Not all renewable energy procurement options are created equally. Onsite solar is generally considered better than contracting for offsite energy generation, which is better than just buying Energy Attribute Certificates (EACs), which are ultimately better than just purchasing Carbon Offsets. But why? The two most important considerations are “proximity” and “additionality”.
In short, proximity can generally be understood as how closely tied the renewable energy generation is to its consumption. Rooftop solar, for instance, is as closely tied as a system can be: the building uses the electricity from the panels on its rooftop. Additionality is a measure of whether the project would have happened otherwise. If a solar project is already built and operating, and a contract is signed to buy energy from it, that’s generally fine, the facility can take credit for using sustainably-generated electrons after all, but it’s better if a new project is built because the facility contracted for it. Additionality is important in many areas of sustainability, but in the instance of renewable energy procurement for factories, proximity is generally the most important consideration.
Additionality, proximity, and standards all taken into account, Ren considers the following to be the best course of action for procuring renewables: onsite, offsite, EACs, and then offsets. Each of these categories has their own subsets. An overview of each is provided below.
Onsite means that renewable electricity is generated on the facility’s premises. The most common instance of onsite is rooftop solar, but solar can also be installed over carports and in adjacent land. Onsite wind and geothermal are also possible, but rare.
There are three primary mechanisms whereby a facility can contract for onsite renewables: an outright purchase, a lease, or an onsite Power Purchase Agreement (PPA). Once installed, the facility can sometimes offset the cost of the installation by way of net metering.
Offsite generally refers to any renewable electricity generated off of a facility’s premises, which the facility is ultimately able to take credit for using. Because the facility does not own the land or generation equipment, offsite procurement generally requires a Power Purchase Agreement to be signed which clearly designates the facility or facility’s owner as the recipient of the power. These contracts generally take one of three forms: Direct PPAs (DPPAs), Green Tariffs or Back-to-Back PPAs, and Virtual PPAs (VPPAs). These contracts often go by different names in different countries, for example VPPAs in Taiwan are referred to as Corporate PPAs with Wheeling, and, confusingly, the DPPAs soon to be piloted in Vietnam are in fact structured as VPPAs.
Energy Attribute Certificates
Energy Attribute Certificates (EACs) are accounting mechanisms that allow energy buyers to take “credit” for using renewable energy. Every time one megawatt-hour (MWh) of renewable electricity is generated, a corresponding EAC is generated as well. Because electrons cannot be tracked through the grid, the EAC enables an offtaker to eventually account for using the renewably-generated electrons. Most renewable energy contracts, such as PPAs, specify who will receive the EAC. That recipient can then retire the EAC upon receipt, to take “credit” for having used renewable energy, or they can trade the EAC on the open market to enable someone else to claim that credit. Generally, for proximity purposes, EACs should be retired by an electricity user on the same grid that the energy was injected into upon creation. EACs take many forms depending on the geography in which they are being purchased, in the European Union the EAC to purchase is known as a Guarantee of Origin (GO), in North America they are known as Renewable Energy Certificates (RECs), and there are many more types of EACs globally.
The RE100 specifically calls out several types of EACs as pre-approved for use and application towards corporate sustainability targets. The RE100 technical guidance advises that “we have identified that RECS (US and Canada), GOs or REGO (Europe), T-REC (Taiwan), Green Power Certificate/J-Credit (renewables) (Japan), I-REC (International) and TIGR (International) meet [our] criteria”. Any EACs issued outside of these pre-approved systems, such as GECs in China or YEK-Gs in Turkey, require additional diligence in order to receive RE100 approval.
As mentioned previously, offsets are an imperfect solution, and in Ren’s strategy offsets will only be considered as a method of last resort to offset any emissions that cannot be prevented through renewable energy solutions. When the situation does require offsets, there are several factors to consider, including additionality (this is especially important for offsets), permanence (is the carbon guaranteed to stay sequestered), vintage (does the year the offset was generated match the year the emission was created), accrediting agency or verifiability (to ensure the validity and quality of the offset), and offset source (funding a direct-air-capture system or cookstove project is much better than just paying for the planting of trees).
Additionality, proximity, and standards are critically important to consider when generating renewable energy procurement strategies. All of these factors are automatically accounted for and incorporated into the roadmaps that Ren’s platform generates for our customers. Reach out to Ren today to learn more about how we can turn your supply chain data into actionable renewable energy procurement roadmaps, so you can hit your 2030 targets with solutions that will meet any standards you’ve committed to.