A Guide to Transitioning to a Greener Grid and Purchasing RECs- Cedara Resources

You’re interested in reducing your company’s carbon footprint, and you know that relying on power produced by fossil fuels to run your infrastructure has a detrimental environmental impact. You’re curious about switching your utilities to 100% renewable energy sources, but it’s a big undertaking, and you’re not sure how to begin the process - or if running your business on renewables will even be a viable option in your area.

Switching your business to 100% renewable energy sources for utilities is a powerful way to slash your carbon emissions, demonstrate your commitment to environmentalism, and achieve your corporate sustainability objectives. As a growing number of business leaders explore the possibility of switching to renewable energy, the demand for these utilities will continue to grow. Furthermore, companies that have limited or no options for renewable energy utilities in their municipalities can purchase renewable energy certificates, or RECs, to meet their environmental goals and shrink their carbon footprints. Let’s break down the basic steps involved in switching your business to renewable energy, as well as how RECs can lower your company’s Scope 2 emissions if renewable utilities aren’t a realistic option.

Gaining Stakeholder Buy-In

You may be eager to start researching renewable energy options, but in order to move forward with this idea, you’ll need to gain buy-in from several relevant stakeholders first. This could include executives at your company, finance department leaders, legal professionals, and your facilities manager. Gaining stakeholder buy-in will involve conducting in-depth research on how switching to renewables would benefit your business.

You can highlight how the shift to renewables would help your company mitigate climate risks, save money in the long run, and appeal to eco-conscious consumers. When you present this information to stakeholders, make sure to include estimates with concrete figures. You’ll also need to go over potential challenges and solutions, such as higher upfront costs, accounting for the time dedicated to this specific project, or ensuring that your infrastructure would still be able to operate without interruptions at peak demand hours.

Data Collection and Analysis

Before exploring renewable energy options for your business, you’ll need to establish a big-picture view of your company’s current energy usage metrics and emissions. Your utility providers might report this information to you, or, if you’re leasing a commercial space, this information might be delivered to the leasing management company instead. Evaluate how much energy you’re using, how much you’re spending on utilities, and any trends or patterns that are present in this data. You can use this data to determine peak demand hours and changing demands based on seasonality.

Business owners who rent commercial offices or other facilities will likely have to get in touch with the management company that handles utility contracts on behalf of tenants in order to determine their energy grid mix and other energy usage data. They might be able to provide data for your specific unit, or for the entire facility, which you can use to determine your company’s average energy usage based on the number of tenants that use the building or facility.

If your building’s utility provider is vertically integrated, they generate and distribute power from one specific source, which means they can provide transparency regarding the grid mix. But in some cases, your leasing management company may not be able to provide information on the specific grid mix from your building’s utility company because the company itself does not have this data. Some utility companies purchase power from the wholesale marketplace from multiple energy providers, which means they do not have data on the exact mix that was purchased. This can vary based on where your company’s physical offices are located - for example, in the United States, much of the Northeast is a wholesale region, while utility companies in the Southeast are generally vertically integrated.

If you operate your business in a wholesale region, and your leasing management company is unable to give you data regarding your company’s grid mix, you can still estimate your company’s reliance on fossil fuels based on external data. In wholesale regions, electricity is regulated and sold by entities known as regional transmission organizations (RTO) or independent system operators (ISO) and subsequently purchased by utility companies for distribution. You can check a wholesale region map to find out which RTO or ISO is based in your region, and then head to the website for your specific region’s ISO or RTO to assess regional energy supply data in real time. If you are located in a large region that encompasses multiple states, you can use the EPA’s Power Profiler tool with your zip code to access energy supply data from 2021. Once you’ve accessed data concerning your area’s average grid mix, you can estimate your own company’s reliance on fossil fuel power by factoring in the average energy usage per square footage for your facility type.

Define Your Company’s Goals

What do you hope to achieve by switching to 100% renewable energy? You’ll need to go beyond vague sustainability goals and come up with realistic, specific objectives. By how much do you want to reduce your emissions, and what is your timeline for achieving these goals? Taking these figures into account will help you determine which providers or energy sources could help you fulfill these objectives. You can also consider how tax certificates for switching to renewable energy sources like solar or wind power could save money for your business.

Assess Your Real Estate Portfolio

Generating renewable energy on-site is an option for some business owners. For example, a small business owner might be able to install solar panels on the roof of their commercial property. However, if you are leasing a commercial space, you will need to include the landlord in stakeholder conversations and determine whether or not this is a possibility for your business.

If you are able to install renewable energy infrastructure on your property, you may have to enter a Power Purchase Agreement (PPA) with a provider. This involves establishing a predetermined price for electricity for the duration of your contract. Setting up a PPA can help you keep your energy costs under control.

