including the first Indian company, IT provider Infosys, and the first Chinese one, Elion Resources Group.
There are multiple definitions of “100 percent renewables,” however, and so far none of them involve a company actually getting all of its power from wind, solar, geothermal, or biofuels plants. And in many cases the companies that have publicly pledged to go fully renewable have not assigned a specific deadline. Falling prices for renewable energy, along with tightening government policies, public and shareholder pressure, and a growing body of evidence that opting for renewables over fossil fuels provides bottom-line benefits are driving this trend. But getting there still involves a complicated set of decisions, compromises, tough conversations with utilities, and financial maneuvering.
Last year the World Resources Institute and the World Wildlife Fund published the Renewable Energy Buyers’ Principles, a sort of shoppers’ guide that helps companies devise strategies to go 100 percent clean. One avenue is to purchase renewable-energy certificates (RECs), or credits, that enable companies to claim 100 percent renewable sources without getting their power directly from solar panels or wind turbines. Such certificates are provided by a number of different companies; the Department of Energy online guide to the certificate systems lists 17 providers in the U.S. Each credit represents one megawatt-hour of renewable energy produced by a plant operator who offers the certificate on the open market via one of the brokers mentioned above.
A company might, for instance, partially power one of its factories with electricity from a nearby solar park, while purchasing green credits to offset the balance of power consumed at the site. Once the certificate is sold and claimed by the purchaser, it is nominally “retired,” although instances of double-booking are not uncommon. In theory, the system should provide additional demand for renewable energy, as opposed to power from fossil-fuel plants; in practice it’s nearly impossible to confirm that a renewable credit actually displaces a megawatt-hour from, say, a coal plant. The sale of these credits benefits producers of renewable energy, essentially adding to their profit from a given unit of energy sold. But the claim that they result in expansions to renewable energy capacity is hard to prove. (Daniel Press, chairman of the environmental studies department at the University of California, Santa Cruz, provides a rundown of the problems with RECs here.)
The system for providing, purchasing, and verifying these certificates remains a hodgepodge of multiple providers and verification systems that vary from state to state and country to country. While some countries have laws that mandate third-party audits of all corporate clean-energy claims, many do not. In the U.S. it’s often grid overseers like regional transmission organizations that track and authenticate the certificates, but the system is hardly foolproof.
“Nobody is going stop you from putting ‘100 percent renewable’ on your project if you’re buying offsets or credits from some faraway place,” says Matt Baker, a program officer in the environment program of the Hewlett Foundation and a former commissioner with the Colorado Public Utilities Commission. “You can buy RECs in the Amazon for hydro projects that may not exist.”
There’s a sharp distinction between markets where utilities and energy users purchase credits in order to meet renewable portfolio standards or other government-mandated rules, and markets where companies purchase them voluntarily. In the latter, prices for green credits have fallen so low that the certificate system is unable to fulfill its real mission, which is to drive the addition of new clean-energy generation capacity to the grid. Health care giant Johnson & Johnson, which is part of the RE100, joined with the World Resources Institute in the early 2000s to help facilitate renewable energy certificate markets, but later decided to limit its use of credits. “In some markets it worked and in some it didn’t,” says Jed Richardson, J&J’s global energy director. “The price of RECs became so low that it wasn’t driving the change that we hoped it would. We moved away from purchasing voluntary, unbundled clean energy credits because we decided we were better off investing in renewable generation on our own properties.”
Companies can also help fund the development of renewable assets that feed into the grids in the regions in which they operate. Facebook, for example, helped develop a wind farm in Iowa to provide wind power to the regional grid. Facebook will claim 138 megawatts worth of renewable-energy certificates to cover the 138 megawatts used at its Altoona, Iowa, data center. Data center operator Equinix is partnering with SunEdison on the construction of the 150-megawatt Mount Signal solar farm in Calexico, California, that will connect into San Diego Gas & Electric’s system. Under a power purchase agreement, Equinix will claim 105 of those megawatts—enough to run the company’s California operations, including its Redwood City headquarters and 11 data centers in the state.
Unfortunately, renewable power will not supply all of the energy demand for factories and large industrial plants anytime soon. Most companies will opt for a mix of green credits and direct purchases of renewable power to get to 100 percent renewables.
“Naturally it will be a combination of both,” says Tomi Rintanen, the sustainability manager at Vaisala, a Finnish manufacturer of measurement and monitoring equipment for weather, environmental conditions, and industrial operations. Vaisala has solar arrays that supply 20 percent of the electricity at its facilities in Finland and northern Colorado, as well as a geothermal system that heats and cools its headquarters in Vantaa, Finland. The company buys RECs from local energy suppliers to cover the rest of its energy use.
The system for verifiable renewable energy certificates is an interim and somewhat messy instrument to facilitate the full use of renewable energy—it’s “the lowest bar,” as Letha Tawney, director of utility innovation at the World Resources Institute, puts it. But for now it’s the best one available.
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