Tag: RECs

Many electricity consumers, including corporate buyers, are often uncertain about what it means to purchase a “renewable electricity” product.

How to buy real green energy

As explained below, one way to avoid confusion is to buy green power from a supplier, such as RPD, that (1) has a direct business relationship with a wind or solar generator; and (2) has created a contractual path across the electricity grid to the end user for that generator’s physical power and associated environmental credits. Given the physics of the power grid, this is the only way for end users to be certain that their money is actually benefiting a chosen off-site renewable facility and their electricity spend is having a direct impact, putting more renewable power on the grid.

This type of verifiable renewable electricity product — a product that is based on a direct contract path between a specific generator and the consumer — avoids confusion. It is also easier to explain this kind of purchase to employees, customers and the media and, thus to enhance the buyer’s green reputation. That is not the case, however, with many other so-called “renewable electricity” products.

Know the product: RECs are not the same as energy

As shown by a recent consumer fraud investigation by the Illinois Attorney General, many alternative electricity suppliers do not actually source physical green power to back up their “renewable electricity” claims. Moreover, in the Illinois case, the retailer investigated by the state’s consumer fraud office falsely advertised that its green product was generated exclusively from renewable energy sources. But, according to investigators, the electricity provided actually came “from a variety of sources from the electric grid” and was then “paired with the purchase of renewable energy certificates (RECs) – which represent proof that one megawatt-hour (MWh) of electricity was generated [for each REC] from a renewable energy source.”

In other words, Illinois consumers who thought they were exclusively buying wind or solar power were actually getting resold grid power (which may have included fossil fuel or nuclear power), together with RECs (which may not have even been produced by a generator feeding the Illinois grid).

The Illinois investigation was primarily concerned with consumer fraud — namely, the failure of the retailer to accurately disclose the source of its “renewable electricity” product. State officials later conceded that because an “energy source cannot be traced once the electricity has been added to the grid”, an electricity product that consists of grid power plus grid related RECs may still be marketed as “renewable electricity”, provided that the retailer plainly discloses the product’s composition. (Click here for the state’s voluntary agreement with the retailer.)

There is a better approach: Follow the money

We think that Illinois officials may have conceded too much. While it is true that the laws of physics do not allow one to track the path of electrons across a large electric grid from a renewable facility to the end-consumer, one can track the ownership of the power via the associated contracts and financial flows. These contracts cover the rights to the physical power as well as the associated RECs.

Given the above, RPD believes that when it comes to determining whether a product for off-site wind or solar power is really “renewable electricity” or not, it is logical to look at the physical power itself. Who owns it? Is there a contract path between the renewable producer and the ultimate consumer for both the electricity and the associated RECs ?

Moreover, because the dollar value of the physical electricity itself is typically 95% or more of the total contract price, we think the contract for the electricity should be the key to determining whether a product truly deserves to be defined as “renewable electricity”. In short, follow the money. After all, you want to know that your purchase is actually benefiting a specific renewable generator and providing an off take market for their power as well as the RECs as the best way to promote and support the market adoption of renewable energy.

Summing up: Choose real renewable power

So here is the main take away from this post: Whether you are a corporate buyer trying to green your own supply or a retailer looking to source power for a mass market renewable product, RPD can help you avoid confusion.

We only represent physical renewable electricity that is dedicated to the grid, on behalf of a customer, from specific wind or solar generators. In addition, unless otherwise agreed by a customer, this power is bundled with RECs that are produced from the same dedicated renewable sources during the same time period, making them concurrent with the customer’s consumption.

Thus, each month, every MWh consumed is matched with the concurrent RECs and the underlying physical power delivered to the grid by the chosen renewable generator. And that generator is dedicated to supporting the customer’s load for the entire contract term. That’s what we call real renewable electricity.

To learn how RPD’s real and verifiable renewable electricity products can help your business, please contact our sales team.