Even if you own your property outright, or your landlord is willing to allow you to move forward with plans for on-site energy generation, the environmental conditions in your area could still restrict your options. For instance, your property might have low potential for generating solar energy on-site due to a lack of consistent sunlight. Therefore, business owners who have the right to move forward with on-site installation projects will still need to assess whether or not this infrastructure could generate the energy they actually need to operate. If on-site energy generation isn’t workable for your business, there are alternative routes to running on 100% renewable energy.

Research Providers

Depending on where your business is located, as well as your climate, you might have several options for renewable energy providers. You will need to thoroughly research each provider to determine the best fit for your company’s needs. Large companies may need to send out requests for proposals (RFPs). You’ll have to consider several factors, including the supplier’s reputation, their financial health, pricing, environmental impact, and, of course, the specific type of renewable energy they provide and whether or not they will be able to meet your company’s energy demands.

Renewable Energy Certificates (RECs)

What if your municipality does not support renewables, or there are constraints preventing you from shifting to on-site renewable energy generation? If this is the case, you don’t have to continue running solely on fossil fuels and resign your business to falling short of your sustainability goals. In this scenario, your company might be a good candidate for purchasing renewable energy certificates, or RECs.

If you’re generating renewable energy on-site, you can pinpoint your specific power source. However, if you’re drawing power from the electricity grid, you can’t identify the exact source of the electricity that your business uses. Depending on where your business is located, the energy provided by your local grid could include sources like coal, natural gas, and renewables like wind energy, solar power, or hydropower.

You can’t choose to solely draw power generated by renewables from the grid. But you can ensure that your company is contributing to the creation of a “cleaner” grid over time. Purchasing RECs to account for 100% of your company’s energy usage is a highly effective strategy for reducing your scope 2 emissions. This includes any indirect emissions generated by your electricity purchases, whether you’re relying on fossil fuels or renewables.

One REC represents one megawatt hour (MWh) of electricity that has been produced and delivered to the electricity grid from a renewable energy source. There are 10 regionally-based electronic REC tracking systems in the US, and every REC is specifically tracked, allowing business owners to verify that they have purchased power from a renewable provider. Once your company has purchased a REC, it will be “retired” on your behalf, which means that

By purchasing RECs that equal your company’s energy usage in MWh, you can ensure that renewable providers are generating 100% renewable energy on your behalf. Furthermore, since there is a strict legal verification system for RECs, you can easily uphold your sustainability claims. RECs include information like the renewable fuel type that you’ve purchased, the facility location, and the emissions rate of the renewable resource.

Certain states are under compliance markets, which means that companies are legally required to generate a certain percentage of their electricity from renewable sources, and if they can’t generate it on-site, they must purchase RECs to account for the difference. Other states have voluntary markets, in which businesses are not required to utilize renewable energy and can choose whether or not to purchase RECs. Prices for RECs are higher in compliance markets than voluntary markets.

Purchasing RECs is a relatively straightforward process. Companies can buy RECs directly from their state’s market, or they can turn to a broker or online platform that facilitates REC purchases for assistance. You will want to ensure that you are buying RECs that have been certified by the nonprofit Green-e, which guarantees that they are new to the market and have not been double-counted. If you are leasing a commercial space, you may need to coordinate with your leasing management company to navigate this process.

Currently, approximately 850 utility companies in the US offer “green power programs,” which means that the utility will buy green power for the grid mix on behalf of their customers that buy RECs. Alternatively, you may need to contact an outside supplier to buy RECs. If your company is able to participate in a green power program through your current utility provider, you may be charged a premium of approximately 1 to 2 cents per kWh. Depending on your company’s needs, you might want to purchase a fixed number of kWh of renewable energy for a specific monthly charge, or allocate a percentage of your monthly utility purchase to renewable energy based on your sustainability goals.

Most small to medium-sized businesses buy unbundled RECs, which means they aren’t attached to a new renewable energy project. Unbundled RECs can be purchased in bulk at any time, which grants businesses flexibility as they invest in their sustainability goals.

Large corporations might be good candidates for purchasing bundled RECs. These RECs are sold in association with energy from new renewables projects. This purchase is mutually beneficial - the developers behind these projects need to demonstrate proven revenue streams from expected energy in order to secure financing, and companies that buy bundled RECs can claim “additionality,” which means that your investment delivered a new source of renewables to the grid. Sometimes large corporations can also enter into “green tariff” or “sleeved PPA” agreements. This involves negotiating a long-term contract with their utility company, which enters into a PPA for new renewables projects and then provides RECs to the business.

If your organization has set ambitious sustainability goals, switching your utilities to 100% renewable energy can help you make dramatic progress. Furthermore, switching to renewables sets a positive example for other companies in your sector. Whether you can generate renewable energy for your business on-site, or your business is a good candidate for purchasing RECs, shifting to renewable energy can allow you to maintain your productivity with a smaller carbon footprint.

Sources:

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Regional Transmission Organizations

EPA - Power Profiler

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