Top benefits and use cases for renewable energy certificates (RECs)

A company’s scope 2 emissions stem from electricity purchases (along with purchases of steam, heat, and cooling), so RECs can directly reduce scope 2 emissions under the Greenhouse Gas Protocol (GHGP)’s market-based accounting method. 

Suppose a company purchases 500 MWh of electricity per year from its local utility. If the company then purchases 100 solar RECs, that enables them to claim zero emissions for 100 MWh. So, even if they still purchase 500 MWh from their utility, in their greenhouse gas (GHG) market-based accounting they would only count the emissions from 400 MWh of electricity from their local utility, resulting in 20% fewer emissions.

As such, companies with ambitious decarbonization goals, like achieving net zero scope 2 emissions, can make progress towards their targets using RECs.

Another benefit of RECs is that they help advance the clean energy transition. While only the REC holders can claim low- or zero-emission electricity from those MWh, adding these sources to the grid can help usher in additional renewable energy projects.

Many renewable energy project developers consider the role of REC revenues from offtakers in the voluntary or compliance markets when structuring a deal, which are critical to a project’s financial returns. For example, a developer agrees to sell the RECs associated with a solar farm to a corporate offtaker to get a positive return on investment. Once the project is running, local stakeholders could also see co-benefits, like lower energy bills and cleaner air. In turn, the success and benefits from this project could encourage new renewable projects.

As more clean energy comes onto the grid, that then decreases the need for fossil fuels. That can be particularly helpful to the environment during peak periods, when utilities often have to activate sources like coal-fired power plants to meet electricity demand. Buying RECs can help incentivize an even faster transition away from these legacy power sources toward a decarbonized grid.

RECs also have the advantage of decoupling the benefits of renewable energy from actual electricity sourcing. That gives companies more flexibility to source RECs elsewhere—such as if onsite solar isn’t feasible for their office space—and still achieve scope 2 emission reductions.

For example, a physical PPA has the advantage of providing long-term renewable electricity for 10-25 years, but for a company with variable power needs, that might be too restrictive. Instead, buying RECs or other EACs enables the company to scale purchases up or down in different regions, depending on its local electricity footprint each year.

RECs can play a key role in helping a company to achieve decarbonization goals, such as hitting emission reduction targets validated by the Science Based Targets initiative (SBTi) or reaching compliance targets such as state-mandated RPS.

With proper planning and renewable energy strategy, RECs can also help lower emissions beyond scope 2. For example, removing an on-site furnace and switching to an electric heat source can transition emissions from scope 1 to scope 2. The associated increase in sourced electricity can then be matched with the purchase of RECs, thereby lowering scope 1 without increasing scope 2.

Companies can also encourage suppliers to use RECs, or an organization could purchase RECs on their suppliers’ behalf. Doing so reduces these suppliers’ scope 2 emissions, which in turn lowers the scope 3 emissions of their customers.

Because RECs decouple electricity from renewable energy benefits, that makes it easier for companies to meet variable electricity demand across markets without compromising on sustainability goals.

For example, Lime, a global leader in micromobility, operates a network of e-bikes and e-scooters. Lime has a voluntary commitment to charge all of its batteries using 100% renewable energy, but it doesn’t directly control all charging. Some vehicles are charged at Lime warehouses, but it also has local networks of charging partners that it needs to account for, and this mix of direct and indirect charging can fluctuate.

At the same time, Lime’s operating regions and electricity loads vary each year, due to changing global transportation needs. As such, directly procuring renewable energy isn’t always practical, especially in low-volume regions and ones where third-party partners do most of the charging.

To solve these problems, Lime partnered with 3Degrees to procure RECs in North America and other EACs internationally, which helped Lime achieve a 96% reduction in scope 2 emissions since 2019.

As Lime’s electricity needs change in the years to come, the company can maintain net zero scope 2 emissions by scaling its REC and EAC portfolio accordingly.

RECs can also provide co-benefits that extend beyond the environmental benefits of lower GHG emissions. That helps REC buyers reach other corporate sustainability or philanthropic goals and align with impact-focused values.

Namely, since RECs can help finance the development of new renewable energy projects, these certificates also support the associated benefits of these projects in the communities where they operate. For example, adding a solar or wind farm can lower local utility bills. While the REC buyer holds claim to the project’s environmental attributes from a carbon accounting perspective, those households still benefit from the economics of renewable energy, e.g., avoiding oil price spikes and decreased energy costs. 

The exact co-benefits vary by project, but some other examples include economic benefits like local job creation stemming from the buildout and management of a renewable energy project.

These projects could also provide more social and environmental advantages locally. For example, if a renewable project financed by RECs helps replace a fossil fuel plant, that can provide environmental advantages to the community, like a cleaner water supply, if there’s no longer runoff from the fossil fuel facility.