Rethinking Renewable Energy Certificate Strategies

In the pursuit of advancing net-zero targets, many organizations have embraced the concept of buying green electrons or Renewable Energy Certificates (RECs) as a convenient way to reduce their carbon footprint. While these strategies have undoubtedly played a crucial role in promoting sustainability, the landscape is rapidly evolving. What was once considered the "easy button" for achieving sustainability goals is no longer as straightforward as it used to be. This blog explains the reasons behind the shift and explores alternative approaches for a sustainable future.
 

Virtual Power Purchase Agreements with Developers

In recent years, businesses have adopted virtual Power Purchase Agreements (PPAs) to secure green electrons or RECs from utility-scale renewable energy projects. These agreements were considered an efficient means of supporting green energy generation without the hassle of managing on-site infrastructure. However, several factors have disrupted this seemingly straightforward process:

1. Rise in the Cost of Capital: The cost of financing these large-scale projects has increased, putting pressure on developers to secure higher PPA prices to ensure project viability.
2. Interconnection Challenges: Connecting renewable energy projects to the grid can be a complex and time-consuming process for developers. Issues related to grid capacity and infrastructure have caused delays and uncertainties.
3. Projects are Falling Offline: Many utility-scale renewable energy projects are not making it through the final stages of development. Delays in permitting, financing, and construction have become common, making it challenging to deliver green electrons on time and on budget.

What's Happening Now?

In response to these recent developments, some developers have sought to renegotiate PPA prices with corporate buyers. This poses significant challenges to businesses that signed agreements at specific price points. Developers are now confronted with the reality that they cannot deliver the promised green electrons at the initially agreed-upon price, leading to several consequences for organizations:

1. Budget Deficits: The rising cost of capital translates into higher PPA prices, further straining corporate budgets and sustainability commitments.
2. Failure to Meet Timelines: As developers scramble to secure adequate financing and resolve interconnection issues, projects are experiencing delays, impacting the overall timelines for carbon reduction goals.
3. Falling Short of Net Zero Goals: Businesses aiming to achieve net-zero targets by a specific date are finding themselves in a precarious situation, as the promised green energy may not materialize as expected.

An Alternative Approach: On-site Renewable Energy

While waiting for the utility-scale market to stabilize, organizations can consider taking matters into their own hands by implementing renewable energy and efficiency improvements at their facilities. This approach involves:

• Rethinking the "Easy Button": Recognizing that utility-scale projects are not the universal solution they once appeared to be, organizations can shift their focus to a sustainability strategy that offers more control and predictability.
• Distributed Generation Solutions: Companies can invest in solar arrays and generate a significant portion of their energy needs on-site. Electricity produced can also be tied to a battery energy storage system or sold back to the grid.
• Deploy Energy Efficiency Strategies: Organizations can reduce energy usage and operations costs by updating old and inefficient systems and equipment while progressing toward net zero goals.
• Improve Reliability: With reduced energy needs and on-site renewable generation, companies can become less reliant on external factors and market fluctuations, ensuring a stable and sustainable energy supply.

The Future of Green Electrons and RECs

As we witness a shift away from virtual PPAs, private-sector organizations can diversify their approach by considering distributed energy solutions. Developing projects on-site will allow businesses to maintain control over their Net Zero targets and contribute to a more sustainable future, regardless of the challenges faced by utility-scale projects. In this ever-changing landscape, adaptability and forward-thinking will be the key to success on the path to achieving sustainability goals.